2024 (11) TMI 1144 - AT - Customs

Non-fulfilment of export obligation in respect of import of Clinker made under Advance Authorization issued by DGFT - Imposition of penalty under Section 112 (a) (b) of the Customs Act, 1962 - HELD THAT - We observe that duty free import of Clinker under Advance Authorization has been made by the Company M/s. SUPL and for non-fulfilment of export obligation separate action has already been initiated by enforcing the Bond. There is no finding in the impugned order about the role played by the appellants in the alleged offence. It is observed that penalty has been imposed on them only on the ground that their company had acquired 51% of shares in the company viz. M/s. SUPL and they were appointed as Directors in M/s. SUPL. Thus, the imposition of penalty on the appellants is not sustainable when separate proceedings have already been initiated against the company M/s. SUPL for the duty free import of Clinker under Advance Authorization and for the non fulfilment of export obligation. Thus, we hold that penalty imposed on the appellants are not sustainable. Penalty of Rs.20,00,000/- each has been imposed on both the appellants under Section 112 (a) (b) of the Customs Act, 1962. The impugned order has not specified categorically as to under which sub-section of Section 112 the penalty has been imposed. The penalty has been imposed under both sub-sections 112(a) and (b) together, which is legally not sustainable. Further we observe that the ingredients required for imposing penalty under Section 112 are not existing in this case. Accordingly, we hold that that penalties imposed on the appellants are not sustainable and the same are liable to be set aside. We set aside the penalties of Rs.20,00,000/- each imposed on the appellants and allow the appeals filed by them.

Summary

Issues:
Imposition of penalty under Section 112 (a) & (b) of the Customs Act, 1962 on the appellants for alleged non-fulfilment of export obligation in relation to the import of Clinker made by M/s. Swati Udyog Private Ltd. under Advance Authorization issued by DGFT.

Analysis:

1. Alleged Violation of Customs Act and Foreign Trade Policy:
The appeals were filed against the penalty imposed on the appellants for the non-fulfilment of export obligation in connection with the import of Clinker by M/s. Swati Udyog Private Ltd. under an Advance Authorization. The penalty was based on the alleged violation of Notification No.96/2009-Cus dated 11.09.2009 and the Foreign Trade Policy. The appellants argued that the penalty was imposed solely for the first allegation and not for the violation related to the import of capital goods under the EPCG Scheme.

2. Role of Appellants in Import and Export Obligation:
The appellants contended that they had no active role in the duty-free import of Clinker and the subsequent non-fulfilment of the export obligation by M/s. Swati Udyog Private Ltd. They claimed that their involvement was limited to acquiring shares in the company and being appointed as directors without participating in the company's decision-making processes.

3. Enforcement of Bond and Double Jeopardy:
The Proper Officer of Customs had initiated proceedings by issuing a Demand-cum-Bond Enforcement Notice against M/s. Swati Udyog Private Ltd. for the failure to fulfil the export obligation. The appellants argued that imposing penalties on them would amount to double jeopardy since separate proceedings were already initiated against the importing company.

4. Legal Grounds for Setting Aside Penalties:
The Tribunal observed that the penalties were imposed on the appellants based on their shareholding and directorship in M/s. Swati Udyog Private Ltd., without establishing their direct involvement in the alleged offence. The Tribunal found that the penalties under Section 112(a) & (b) of the Customs Act were not sustainable as the necessary ingredients for imposing penalties were lacking.

5. Decision and Conclusion:
The Tribunal set aside the penalties of Rs.20,00,000/- each imposed on the appellants, emphasizing that the penalties were not legally sustainable due to the absence of direct involvement or evidence linking the appellants to the alleged offence. The appeals filed by the appellants were allowed, and the penalties were revoked.

This detailed analysis highlights the key arguments, legal considerations, and the ultimate decision of the Appellate Tribunal in the case involving the imposition of penalties under the Customs Act, 1962.