2007 (9) TMI 69 - AT - Customs

Tribunal revokes penalty for lack of evidence on appellant's knowledge in customs violation case

The Tribunal set aside the penalty imposed under Section 112 of the Customs Act, 1962 on the appellant for assisting in selling raw silk imported ... Penalty under Section 112 of the Customs Act, 1962 for dealing with goods liable to confiscation - knowledge or reason to believe that goods were liable to confiscation - assistance or abetment in diversion/sale of dutyfree imported goods contrary to ImportExport PolicyPenalty under Section 112 of the Customs Act, 1962 for dealing with goods liable to confiscation - knowledge or reason to believe that goods were liable to confiscation - Whether penalty under Section 112(b) could be imposed on the appellant for selling imported dutyfree raw silk on behalf of the importer on the ground that he knew or had reason to believe the goods were liable to confiscation. - HELD THAT: - The appellant acted as a commission agent and effected sale of approximately 3,000 kgs. of mulberry raw silk on behalf of the importer; payment was received in cash by a representative of the importer. On being asked why no sale invoices were raised, the appellant was told that sale could not be shown because the export obligation had not been fulfilled. The record does not show that at the time of sale the appellant knew that the export obligation remained unfulfilled or that the goods were liable to confiscation, and the importer's representative did not ascribe such knowledge to the appellant. Section 112(b) attracts penalty only where the person dealt with goods which he knew or had reason to believe were liable to confiscation. Absent proof of such knowledge or belief on the part of the appellant, the statutory requirement is not satisfied. Accordingly the penalty could not be sustained.Penalty under Section 112(b) set aside and the appeal allowed.Final Conclusion: The Tribunal found no evidence that the appellant knew or had reason to believe the imported raw silk was liable to confiscation; the penalty under Section 112 was set aside and the appeal allowed. Issues:Challenge to imposition of penalty under Section 112 of the Customs Act, 1962 for assisting in selling mulberry raw silk imported duty-free against advance licenses.Analysis:The appellant contested the penalty of Rs. 10,00,000 imposed under Section 112 of the Customs Act, 1962, alleging that he assisted in selling raw silk imported duty-free in violation of Customs Notification 204/92 and the Import-Export Policy. The appellant sold 3,000 kgs of raw silk on commission basis for the importer, with payment received in cash by Jesal Kumar Exports. Notably, no sale invoices were raised due to unfulfilled export obligations, as explained by Shri Kantilal Rathod. The Tribunal observed that there was no evidence to suggest that the appellant had knowledge at the time of sale that the goods were being sold in contravention of regulations. Importantly, it was not established that the appellant was aware of the export obligation status, which would render the raw silk liable to confiscation. Shri Kantilal Rathod also did not attribute any such knowledge to the appellant. Consequently, the Tribunal held that Section 112(b) requirements, necessitating knowledge or reason to believe goods were liable to confiscation, were not met in this case. Therefore, the penalty was set aside, and the appeal was allowed.This judgment highlights the importance of establishing the accused's knowledge or reason to believe that goods were being dealt with in contravention of regulations to impose penalties under Section 112 of the Customs Act, 1962. The Tribunal emphasized that mere involvement in the sale of goods is not sufficient to attract penalties; rather, there must be a demonstrated awareness of the illegal nature of the transaction. The decision underscores the significance of clear evidence linking the accused to the unlawful activity, especially concerning the specific conditions that would render goods liable to confiscation. In this case, the lack of proof regarding the appellant's knowledge of the export obligation status was pivotal in determining the outcome of the appeal and setting aside the penalty. Consequently, this judgment serves as a precedent for cases involving penalties under Section 112, emphasizing the necessity of establishing the accused's culpable knowledge or belief in the context of customs violations.