Tribunal overturns penalty in Customs Act case due to lack of knowledge, good faith

The Tribunal allowed the appeal, setting aside the penalty imposed on the appellant under Section 114 of the Customs Act. The appellant, a dealer/trader in stones, was found to have acted in good faith and without knowledge of the smuggling of red sanders. The lack of mens rea and the statements of customs officials supported the conclusion that the appellant had not knowingly facilitated the smuggling. The appellant was granted consequential benefits in accordance with the law.

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Issues Involved:
1. Substitution of the deceased appellant and continuation of the appeal.
2. Alleged smuggling of red sanders under the guise of exporting granite blocks.
3. Examination and cross-examination of various parties involved.
4. Imposition of penalties under Section 114 of the Customs Act.

Detailed Analysis:

1. Substitution of the Deceased Appellant:
The appeal was initially filed by Shri B. Siva Prasad, who passed away during the pendency of the appeal. His son and legal heir, Shri B. Anvesh, filed a fresh vakalat and was allowed to be substituted to pursue the appeal.

2. Alleged Smuggling of Red Sanders:
The appellant, a dealer/trader in stones, was approached by Mr. K. Prabhakaran for exporting stones to China. The appellant procured and exported the stones, but the containers were intercepted by DRI officials on suspicion of smuggling red sanders. Upon examination, the containers were found to be stuffed with red sanders instead of the declared granite blocks. The appellant claimed no knowledge of the substitution and stated that Mr. K. Prabhakaran handled the logistics.

3. Examination and Cross-Examination:
- Customs Officials: Statements from customs officials indicated that the containers were sealed with customs seals and found intact at the gateway port. This suggested that the appellant had taken reasonable care and had no mens rea.
- Mr. Premchand Gupta (Sungrace Logistics): Confirmed that containers were released at the instance of Mr. K. Prabhakaran, with no direct involvement from Baba Rocks.
- Smt. Susan Verghese (DRI): Acknowledged that Mr. K. Prabhakaran arranged everything and that Baba Rocks merely lent their IEC code. She also noted a lack of thorough investigation.
- Mr. Nageshwara Rao and Mr. Ramesh Babu (Customs): Confirmed that granite blocks were properly examined and sealed at ICD, with no discrepancies noted until the containers were opened at the gateway port.

4. Imposition of Penalties:
The impugned order imposed a penalty of Rs. 1 crore on the appellant under Section 114 of the Customs Act, citing negligence and failure to exercise due diligence. Penalties were also imposed on other parties involved, including Mr. A. P. Raja, M/s Sterling Container Line Madras Private Ltd., and Mr. K. Prabhakaran.

Judgment:
The Tribunal found that the appellant had acted in good faith and had not knowingly facilitated the smuggling of red sanders. The statements of customs officials and the lack of thorough investigation supported this conclusion. Therefore, the penalty imposed on the appellant was set aside, and the appeal was allowed with the appellant entitled to consequential benefits in accordance with the law.

(Order pronounced in open court on 17.07.2019)

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