2012 (7) TMI 575 - AT - Customs

CEO fined for smuggling Red Sander logs, penalty upheld despite innocence claim

Shri P. Bhaskar Naidu Versus CC, Chennai

The appellant, CEO of an exporting firm, was penalized Rs.6 lakhs under Section 114 of the Customs Act for attempting to smuggle Red Sander logs disguised ... Penalty - Red Sander logs, prohibited for export under the Foreign Trade Policy, were being smuggled out of India – Held that:- Appellant had hatched a fraud against the department by creating a web of intermediaries to smuggle prohibited red sander logs under garb of granite cobble stones - mis-declaration of description of goods as well as consequent mis-declaration of value etc - appellant is liable to penal action under Section 114 of the Customs Act, 1962 - goods valued at Rs. 23 lakhs in the Indian market have been absolutely confiscated. In cases of absolute confiscation, where the entire value of the goods is lost to the importer/exporter, a lower penalty would meet the ends of justice - penalty imposed on the appellant is reduced Issues:Challenge to penalty imposition on the appellant under Section 129C (4) of the Customs Act, 1962 for smuggling Red Sander logs prohibited for export under the Foreign Trade Policy.Detailed Analysis:Issue 1: Challenge to Penalty ImpositionThe case involved a penalty of Rs.10 lakhs imposed on the appellant for smuggling Red Sander logs prohibited for export. The appellant, CEO of the exporting firm, was accused of creating a fraudulent scheme using intermediaries to smuggle the logs under the guise of Granite Cobble Stones. The adjudicating Commissioner found the appellant to be the main conspirator behind the smuggling operation. The appellant's defense argued lack of concrete evidence linking him to the smuggling and claimed innocence, stating he was cheated by other individuals involved. However, the department contended that the appellant, being the main person handling the firm's activities, could not escape liability for the illegal export attempt.Issue 2: Legal Basis for PenaltyThe adjudicating Commissioner imposed a penalty of Rs. 10 lakhs on the appellant under Section 114(i) of the Customs Act, 1962. Section 114(i) allows for penalties up to three times the value of the goods for contravention of prohibitions under the Act or other laws. The Commissioner found the mis-declaration of goods, in this case, Red Sander logs disguised as Granite Cobble Stones, to be a clear violation of Section 113(i). The judgment cited legal precedents, including a Supreme Court ruling, emphasizing that mens rea is not necessary to establish liability for mis-declaration of export goods. The judgment also highlighted the exporter's obligation to truthfully declare export cargo contents and the seriousness of mis-declaration, especially if the exported goods are prohibited.Issue 3: Appellant's Responsibility and Mitigating FactorsThe judgment noted several inconsistencies in the appellant's version of being duped by others, highlighting his obligations as an experienced exporter to ensure legal compliance and accurate declarations. The appellant's failure to take legal action against the alleged fraudsters and lack of proper banking channels for transactions were considered detrimental to his defense. The judgment emphasized that obtaining an excise seal does not absolve the exporter from ensuring the cargo's safe passage and accurate declaration. The appellant's attempt to shift responsibility to untraceable individuals was deemed futile, as he failed to provide actionable details for investigation.Conclusion:After thorough consideration of legal provisions, case facts, and precedents, the judgment concluded that the appellant was liable for penal action under Section 114 of the Customs Act, 1962. The penalty imposed was reduced from Rs.10 lakhs to Rs.6 lakhs due to the absolute confiscation of the impugned goods. The appeal challenging the penalty imposition was rejected, affirming the appellant's liability for the smuggling attempt.