2015 (6) TMI 652 - AT - Customs

Appeals granted, penalties reduced for non-compliance with KYC norms under Customs Act.

M/s Scope Amra Logistics (I) Pvt Ltd, M/s Marinetrans (I) Pvt Ltd, Shri Manoj B Kotian, Shri K Venugopal Versus Commissioner of Central Excise, Customs, And Service Tax, Aurangabad

The tribunal allowed the appeals of two individuals, reducing penalties imposed on the companies from Rs. 15 lakhs to Rs. 5 lakhs each. While the ... Confiscation of goods - Smuggling of red sanders - Held that:- Appellants were not involved in the smuggling of Red Sanders for the reason that the containers were stuffed and sealed with Corrugated Boxes at ICD, Waluj under the physical supervision of the custom officers, thereafter the custodian got the control of the container. The tampering of seal, change of the goods i.e. loading and concealment of prohibited goods i.e. Red Sanders were taken place in the transit from ICD to the Nhava Sheva Port. This clearly shows that the present Appellants whose role was to arrange and provide the empty container for export goods, cannot be implicated in the act of smuggling of Red Sanders. However, the Appellants have knowingly about the Public notice No. 17/2012 not complied the KYC norms of the person Shri Rohit Mahadik who placed order for container. Employees have deliberately for their vested committed an act to make the goods liable for confiscation. From the nature of the offence committed in the present case, when the penalty is imposed on the companies, penalties on the employees are not warranted. As regard penalties on the Appellant companies, I find that in view of the role of the companies, the lapse is only confined to the non compliance of KYC and not involvement in the smuggling of Red Sanders. In view of this facts, I am of the view that the quantum of penalty on the Appellant companies are very higher side and the Appellant companies deserve reduction in the penalty imposed under Section 114(i). - However, penalty reduced - Decided partly in favour of assessee. Issues:1. Imposition of penalties under Section 114(i) of the Customs Act, 1962 on the appellants for alleged involvement in smuggling of Red Sanders.2. Compliance with KYC norms and its impact on penalties imposed.3. Role of the appellants in the transportation and sealing of containers containing export goods.4. Applicability of legal precedents in similar cases to the present situation.Issue 1: Imposition of Penalties under Section 114(i):The judgment revolves around four appeals challenging the Order-in-Original passed by the Commissioner, Central Excise and Customs, Aurangabad. The penalties were imposed under Section 114(i) of the Customs Act, 1962 on the appellants for their alleged involvement in the smuggling of Red Sanders. The appellants contested these penalties, claiming they were not aware of any wrongdoing and were not directly involved in the smuggling operation.Issue 2: Compliance with KYC Norms:The failure of the appellants to comply with the Know Your Customer (KYC) norms, as outlined in Public Notice No. 17/2012, was a crucial aspect. The KYC norms were designed to prevent smuggling of prohibited goods like Red Sanders. The appellants' non-compliance with these norms was cited as a key reason for the penalties imposed, as it was deemed to have facilitated the attempt to smuggle Red Sanders.Issue 3: Role of the Appellants in Transportation and Sealing of Containers:The judgment highlighted that the appellants' role was limited to arranging and providing empty containers for export goods, specifically corrugated boxes. The containers were stuffed and sealed under the supervision of customs officers at ICD, Waluj. The actual tampering and smuggling of Red Sanders occurred during transit to Nhava Sheva Port, indicating that the appellants were not directly involved in the smuggling operation.Issue 4: Applicability of Legal Precedents:The appellants relied on legal precedents to support their defense, citing cases related to smuggling of Red Sanders under similar modus operandi. However, the tribunal distinguished these cases as they did not address the specific KYC norms outlined in Public Notice No. 17/2012. The judgment emphasized the importance of compliance with these norms in determining liability and penalties in smuggling cases.In the final analysis, the tribunal allowed the appeals of two individuals, reducing the penalties imposed on the companies from Rs. 15 lakhs to Rs. 5 lakhs each. The judgment emphasized that while the appellants were not directly involved in the smuggling of Red Sanders, their failure to comply with KYC norms made them liable for penalties under Section 114(i). The tribunal recognized the need for a reduction in penalties, considering the appellants' role and the specific circumstances of the case.