2023 (5) TMI 1086 - AT - Customs

Customs penalty appeal based on misdeclaration of imported goods upheld but later overturned on procedural grounds

The appellant appealed against the penalty imposed under sections 112(a) and 114AA of the Customs Act, 1962, for misdeclaration of imported goods. The ... Levy of penalty u/s 112(a) of Customs Act, 1962, and u/s 114AA of Customs Act, 1962 - mis-declaration of imported goods - allegation that import export code (EC) had been procured illicitly - HELD THAT:- It is on record that bill of entry had not been filed under section 46 of Customs Act, 1962 for imported of the said goods. Accordingly, scope for invoking of section 111(m) of Customs Act, 1962 for confiscation of goods arising from misdeclaration and, in the absence of documents available on record, the ingredients for invoking of section 114AA of Customs Act, 1962 did not exist. All documents available till then are limited to those mandated by section 30 of Customs Act, 1962 upon carrier of goods. Penalties are not imposable on the presumption that goods are likely to be misdeclared or to be attempted to be cleared against false declaration and incorrect material. Confiscation under section 111(d) appears to have been invoked in a routine manner inasmuch as the impugned goods are not prohibited for import. Until bill of entry is filed, the identity of the importer, and lack of ‘import-export code (IEC)’ will not be known. Though adjudicating authority has invoked the provisions of Prohibition of Benami Property Transactions Act, 1988 without any empowerment to do so, and ostensibly to bring the appellant within the scope of Customs Act, 1962 in circumstances initiating proceedings even before bill of entry was filed, that law, intended to be invoked for prosecution as a consequence of holding property in ‘benami’ as well as for interdiction of such property, exists as an independent statute not amenable for concatenation with Customs Act, 1962 by any enabling provision. The impugned order, failing to sustain under law, is set aside and appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether confiscation and penalties under the Customs Act (specifically sections 111(d), 111(m), 112(a) and 114AA) can be validly imposed where no bill of entry has been filed and the goods have not been entered for import under section 46. 2. Whether penalties under the Customs Act can be imposed on a person alleged to have procured an import-export code (IEC) illicitly, when the identity of the importer is not established because the goods were not entered for import. 3. Whether the Prohibition of Benami Property Transactions Act (PBPT Act) can be lawfully invoked or concatenated by the Customs authorities to render a person liable under the Customs Act in absence of statutory empowerment to treat property as benami in Customs proceedings. 4. Whether section 111(m) (confiscation for misdeclaration) and section 114AA (penalty for certain mis-declarations/attempts) can be applied where record evidence is limited to carrier documents required by section 30 and no import-entry documents exist. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of confiscation/penalties where no bill of entry filed (sections 46, 111(d), 111(m), 112(a), 114AA) Legal framework: Section 46 requires filing of bill of entry for goods to be entered for import. Section 111(d) empowers confiscation for contravention of any prohibition for import; section 111(m) deals with confiscation for mis-declaration; section 112(a) and section 114AA provide for penalties in specified circumstances. Precedent treatment: Parties relied on Tribunal and High Court decisions to the effect that penalties are not attracted unless goods are entered for import; the Court considered those authorities in context. Interpretation and reasoning: The Court held that, on the material on record, no bill of entry had been filed. In absence of filing under section 46, the goods had not been entered for import and therefore the identity of the importer and the factual foundation for invoking misdeclaration provisions were not established. The available documents were limited to those mandated by section 30 (carrier documents). The Court reasoned that confiscation under section 111(d) and section 111(m) and imposition of penalties under sections 112(a) and 114AA presuppose the existence of import-entry and factual misdeclaration or other statutory contraventions proved on the record; penalties cannot be imposed on the basis of speculation that goods are 'likely' to be misdeclared or may be attempted to be cleared against false declaration. Ratio vs. Obiter: Ratio - Where no bill of entry is filed and goods are not entered for import, confiscation under sections 111(d)/111(m) and penalties under section 112(a)/114AA cannot be sustained merely on carrier documents or presumption. Obiter - Observations about routine invocation of section 111(d) in other cases are illustrative but not necessary for decision. Conclusions: Confiscation and penalties premised on misdeclaration or entry-related contraventions cannot be sustained in the absence of bill of entry and proof that goods were entered for import; the impugned confiscation and penalties were set aside on that ground. Issue 2 - Liability of person alleged to have illicitly procured IEC when importer identity is not established Legal framework: Liability under the Customs Act for import-related offences depends on establishing the role and status of the person as importer or person responsible under relevant Customs