2017 (6) TMI 743 - AT - Customs

Penalties overturned in export fraud case due to lack of evidence

CC (Port- Export), Chennai Versus Shri P. Illangovan, Shri V. Sridharan

The case focused on penalties imposed on respondents for fraudulent export activities and failure to fulfill duties under CHA Regulations. The ... Penalty on partner and employee of CHA - Export of prohibited goods - invocation of section 114 (i), 114AA, 117 of the CA, 1962 - Held that: - Tribunal in the case of Syndicate Shipping Services Pvt. Ltd. Vs. CC, Chennai [2003 (3) TMI 158 - CEGAT, CHENNAI] has held, in identical circumstances, that the CHA cannot be penalized under the Customs Act, in the absence of any positive evidence on record to show any malafide intention on his part or to establish him as an abettor. Mere failure in carrying out duties in accordance with law cannot be held to be a sufficient ground for imposition of penalty upon him - appeal rejected - decided against Revenue. Issues:1. Imposition of penalties on respondents for fraudulent export activities.2. Allegation of failure to fulfill duties under CHA Regulations.3. Applicability of Sections 114, 114AA, and 117 of the Customs Act, 1962.4. Interpretation of evidence and knowledge of respondents regarding illegal export goods.5. Comparison with previous tribunal decisions regarding penalties on CHAs.Analysis:1. The issue in this case revolves around the imposition of penalties on the respondents for their involvement in fraudulent export activities. The Commissioner (Appeals) set aside the penalties imposed by the original authority, leading to an appeal by the Revenue. The main contention was that the respondents failed to verify the genuineness of the exporter, but there was no allegation of their knowledge about the illegal goods. The penalties were imposed based on Sections 114 (i), 114AA, and 117 of the Customs Act, 1962.2. The allegations against the respondents were related to their failure to fulfill their duties as per the Customs House Agent (CHA) Regulations Act. The appellate authority rightly observed that if there was any violation of the Customs House Agents Licensing Regulations (CHALR), action could have been taken under those regulations. The reading of the show-cause notice (SCN) did not provide evidence to show that the respondents were aware of the substitution of goods.3. The interpretation of Sections 114, 114AA, and 117 of the Customs Act, 1962 was crucial in this judgment. The Commissioner (Appeals) noted that the penalties imposed on the respondents were not correct as there was no evidence to prove their awareness of the prohibited goods. The tribunal referred to previous decisions to support the conclusion that mere failure to carry out duties in accordance with the law may not be sufficient for penalty imposition.4. The key aspect of this case was the lack of evidence regarding the knowledge of the respondents about the illegal export goods. The tribunal highlighted that without positive evidence showing malafide intention or abetment, penalties under the Customs Act could not be justified. The absence of proposals under the CHALR in the SCN limited the scope of penalties that could be imposed on the respondents.5. The judgment also compared this case with previous tribunal decisions, such as Syndicate Shipping Services Pvt. Ltd. Vs. CC, Chennai and Shri Boria Ram and others Vs. CC, New Delhi. These decisions emphasized the importance of concrete evidence and adherence to regulations before penalizing CHAs. The lack of evidence implicating the respondents in the illegal export activities led to the rejection of Revenue's appeals, affirming the Commissioner (Appeals) conclusion as legal and in accordance with the law.