2013 (4) TMI 511 - AT - Customs

Tribunal overturns customs penalties citing lack of knowledge, good faith actions

The Tribunal set aside the order confiscating the goods and revoked the penalties imposed under the Customs Act, 1962 on all appellants, including the ... Misdeclaration – confiscation/penalty – As per revenue the goods attempted to be exported were of the prohibited nature and therefore, fine and penalties have been correctly imposed upon all the three appellants. – held that - As per DGFT Notification No. 55/RE-2008-2011 only Basmati Rice of certain specifications are permitted to be exported as per Serial No.55A of the above notification. Non-basmati Rice is specified under serial No. 45A of the above notification has been prohibited. In the present case appellant No. 1 had Agmark certificates in their favour and thus had no knowledge that the rice brought for export was a category of non basmati rice. However, when the DNA testing was brought to appellant’s knowledge he also requested for taking the goods back to the town as the export orders have also been cancelled, which should have been considered by the adjudicating authority. The ratio laid down by the CESTAT in the case of Sachdeva & Sons [1986 (12) TMI 215] is squarely applicable in this case and no confiscation/ penalty is imposable upon the appellant No.1. So far as the penalties imposed upon appellant No.2 are concerned, he also had no knowledge, so no penalties can be imposed upon him. Imposition of penalty upon appellant No.3 is concerned, the ratio of Tribunal in the case of M/s. Anchor Logistics vs. Commissioner of Customs Kandla [2010 (8) TMI 781] is squarely applicable as till the DNA testing was done, CHA was having no knowledge of prohibited nature of the export cargo. Therefore, penalty cannot be imposed. Issues:Appeal against order confiscating goods for export of non-basmati rice; Imposition of penalties under Customs Act, 1962 on appellants.Detailed Analysis:1. Confiscation of Goods for Export of Non-Basmati Rice:- The appellants filed appeals against an order confiscating goods meant for export, declaring them as non-basmati rice instead of basmati rice as per shipping bills.- Samples tested by Agmark Laboratory and DNA testing by BEDF revealed discrepancies in the rice declared in the shipping bills.- The appellants argued that they purchased the rice as basmati parboiled rice certified by Agmark, and DNA testing was not required as per DGFT circular.- The Tribunal noted that the appellants had no knowledge of the prohibited nature of the rice until DNA testing results, and they acted in good faith based on certifications obtained.- Relying on precedents like the Sachdeva & Sons case, the Tribunal held that no penalty or confiscation is warranted when different testing authorities provide conflicting reports.2. Imposition of Penalties under Customs Act, 1962:- Penalties under Sections 114(i) and 114AA of the Customs Act, 1962 were imposed on the appellants for the alleged violation.- The appellants contended that they had no knowledge of the rice being non-basmati and acted in accordance with certifications and DGFT circular.- Citing the case of M/s. Anchor Logistics, the Tribunal found that penalties cannot be imposed when the party had no knowledge of the prohibited nature of the cargo.- The Tribunal set aside the penalties imposed on all appellants, including the Custom House Agent, based on the lack of awareness regarding the nature of the goods meant for export.3. Judicial Precedents and Legal Interpretation:- The Tribunal referred to past judgments like Sachdeva & Sons to establish the principle that conflicting test reports absolve parties of penalties and confiscation.- Emphasizing the importance of investigations to determine misdeclaration and culpability, the Tribunal highlighted the need for thorough examination before imposing penalties.- The Tribunal applied the principles laid down in previous cases to the current scenario, concluding that the appellants were not liable for penalties due to their genuine belief in the nature of the exported goods.In conclusion, the Tribunal set aside the order confiscating the goods and allowed the appeals of all three appellants, emphasizing their lack of knowledge regarding the prohibited nature of the rice meant for export. The penalties imposed under the Customs Act, 1962 were also revoked based on the appellants' good faith actions and reliance on certifications and official communications. The judgment underscores the importance of thorough investigations and adherence to legal principles in cases involving export violations.