2019 (5) TMI 928 - AT - Customs

Imposition of penalty u/s 112(a) of the Customs Act, 1962 on CHA - Smuggling of Cigarettes - whether the Appellant, who is a CHA, is liable for penalty under Section 112(a) ibid? HELD THAT - This section deals with the cases of confiscatory goods where abetment goes to the root of the matter. It stipulates that a person shall be liable to penalty, who, in relation to any goods does or omits to do any act, which act or omission would render such goods liable to confiscation under section 111 or abets the doing or omission of such an act. The said section provides for imposition of penalty on any person who abets the doing or omission, of any act or omission, which will render the goods liable to confiscation - Cogent, tangible and reliable evidence is required for such penal actions. There is no evidence to establish that the appellant was aware that the clearance work undertaken by them at the instance of the said Mukhtar Sheikh, was not of a genuine importer. Nor any evidence has been produced to show that the appellant had the knowledge of any fraud or mis-declaration. As per the evidence on record, import of cigarettes under the guise of trolley bags was not within the knowledge of the Appellant and this establishes that the CHA was not aware about the violations beforehand. No evidence has been brought out about the prior knowledge of the appellant regarding violation of the provisions of Customs Act. As per evidence brought on record, it is not a case that the appellant had wrong intent. It is also not a case that the appellant worked as an accomplice. It is settled principle that lack of due diligence and failure to take more precautions cannot, by itself bring in penal consequences under Section 112(a). When there is no evidence to establish that the appellant had prior knowledge of the illegal import of cigarettes and also when there is no evidence to establish any wrongful intent on the part of the appellant then there is no justification to impose penalty under section 112(a) ibid - penalty set aside - appeal allowed - decided in favor of appellant-CHA.

Summary

Issues:
- Determination of liability for penalty under Section 112(a) of the Customs Act, 1962 on a Customs House Agent (CHA).

Analysis:
1. Background: The appeal was filed challenging the order passed by the Commissioner of Customs (Appeals) reducing the penalty imposed on the appellant, who is a CHA, under Section 112(a) of the Customs Act, 1962.

2. Facts of the Case: The appellant, a partner of a CHA firm, was approached by an individual to handle import & export clearance work. The appellant's role was limited to preparing and uploading checklists in the Customs EDI system. In a specific instance, the appellant uploaded documents for a consignment that was later found to contain undeclared cigarettes, leading to a penalty imposition under Section 112(a).

3. Imposition of Penalty: The Adjudicating Authority imposed a penalty of ?25 lakhs on the appellant, which was reduced to ?5 lakhs by the Commissioner on appeal. The issue revolved around whether the appellant could be held liable under Section 112(a) for the fraudulent attempt to clear contraband goods.

4. Legal Analysis: Section 112(a) deals with cases where abetment leads to confiscation of goods. The key requirement for imposing a penalty under this section is clear evidence that the person knowingly abetted the illegal act. In this case, it was argued that the appellant lacked prior knowledge of the illegal importation and did not have any wrongful intent, thus challenging the imposition of the penalty.

5. Lack of Evidence: The Tribunal found that there was no evidence to establish that the appellant was aware of the fraudulent activity or had any intention to aid in the illegal importation of goods. The appellant's lack of prior knowledge regarding the violation and absence of wrongful intent were crucial factors in determining the liability under Section 112(a).

6. Conclusion: The Tribunal set aside the impugned order upholding the penalty imposition, stating that in the absence of evidence proving the appellant's prior knowledge or wrongful intent, there was no justification for imposing a penalty under Section 112(a). The appeal filed by the appellant was allowed with consequential relief.

In conclusion, the judgment focused on the requirement of clear evidence to establish liability under Section 112(a) of the Customs Act, emphasizing the importance of prior knowledge and wrongful intent in determining penalties for abetment of illegal activities related to customs clearance.