2016 (8) TMI 830 - AT - Customs

Penalty under Customs Act 1962 set aside due to lack of involvement, innocence established

The Tribunal set aside the penalty imposed on Natwar Dalmia under Sec 112(a) of the Customs Act 1962, citing lack of direct involvement and establishing ... Penalty under Section 112(a) of the Customs Act, 1962 - Liability of a limited company versus an individual shareholder/promoter - Requirement of specific findings of active participation or fraud for imposing personal penalty - Withdrawal of appealPenalty under Section 112(a) of the Customs Act, 1962 - Liability of a limited company versus an individual shareholder/promoter - Requirement of specific findings of active participation or fraud for imposing personal penalty - Penalty imposed on Shri Natwar Dalmia under Section 112(a) of the Customs Act, 1962 is not sustainable. - HELD THAT: - The adjudicating order did not record any specific act, omission or role of Shri Natwar Dalmia which would attract personal liability under Section 112(a); he was not an office-bearer of the importer company, did not sign customs documents and his statement was not recorded. Precedent establishes that, absent findings of fraud or active participation, the liabilities arising from import irregularities rest with the corporate person (the importer) and not with individual shareholders or promoters. Having regard to the lack of particularised findings against Shri Natwar Dalmia and the authorities relied upon, the penalty imposed was excessive and without a legal foundation and therefore liable to be set aside. [Paras 5, 6]Penalty imposed upon Shri Natwar Dalmia under Section 112(a) set aside; appeal C/688/1999 allowed.Withdrawal of appeal - Appeal No. C/350/1998 by La Grande Projects Ltd. disposed of as withdrawn at the instance of the appellant. - HELD THAT: - The appellant La Grande Projects Ltd. sought permission to withdraw its appeal on the ground that no adverse order had been passed against it by the adjudicating authority. The bench allowed the request and disposed of the appeal as withdrawn. [Paras 7]Appeal No. C/350/1998 disposed of as withdrawn.Final Conclusion: The penalty imposed on Shri Natwar Dalmia under Section 112(a) of the Customs Act, 1962 was quashed for want of specific findings of personal culpability; the appeal against that penalty was allowed. A separate appeal by La Grande Projects Ltd. was permitted to be withdrawn and is disposed of as withdrawn. Issues Involved:1. Penalty imposition on appellant Natwar Dalmia under Sec 112(a) of the Customs Act 1962.2. Withdrawal of appeal filed by La Grande Projects Ltd.Analysis:Issue 1: Penalty imposition on appellant Natwar Dalmia under Sec 112(a) of the Customs Act 1962:The case involved an appeal by appellant Natwar Dalmia against a penalty of Rs. 105 lakh imposed under Sec 112(a) of the Customs Act 1962. The appellant argued that no statement was recorded by the investigation and that he was implicated based on statements of directors of La Grande Projects Ltd. It was highlighted that similar cases in Mumbai and Indore had resulted in no penalty on Natwar Dalmia. The appellant's counsel referenced various case laws to support the argument that penal liability should be borne by the importer company only. The Revenue contended that Natwar Dalmia was the mastermind behind the fraud, as stated by other directors, and defended the penalty imposed.The Tribunal considered the arguments and case laws cited. It noted that in similar cases in Mumbai and Indore, no penalty was imposed on Natwar Dalmia. The Tribunal referred to case laws emphasizing that the liability of a shareholder would be limited to his shareholding and that penalties on officers of the company are not permissible in the absence of fraud or misappropriation. It was observed that Natwar Dalmia was not an office bearer of La Grande, had not signed any Customs documents, and his specific role in the fraud was not established. Considering the principles of equity and the lack of direct involvement of Natwar Dalmia, the Tribunal found the penalty imposed on him unsustainable and set it aside, allowing the appeal.Issue 2: Withdrawal of appeal filed by La Grande Projects Ltd:The appeal filed by La Grande Projects Ltd was sought to be withdrawn as no adverse order had been passed against the appellant by the Adjudicating authority. The appellant's counsel requested that the appeal be allowed to be withdrawn. The Tribunal disposed of Appeal No. C/350/1998 as withdrawn.In conclusion, the Tribunal allowed the appeal filed by Natwar Dalmia, setting aside the penalty imposed under Sec 112(a) of the Customs Act 1962. The appeal filed by La Grande Projects Ltd was disposed of as withdrawn.