2015 (3) TMI 778 - HC - Customs

Court overturns Tribunal's penalty order under Customs Act, stresses need for meticulous consideration.

Chandrakant Thakkar, Ashte Logistic Pvt. Ltd., George Joseph Thokalath Versus The Commissioner of Customs (Exports)

The Court overturned the Tribunal's decision to maintain penalty orders under the Customs Act, emphasizing the lack of specific regulations empowering ... Violation of Regulation 6(n) and Regulation 9 - Imposition of penalty - Penalties under Regulation 12 (8) of the Handling of Cargo in Custom Area Regulation, 2009 and Section 158(3) of the Customs Act, 1962 and penalties on the co-appellant of ₹ 1 lakh each under Section 117 - Held that:- The allegations would reveal as to how the boundary wall of the CFS encompasses the whole area of Survey Nos. 117 and some 145 containers are stacked in the unauthorised area. The whole show cause notice is premised on the fact that the Customs operations have been carried out in the area outside the demarcated CFS. Therefore, unauthorised area has been brought in within the purview of the CFS. The Directors of the Appellants had clarified that Survey No.117 was not a part of notified area, however they stated that while constructing the wall of the CFS they did not pay particular attention to the various survey numbers mentioned in the Notification. The Directors further informed that the initial wall of the CFS was constructed including the area of Survey No. 117. The legal owner of Survey No. 117 is Shri.Ramesh Gharat and they have a lease agreement with him for 15 years. The reply to this allegation in the show cause notice reveals that all the directions have been complied with and the total area together with the boundaries has been indicated in the reply to the show cause notice. Thus, the land Survey No. 117 was, according to the Appellants, already used by them as open warehouse for storing various goods and which was enclosed by 10 feet wall. It was incumbent upon the Tribunal to find out whether the allegations in the show cause notice and particularly of violation of Regulation 6(n) and Regulation 9 could be held to be established and proved. Regulation 6(n) sets out the responsibility of Customs Cargo Service Provider not to make any alteration in the entry or exit points or boundary wall without the permission of the Commissioner of Customs. Regulation 9 provides for an application for approval of Customs Cargo Service Provider and the details in which it has to be made. - If the show cause notice alleges violation and breach of these Regulations and section 8(b) and 141(2) of the Customs Act, 1962, then, we do not see how the Tribunal, in a single paragraph reasoning, makes no reference to any of these provisions or the clauses of the Regulations, but only section 158. An imposition of penalty has a far reaching effect and consequence and may result in suspension of the approval or withdrawal of it or nonPage renewal thereof. Therefore, all such matters have to be gone into and considered meticulously, minutely and seriously. That having not been done and the Tribunal failing to apply its mind to some of the most important and crucial factors that we are constrained to set aside the impugned order. - Decided in favour of appellants. Issues:1) Whether the Tribunal was justified in maintaining the penalty order under section 158(2)(ii) of the Customs Act, 1962 without specific regulationsRs.2) Whether the Appellants violated Regulation 6(n) and Regulation 9 of the Handling of Cargo in Customs Area Regulations, 2009Rs.Analysis:1) The Appellants applied for permission to set up a Container Freight Station (CFS) and obtained approval from the Inter-Ministerial Committee. The dispute arose when a portion of the CFS area was found to be unauthorized during a physical verification. The Customs Department suspended the approval, directing the containers to be shifted. A show cause notice alleging violations of Regulations and permission conditions was issued. The Tribunal upheld the penalties, citing non-compliance with Regulations. However, the Appellants argued that the Tribunal failed to consider crucial issues regarding the imposition of penalties and the absence of specific Regulations empowering penalties. The Court found the Tribunal's order lacking in critical analysis and overturned it, emphasizing the need for meticulous consideration before imposing penalties.2) The show cause notice accused the Appellants of storing goods in an unauthorized area outside the demarcated CFS. The Appellants clarified that while constructing the CFS wall, they inadvertently included Survey No. 117 in the area. They had a lease agreement for Survey No. 117 and enclosed it within the CFS boundary. The Tribunal's reasoning focused on section 158 of the Customs Act, overlooking the specific Regulations allegedly violated. The Court highlighted the importance of assessing whether the alleged breaches were intentional and deliberate, as penalties have significant consequences. As the Tribunal failed to delve into these crucial aspects, the Court set aside the penalty order and remanded the case for a fresh decision, emphasizing a thorough examination of all relevant factors.3) In conclusion, the Court allowed the Appeals, quashed the penalty order, and directed the Tribunal to reconsider the case based on its merits and in compliance with the law. The Court refrained from expressing opinions on the facts, leaving them open for the Tribunal's review. The judgment stressed the necessity of a comprehensive evaluation before imposing penalties, ensuring a fair and just decision-making process.