provisions; procurement of IEC is an external fact relevant to identification of importer. Precedent treatment: Counsel relied on earlier Tribunal and High Court authorities supporting non-imposition of penalties absent entry for import; the Court accepted the principle that penalty regimes attach to import/entry and not merely to possession of carrier documents. Interpretation and reasoning: The Court noted that the appellant had denied involvement in import and that goods were consigned to a different trading entity. The Court observed that until a bill of entry is filed, the identity of the importer and absence or presence of IEC cannot be conclusively established. Admissions or statements regarding illicit procurement of IEC, in the absence of entry and corroborative documentary proof tying the appellant to the act of importation or to the goods, are insufficient to sustain confiscation or penalty. The Court emphasized that penalties are not to be imposed on the basis of presumption or speculation about future mis-declaration or attempted clearance. Ratio vs. Obiter: Ratio - A person cannot be held liable to customs confiscation/penalty merely on the basis of alleged illicit procurement of IEC where the statutory import-entry has not been made and the identity of the importer is not established. Obiter - Comments on investigative practice and the insufficiency of carrier documents are explanatory. Conclusions: Allegations of illicit procurement of IEC, standing alone and without proof of entry for import or other statutory ingredients, do not suffice to attract confiscation or penalties under the Customs Act. Issue 3 - Permissibility of invoking the Prohibition of Benami Property Transactions Act (PBPT Act) in Customs adjudication to create liability under the Customs Act Legal framework: The PBPT Act is an independent statute aimed at treating properties held benami and prescribing consequences; Customs Act contains its own scheme for confiscation and penalties. A statute not expressly incorporated cannot be concatenated to extend liability under another enactment unless empowered. Precedent treatment: The Court considered that the adjudicating authority had invoked the PBPT Act without statutory empowerment to do so for Customs adjudication purposes; no appellate or precedent-based justification for such concatenation was found on the record. Interpretation and reasoning: The Court held that invoking the PBPT Act by Customs authorities to bring a person within the ambit of the Customs Act, particularly prior to an import-entry being made, lacks legal foundation. The PBPT Act operates as an independent code; its provisions cannot be grafted onto Customs proceedings to supply jurisdictional or substantive ingredients absent express enabling provisions. The exercise appeared to be an attempt to obtain, by reference to the PBPT Act, a foundation for imposing customs consequences even where the statutory requisites under the Customs Act were missing. Ratio vs. Obiter: Ratio - Customs authorities cannot lawfully concatenate the PBPT Act with the Customs Act to create or supply jurisdictional basis for confiscation/penalty in the absence of express statutory empowerment. Obiter - Observations on intended use of PBPT Act (prosecution/interdiction) are illustrative. Conclusions: Invocation of the PBPT Act to justify confiscation/penalty under the Customs Act in circumstances where the statutory prerequisites for customs action are absent is impermissible; such invocation does not cure the lack of foundational facts required under the Customs Act. Issue 4 - Applicability of section 111(m) and section 114AA where only carrier documents under section 30 exist Legal framework: Section 30 prescribes carrier's documents; sections 111(m) and 114AA require proof of misdeclaration/attempt or other specified ingredients for confiscation/penalty. Precedent treatment: The Court treated earlier authorities as supportive of the proposition that penalties and confiscation provisions tied to import-entry cannot be invoked where only carrier documentation exists and no bill of entry has been filed. Interpretation and reasoning: The Court found the record limited to documents required from the carrier under section 30; there was no bill of entry or other import-entry documents to demonstrate misdeclaration or attempted clearance. Consequently, the elements necessary to invoke section 111(m) and section 114AA were absent. The Court rejected the imposition of penalties on assumptions or possibilities of future misuse of importer credentials or false declarations. Ratio vs. Obiter: Ratio - Sections 111(m) and 114AA cannot be validly invoked where the record contains only carrier documents and lacks the import-entry documentation required to establish misdeclaration or attempt to clear goods by false declaration. Obiter - Remarks on investigative timing and routine invocation of provisions are ancillary. Conclusions: The ingredients for invoking section 111(m) and section 114AA were not present on the record; therefore those provisions could not sustain the impugned confiscation and penalties. Overall Disposition The Court held that, on the available material, confiscation and penal consequences under the Customs Act were unsustainable where no bill of entry was filed, the identity of the importer was not established, the statutory ingredients of sections 111(d)/111(m)/112(a)/114AA were absent, and the PBPT Act could not be concatenated with the Customs Act to cure those defects; the impugned order was set aside and the appeal allowed.