2024 (10) TMI 1360 - AT - Customs

Levy of penalties u/s 114(i) and/or 114(AA) of the Customs Act, 1962 - appellant was involved in abating the smuggling of red sanders - bona fide belief. Penalty u/s 114(i) of CA - HELD THAT - The penalty was imposed on the appellant only for the charge of negligence. In this case, since, the appellant was not aware about the concealment of red sander in the container with feldspar powder , It cannot be said that the appellant was involved with mala fide intention to abet the smuggling of red sander . It is found that involvement in abetting the smuggling of red sander was not established against the appellant. The case was detected only on the intelligence received by the DRI. In such case in absence of any intelligence, the appellant was not aware about the concealment of red sander under the bags of feldspar powder. It is also found that when Shri Sandeep, Inspector Customs examined the containers after opening it at that time only feldspar powder was found. Therefore, he was of bona fide belief that the goods stuffed in the containers is feldspar powder. In the normal course it cannot be expected by any one that behind the feldspar powder bags some other goods are concealed. Therefore, there are no involvement of the appellant in the abetment in smuggling of Red Sander. Accordingly, the penalty under Section 114(i) of Customs Act, 1962 was wrongly imposed on the appellant - It is also observed that it is not coming out from record that the appellant was aware of the stuffing of red sander in the container. Therefore, even if some negligence has occurred on his part which is not established, the appellant cannot be charged for aiding or abetting the smuggling of red sander . Penalty u/s 114(AA) of CA - HELD THAT - It is found that the appellant had not signed or submitted any document before customs with a prior knowledge about alleged mis-declaration, neither any show cause nor impugned order pointed out any specific documents were made or signed before the customs. Therefore, the appellant is not liable to penalty under the provision of Section 114(AA) also. The penalties are set aside - appeal allowed.

Summary

Issues Involved:

1. Whether the appellants are liable for penalties under Section 114(i) and/or 114(AA) of the Customs Act, 1962, for their alleged involvement in aiding and abetting the smuggling of "red sanders."

Issue-wise Detailed Analysis:

Issue 1: Liability of Shri Sandeep, Inspector Customs, for Penalty under Section 114(i) of the Customs Act, 1962

The primary issue concerning Shri Sandeep revolves around whether he was negligent in his duties, leading to the smuggling of red sanders. The tribunal examined the circumstances under which the penalty was imposed. It was noted that the detection of the smuggling was based on intelligence received by the Directorate of Revenue Intelligence (DRI), and there was no evidence to suggest that Shri Sandeep was aware of the concealment of red sanders under feldspar powder. The tribunal highlighted that when Shri Sandeep inspected the containers, only feldspar powder was visible, supporting his bona fide belief that no other goods were present. Consequently, the tribunal concluded that there was no involvement or mala fide intention on his part to abet the smuggling, and thus, the penalty under Section 114(i) was wrongly imposed. The tribunal referenced the judgment in the case of Eureasian Equipment and Chemicals Ltd., which emphasized that liability for confiscation arises only when goods are attempted to be exported contrary to prohibitions, which was not established here.

Issue 2: Liability of Shri Rahul Mishra, H-Card Holder, for Penalty under Sections 114(i) and 114(AA) of the Customs Act, 1962

For Shri Rahul Mishra, the issue was whether he aided and abetted the smuggling of red sanders. The tribunal reviewed the evidence, primarily based on his statement recorded by the DRI, which he later retracted. The tribunal noted that the retracted statement lost its evidentiary value and could not be used to penalize him. Furthermore, the tribunal found that the customs broker, where Shri Rahul was employed, was not issued any show cause notice, indicating no breach on the broker's part. The tribunal also acknowledged that the shipping documents were not handled by Shri Rahul personally, and there was no evidence of his involvement in the container stuffing. The tribunal underscored the lack of cross-examination by the adjudicating authority, which was crucial given the retraction of his statement. In the absence of evidence of monetary gain or knowledge of the smuggling, the tribunal determined that Shri Rahul Mishra was not liable for penalties under Sections 114(i) and 114(AA).

Conclusion:

The tribunal concluded that neither appellant was liable for the penalties imposed under the Customs Act. The penalties against Shri Sandeep were set aside due to the absence of evidence of negligence or intent to abet smuggling. Similarly, the penalties against Shri Rahul Mishra were dismissed due to the lack of evidentiary support following the retraction of his statement and the absence of any direct involvement in the alleged smuggling activities. Both appeals were allowed, and the penalties were annulled.