2018 (6) TMI 652 - AT - Customs

Customs Act penalties overturned; lack of evidence for collusion or conspiracy; appellants not held responsible without clear proof

The Tribunal set aside the penalties imposed under Section 114 of the Customs Act on Chandra CFS and Shri M.B. Sathyam for allowing the entry of a ... Penalty u/s 114 (i) of the CA 1962 on Shri M.B.Sathyam, AGM of Chandra CFS - Department intercepted a consignment described as “Industrial Salt” received by the appellant M/s.Chandra Container Freight Station & Terminal Operators for which no shipping bill had been filed - restricted item. Held that: - there are no imputation in the SCN that they were in any way in the know of the actual nature of the cargo brought to the CFS by the exporter. There is no evidence that these appellants had colluded or conspired with the exporter or their CHA in their attempt to export MOP under the guise of Industrial Salt - There is also no allegation that the consignment has been brought by these appellants only for the purpose of export. When the Customs authorities themselves were unsure about the nature of the cargo and had to wait till the receipt of the Analytical Report to confirm that it was MOP, it would be unfair to foist an allegation on the CFS or their AGM that they were in the know of the illicit nature of the consignment, yet had allowed it to enter the CFS. When no evidence is found against the main protagonists, we are unable to fathom how Chandra CFS who only acted as a bailee of the goods can in any way be held responsible and penalized under Section 114 of the Act especially when there is no evidence that they were, in any way, knowingly involved or part of the attempted fraud - penalties do not sustain - appeal allowed - decided in favor of appellant. Issues:1. Imposition of penalty under Section 114 of the Customs Act on Chandra CFS and Shri M.B. Sathyam for allowing the entry of a consignment without a shipping bill.2. Interpretation of the provisions of Section 113 and Section 114 of the Customs Act in relation to the actions of the appellants.3. Application of the High Court judgment in CC (Exports) Chennai Vs I. Sahaya Edin Prabhu to the present case.4. Allegations against Chandra CFS and Shri M.B. Sathyam regarding the entry of the consignment and their knowledge of the actual nature of the goods.5. Lack of evidence of collusion or conspiracy by the appellants in the attempt to export restricted goods.6. Evaluation of the evidence and arguments presented by both sides to determine the liability of the appellants for penalty under Section 114.Analysis:1. The case involved the imposition of penalties under Section 114 of the Customs Act on Chandra CFS and Shri M.B. Sathyam for allowing the entry of a consignment without a shipping bill. The department intercepted a consignment described as 'Industrial Salt' which was actually 'Agricultural Grade Muriate of Potash' (MOP), a restricted item. The Commissioner imposed penalties on the appellants based on the violation of regulations regarding the filing of shipping bills.2. The interpretation of Sections 113 and 114 of the Customs Act was crucial in this case. The appellants argued that the penalties could only be imposed if they had rendered the goods liable for confiscation under Section 113 or abetted such actions. The focus was on whether the appellants' actions fell within the scope of these provisions and whether they were directly involved in the attempt to export restricted goods.3. The judgment of the Hon'ble High Court of Madras in CC (Exports) Chennai Vs I. Sahaya Edin Prabhu was cited to support the appellants' position. The High Court's decision highlighted that penalties cannot be imposed on individuals unless there is clear evidence of their involvement in acts that render goods liable for confiscation. This precedent was deemed relevant to the present case.4. The allegations against Chandra CFS and Shri M.B. Sathyam involved their knowledge of the actual nature of the goods and their role in allowing the entry of the consignment without a shipping bill. The appellants maintained that they acted in good faith and were not aware of the true nature of the cargo being exported.5. The lack of evidence of collusion or conspiracy by the appellants in the attempt to export restricted goods was a critical point of contention. The appellants argued that they were not knowingly involved in any fraudulent activities and had no prior knowledge of the illicit nature of the consignment.6. After evaluating the evidence and arguments presented by both sides, the Tribunal concluded that the penalties imposed on the appellants could not be sustained. It was determined that the appellants, acting as bailees of the goods, could not be held responsible for the attempted fraud without clear evidence of their knowing involvement. As a result, the penalties were set aside, and both appeals were allowed with consequential relief as per the law.This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's reasoning in reaching its decision.