2014 (5) TMI 56 - AT - Customs

Judge overturns penalties for importers and employees under Customs Act citing prior payment, referencing precedents.

The judge set aside penalties imposed on importers and their employees under section 112(a) of the Customs Act 1962 for defrauding customs duty, citing ... Imposition of penalties - u/s 112(a) of the Customs Act 1962 - Cutoms Duty – Erroneous business diligence - Duty & Interest paid - Held That:- Duty has already been discharged by importers alongwith interest - This Court finds that the penalties imposed on the importers and their employees is not sustainable – The action of the importers or their employees in paying an amount for which was shown by the individuals who master minded the entire fraud, can at the most be an act of erroneous business diligence on their part - Such an action is not covered u/s 112(a) in as much as the importers or their employees never could have had a doubt that their goods are liable for confiscation, as the said goods were removed on BOE on which there was payment of duty - Importers having discharged the customs duty and the interest thereof on all the goods imported by them, the question of visiting them with penalty does not arise - The importer cannot be charged with the commission of omission which made the goods liable for confiscation - The importers and their employees have made out the case for setting aside the penalty imposed on them – Relied upon M/s ITW India Ltd vs Commissioner of Customs, Chennai 2006(198) ELT.117 [2005 (10) TMI 392 - CESTAT, BANGALORE] – Decided in favour of assesse. Issues: Imposition of penalties under section 112(a) of the Customs Act 1962 on importers and their employees for defrauding customs duty.Analysis:1. The judgment pertains to multiple appeals involving importers and their employees, raising a common question regarding the imposition of penalties under section 112(a) of the Customs Act 1962. The issue revolves around the defrauding of customs duty by an individual named Malleshwar Rao.2. The Adjudicating Authority had imposed penalties on the importers and their employees, alleging a failure to ascertain the correct identity of individuals involved in the fraud and a breach of business ethics by purchasing demand drafts not issued by their own bankers. However, the presiding judge found that the penalties were not sustainable based on the facts presented.3. The judge concluded that the importers and their employees could not be held liable for penalties as they had already discharged the customs duty along with interest for the goods imported. The judge reasoned that the actions of the importers, even if erroneous in business diligence, did not warrant penalties under section 112(a) of the Customs Act 1962.4. Citing precedents such as *M/s ITW India Ltd vs Commissioner of Customs, Chennai 2006(198) ELT.117 (Tri.-Bang.)* and *M/s Hetero Drugs Ltd vs. Commissioner of Customs, Chennai 2004(168) ELT.211 (Tri. Bang.)*, the judge supported the decision to set aside the penalties imposed on the importers and their employees.5. Consequently, the judge set aside the impugned order challenging the penalization and allowed the appeals in favor of the importers and their employees. The judgment was pronounced on 4.4.2014, providing relief to the appellants against the penalties imposed under section 112(a) of the Customs Act 1962.