2022 (4) TMI 212 - AT - Customs

Tribunal rules in favor of appellant in Customs Act case, overturning penalties.

The Tribunal overturned the Commissioner of Customs (Appeals) decision, ruling that the appellant was not the 'beneficial owner' under Section 2(3A) of ... Beneficial owner - deeming fiction - goods-currency as goods and distinction from baggage - jurisdiction of the Appellate Tribunal under section 129A - scope of Customs authority vis-a -vis FEMA-carrying out of India versus acquisition/possession/useBeneficial owner - deeming fiction - scope of Customs authority vis-a -vis FEMA-carrying out of India versus acquisition/possession/use - Appellant is not a 'beneficial owner' under section 2(3A) of the Customs Act in respect of the seized foreign currency. - HELD THAT: - The Court examined the definition of 'beneficial owner' as a deeming fiction introduced in 2017 to cover situations where the actual owner is not available and acts are done at the behest of another. When the actual owner is identified, the deeming fiction does not apply. The statements recorded under section 108 showed that the foreign currency belonged to SEMPL, was acquired and maintained by SEMPL for corporate event expenses, and was handed to Amit Bali from SEMPL's accounts for discharging contractual obligations. The Additional Commissioner had found HMC and the appellant to be mere recipients of SEMPL's services and that the appellant was unaware of cash being carried by Amit Bali. The Commissioner (Appeals) relied on an earlier inconsistent statement by Amit Bali but did not give adequate weight to subsequent clarifying statements and documentary indicia that SEMPL was the owner and that invoices were raised on HMC with payments made by HMC. The Tribunal held that the Commissioner (Appeals) erred in reversing the finding that the concept of 'beneficial owner' would not arise once the actual owner (SEMPL) is identified, and that treating corporate-purpose foreign exchange as personal expenses of the appellant was conjectural. Consequently, the imposition of penalties on the appellant as beneficial owner could not be sustained. [Paras 15, 27, 29, 39]Order treating the appellant as 'beneficial owner' set aside and penalties/fines imposed on that basis quashed.Goods-currency as goods and distinction from baggage - jurisdiction of the Appellate Tribunal under section 129A - Appeal is maintainable before the Appellate Tribunal despite the proviso to section 129A concerning goods imported or exported as baggage. - HELD THAT: - The Tribunal considered the proviso to section 129A which bars appeals to the Appellate Tribunal in respect of orders relating to goods imported or exported as baggage. The Court examined statutory definitions of 'baggage' and 'goods' (which expressly include 'currency and negotiable instruments') and relied on earlier Tribunal and High Court decisions which treated currency as distinct within the definition of 'goods' and held that appeals concerning currency seizures are maintainable. Applying that precedent and the statutory scheme, the Tribunal found no merit in the Department's contention that the appeal is barred and held the appeal to be within the Tribunal's jurisdiction. [Paras 31, 38]Objection to maintainability overruled; appeal admitted and heard on merits.Final Conclusion: The Commissioner (Appeals) order holding the appellant to be the 'beneficial owner' and imposing penalties and fines is set aside; the appeal is allowed and the penalties/fines imposed on the appellant quashed. The Tribunal also ruled that the appeal was maintainable before it. Issues Involved:1. Whether the appellant can be considered a 'beneficial owner' under Section 2(3A) of the Customs Act, 1962.2. The applicability of penalties and fines under Sections 114(i) and 125 of the Customs Act, 1962.3. The maintainability of the appeal under Section 129A of the Customs Act, 1962.Issue-Wise Detailed Analysis:1. Beneficial Owner under Section 2(3A) of the Customs Act, 1962:The appellant, Chairman, CEO, and Managing Director of Hero MotoCorp Limited (HMC), was alleged to be the 'beneficial owner' of foreign currency seized from an employee of M/s Salt Experience and Management Pvt. Ltd. (SEMPL). The Commissioner of Customs (Appeals) modified the Additional Commissioner's order, imposing penalties and fines on the appellant by treating him as a 'beneficial owner' under Section 2(3A) of the Customs Act.The appellant argued that the foreign currency was managed by SEMPL for corporate events and not for his personal use. The Additional Commissioner had previously dropped proceedings against the appellant, stating that the appellant was unaware of the currency being carried by SEMPL's employee, Amit Bali, and that HMC was merely a recipient of services from SEMPL.The Tribunal reviewed various statements recorded under Section 108 of the Customs Act, including those of Amit Bali, Hemant Dahiya (Director of SEMPL), K.R. Raman (Finance Head of SEMPL), and the appellant. It concluded that the foreign currency belonged to SEMPL and was intended for corporate expenses related to events organized by HMC. The Tribunal found that the concept of 'beneficial owner' was misapplied by the Commissioner (Appeals) as the actual owner of the currency was identified as SEMPL.2. Applicability of Penalties and Fines:The Commissioner (Appeals) had imposed penalties and fines on the appellant under Sections 114(i) and 125 of the Customs Act, 1962, by treating him as the 'beneficial owner' of the seized foreign currency. The Tribunal, however, found that the foreign currency was intended for corporate expenses managed by SEMPL and not for the appellant's personal use. The Tribunal held that the penalties and fines were wrongly imposed based on conjectures and surmises.3. Maintainability of Appeal under Section 129A:The department argued that the appeal was not maintainable under Section 129A of the Customs Act, as the issue related to the export of baggage. The Tribunal examined the relevant provisions and previous judgments, including those from the Calcutta High Court and the Ahmedabad Bench of the Tribunal. It concluded that the appeal was maintainable, as the seized foreign currency was considered 'goods' and not 'baggage.'Conclusion:The Tribunal set aside the order dated 30.07.2021 passed by the Commissioner of Customs (Appeals), concluding that the appellant was not a 'beneficial owner' under Section 2(3A) of the Customs Act. The penalties and fines imposed on the appellant were also set aside, and the appeal was allowed.