2010 (6) TMI 802 - AT - Customs

Tribunal upholds penalties under Customs Act for abetting disposal of imported goods

Shri Munilal Mehra Versus Commissioner of Customs (Adjudication)

Shri Munilal Mehra Versus Commissioner of Customs (Adjudication) - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether a person who did not physically handle imported goods but opened a bank account in a fictitious name, obtained demand drafts and assisted transfer of sale proceeds, can be held 'concerned in' dealing with goods and therefore liable to penalty under Section 112 of the Customs Act. 2. Whether mens rea (criminal intention) is a necessary element for imposing penalty under Section 112 of the Customs Act. 3. Whether precedents of the Tribunal finding no liability where a person had not dealt with goods remain binding where the Supreme Court decision in Sachindananda Banerji (recognizing liability for arrangements/attempts to deal with prohibited goods) was not considered by those Tribunal decisions. 4. Whether sale proceeds (money) arising from illegal disposal should be treated differently from the goods themselves for the purpose of attracting penalty under Section 112, and the relation between confiscation under Section 111(o)/Section 121 and penalty under Section 112. 5. If liability is established, the scope for judicial mitigation of penalty having regard to the appellant's age, period of transaction and receipt of remuneration. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Liability under Section 112 for a person who facilitated disposal without physically handling goods Legal framework: Section 112 empowers imposition of penalty on a person 'concerned in' any activity for which confiscation is warranted under the Customs Act; Section 111(o) deals with confiscation where import conditions (here Advance Licence) are contravened. Precedent Treatment: Earlier Tribunal decisions addressed by counsel (Munilal Mehra and Jiwraj Srinivas Rathi) held no penalty where the person had not dealt with the goods. These decisions, however, did not consider the Supreme Court decision in Sachindananda Banerji. The Supreme Court in Sachindananda held that a person who enters into transactions or attempts to transact in prohibited goods pursuant to prior arrangement is 'concerned in' dealing with such goods even if the transaction is interrupted. Interpretation and reasoning: The Tribunal applied the Supreme Court's reasoning in Sachindananda to facts where the goods had already been sold contrary to licence terms and sale proceeds were intercepted via a fictitious bank account opened by the appellant. The Tribunal reasoned that active assistance in depositing and transferring sale proceeds formed part of the arrangement facilitating illegal disposal, thereby making the appellant 'concerned in' dealing with the prohibited/liable-to-confiscation goods. The Tribunal treated the present facts as stronger than Sachindananda because there the transaction was interrupted before completion, whereas here the illegal sale had occurred and proceeds were being processed. Ratio vs. Obiter: Ratio - facilitation (opening account, obtaining drafts, transferring sale proceeds) that forming part of a prior arrangement to dispose of imported goods contrary to licence attracts liability as being 'concerned in' dealing with goods under Section 112; distinguishing prior Tribunal decisions that did not consider the Supreme Court authority. Obiter - comparative language describing this case as 'worse' than Sachindananda is explanatory rather than independently determinative. Conclusions: The appellant, by opening a fictitious account and assisting in transfer of sale proceeds, was 'concerned in' dealing with the goods and liable to penalty under Section 112. Issue 2 - Requirement of mens rea for imposing penalty under Section 112 Legal framework: Section 112 is a penal provision in the Customs Act allowing levy of monetary penalty for acts attracting confiscation; applicable principles assess whether mens rea is an element for civil/penal forfeiture. Precedent Treatment: The Tribunal relied on the High Court of Madras decision (CC (Exports) vs. Bansal Industries) which held mens rea is not required for imposition of penalty under Section 112. The Tribunal also treated Sachindananda as supporting liability for acts demonstrating concern with prohibited goods even where the act may be at the level of arrangement or attempt. Interpretation and reasoning: The Tribunal held that mens rea is not a prerequisite to attract penalty under Section 112; liability may arise from conduct that objectively renders goods liable to confiscation or shows the person was concerned in dealing with such goods. Moreover, the appellant's own statements indicated awareness of illegal disposal and receipt of remuneration, reinforcing that absence of mens rea cannot be relied upon. Ratio vs. Obiter: Ratio - mens rea is not required to impose penalty under Section 112; objective involvement