2024 (1) TMI 682 - AT - Customs

Levy of penalty u/s 114(i) of the Customs Act - smuggling - red sander woods logs of Nepal Origin - omission or the commissioning of action/act, performed/non-performed by the present appellant - HELD THAT - It be noted that in terms of the obligations under the CHALR, no case remains any further in view of the said proceedings, having attained finality. It is the expressly incumbent on the department to have pointed out the role played by the individual/appellant herein for imposition of penalty on them under Section 114(i) of the Customs Act - it is also noted that there is no finding by the adjudicating authority to indicate any beneficial consideration having been passed on to the appellant by way of a monetary reward or otherwise for his assumed role for which the appellant has been penalised by the adjudicating authority. There is nothing to impute by way of a categorical assertion the conspiring of, or an express omission or commission, leading to the fraud on the part of the appellant. There is nothing in the findings of the learned Commissioner to assert a positive role or to impute abetment on the part of the appellant in the attempt to smuggle out Red Sanders. Thus, in view of anything specific on the part of the appellant being brought out on record, it would be completely inappropriate to subject the appellant to penal provisions under Section 114(i). The fact that in so far as this Custom Brokerage firm was concerned, Tribunal has categorically held that though the appellant was found wanting in discharge of his obligations under Regulation 13 (a), (b) and (o) of CBLR, 2004, they cannot be penalized in perpetuity and though had accordingly upheld the order of the learned Adjudicating Authority issued under Regulation 20(1) of the CBLR, it had however restored the same. The order passed by the adjudicating authority is based largely on conjectures and assumptions. It is also noted that in respect of Nepal origin exports to third countries transiting through India, the Indian CHA s function is limited to processing the Border endorsed CTD at Customs House, Kolkata, taking the EF no. and to get the seals on the containers inspected and to take allow order from Customs for export through Kolkata port. In the instant case, we find that the appellant did not have any chance to verify the seal of the containers before interception by the DRI and to inform the Customs accordingly. Further, as stated above it is not within the express scope of activities of the CHA to escort the consignment from the Indo-Nepal border and oversee physical transit of the cargo or for any acts of omission/commission of the transporter/freight forwarder as alleged. The learned Adjudicating Authority erred in not appreciating that the export documents in respect of the Nepalese export consignment were received from the Nepalese exporter. Also it is not in the scope/mandate of the CHA firm or his representative to collect KYC of transporter or freight forwarder or other intermediaries. It is settled law that for imposition of penalty, it is necessary to establish a positive role on the part of the concerned person or the establishment of mens rea on part of such a person is a must. Vague allegations and negligence, if any, howsoever grave cannot be assumed to mean abetment so as to invoke penal action. For any penal action to be enforced, the establishment of an active role on the part of the accused is imperative. The departments case falls woefully short of substantiating the invocation of penalty under Section 114(i) of the Customs Act. The impugned order is liable to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Violation of Customs Brokers Licensing Regulations (CBLR), 2004.
2. Penal action under Section 114(i) of the Customs Act, 1962 for attempted export of prohibited goods (red sanders).

Summary:

Issue 1: Violation of Customs Brokers Licensing Regulations (CBLR), 2004

The Tribunal noted that the appellant, a partner of a Customs Brokers firm, was found wanting in discharging his obligations under Regulation 13(a), (b), and (o) of the CHALR, 2004. The Tribunal upheld the orders passed by the adjudicating authority under Regulation 20(1) of CHALR, 2004 but limited the revocation of the Custom Brokers license to a specific period, restoring it effective from 01.04.2016. The Tribunal emphasized that the appellant had no knowledge of the contraband nature of the goods substituted in the containers, and punishment for a lifetime cannot be imposed.

Issue 2: Penal action under Section 114(i) of the Customs Act, 1962

The proceedings concerned the initiation of action against the appellant for penal action under Section 114(i) of the Customs Act, which deals with penalties for attempts to export goods improperly. The show cause notice alleged that the appellant failed to comply with responsibilities as a Custom House Agent, facilitated the attempted smuggling of red sanders, and did not report discrepancies regarding container seals.

The learned Commissioner's findings indicated that the appellant did not actively participate in the attempted export but failed to exercise necessary precautions, which facilitated the attempted smuggling. However, the Tribunal found no categorical assertion of conspiracy or express omission/commission leading to fraud on the part of the appellant. There was no evidence of the appellant's positive role or abetment in the attempt to smuggle red sanders.

The Tribunal noted that the appellant's failure to check bottle seals was primarily the responsibility of Customs Officers, not the Customs Broker. The Tribunal emphasized that for penal action, a positive role or mens rea must be established, which was not done in this case. The Tribunal relied on several case laws to support the proposition that vague allegations and negligence cannot be assumed to mean abetment for invoking penal action.

The Tribunal concluded that the department's case fell short of substantiating the invocation of penalty under Section 114(i) of the Customs Act. The impugned order was set aside, and the appeal was allowed with consequential relief.

Conclusion:

The Tribunal allowed the appeal, setting aside the order passed by the learned Adjudicating Authority, and provided consequential relief to the appellant. The operative part of the order was pronounced in the open Court.