suffices. Obiter - remarks on the appellant's age and unemployment are mitigating context, not legal determinants on mens rea. Conclusions: The Tribunal affirms that mens rea is not required for imposition of penalty under Section 112; the appellant's conduct sufficed to attract penalty. Issue 3 - Treatment of conflicting Tribunal decisions in light of Supreme Court authority Legal framework: Lower courts and tribunals must follow binding decisions of the Supreme Court; earlier Tribunal decisions not considering relevant Supreme Court authority can be distinguished or treated as per incuriam. Precedent Treatment: The Tribunal expressly distinguished earlier Tribunal orders cited by the appellant (Munilal Mehra, Jiwraj Srinivas Rathi) on the ground that those decisions did not consider Sachindananda Banerji. The Tribunal noted that subsequent Tribunal and High Court decisions (Dr. Writer's Food Products, Larger Bench in Steel Tubes, and a Mumbai order in Nasik Strips matter) had engaged the Supreme Court authority with differing outcomes, but the present Panel followed the Supreme Court's principle. Interpretation and reasoning: Because Sachindananda establishes that an arrangement or attempt to deal with prohibited goods suffices to make a person 'concerned in' dealing, earlier Tribunal rulings that found no liability without considering Sachindananda were not applicable. The Tribunal therefore declined to follow those decisions despite factual similarity. Ratio vs. Obiter: Ratio - where a Tribunal precedent is inconsistent with binding Supreme Court authority not considered in that precedent, it may be distinguished and not applied. Obiter - discussion of inter-Tribunal divergence is explanatory. Conclusions: Earlier Tribunal decisions cited for the appellant are inapplicable as they did not consider binding Supreme Court authority; the Tribunal applies the Supreme Court principle to find liability. Issue 4 - Distinction between sale proceeds and goods for purposes of confiscation and penalty Legal framework: Section 111(o) provides for confiscation where imported goods are disposed of in contravention of licence conditions; Section 121 deals with confiscation of sale proceeds. Section 112 imposes penalties on persons concerned in acts attracting confiscation. Precedent Treatment: The respondent contended that sale proceeds are governed by Section 121 and thus Section 112 may not apply; the Tribunal addressed this contention by linking the moment of illegal disposal to confiscation of the goods under Section 111(o), thereby invoking Section 112 against persons concerned. Interpretation and reasoning: The Tribunal clarified it was concerned with the fact of illegal disposal of goods which renders the goods liable to confiscation under Section 111(o). Once the goods are liable to confiscation, any person 'concerned in' that dealing is amenable to penalty under Section 112. The existence of sale proceeds recoverable under Section 121 does not negate liability under Section 112 for those concerned in the illegal disposal itself. The appellant's actions facilitating deposit/transfer of proceeds were part of the scheme enabling illegal disposal. Ratio vs. Obiter: Ratio - liability under Section 112 follows from acts that render goods liable to confiscation under Section 111(o), irrespective of parallel remedies against sale proceeds under Section 121. Obiter - comments on procedural distinctions between confiscation of goods and proceeds are explanatory. Conclusions: The appellant's facilitation of sale proceeds did not insulate him from Section 112 liability since the underlying illegal disposal rendered the goods liable to confiscation under Section 111(o). Issue 5 - Mitigation of penalty Legal framework: Tribunals have discretion to assess and, where appropriate, reduce statutory penalties by considering facts such as duration of involvement, amounts received, and personal circumstances. Precedent Treatment: The Tribunal acknowledged established power to temper penalties on equitable grounds while maintaining legal liability. Interpretation and reasoning: The Tribunal accepted that although liability existed, factors warranted reduction: the transactions spanned about six months, the appellant admitted receiving remuneration totalling about Rs. 1.2 lakhs, and the appellant's age and unemployment. Taking these into account, the Tribunal reduced the monetary penalties imposed by the original orders to measured lesser sums (specified reductions were applied to the two appeals respectively). Ratio vs. Obiter: Ratio - appellate discretion permits reduction of penalty quantum based on mitigating circumstances while upholding legal liability. Obiter - numeric reasons given for specific reduced amounts reflect case-specific equitable assessment. Conclusions: While upholding liability and the legal principles invoked, the Tribunal exercised discretion to reduce the quantum of penalty in light of the appellant's personal and transactional circumstances.