Penalty under Section 114(i) set aside for customs house agent in red sanders smuggling case due to lack of proven active role

CESTAT Kolkata set aside penalty imposed under Section 114(i) of Customs Act against a customs house agent in red sanders smuggling case involving Nepal origin goods. The tribunal found the adjudicating authority failed to establish appellant's positive role or mens rea in the smuggling attempt. The department's case relied on conjectures and assumptions without proving beneficial consideration or active participation by the appellant. The tribunal noted that customs house agent's role was limited to processing border-endorsed documents and obtaining export clearance, not escorting consignments or verifying transporter credentials. Penalty provisions require establishment of active role and cannot be imposed based on vague allegations or negligence alone.

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Issues Involved:
1. Violation of Customs Brokers Licensing Regulations (CBLR), 2004.
2. Penal action under Section 114(i) of the Customs Act, 1962 for attempted export of prohibited goods (red sanders).

Summary:

Issue 1: Violation of Customs Brokers Licensing Regulations (CBLR), 2004

The Tribunal noted that the appellant, a partner of a Customs Brokers firm, was found wanting in discharging his obligations under Regulation 13(a), (b), and (o) of the CHALR, 2004. The Tribunal upheld the orders passed by the adjudicating authority under Regulation 20(1) of CHALR, 2004 but limited the revocation of the Custom Brokers license to a specific period, restoring it effective from 01.04.2016. The Tribunal emphasized that the appellant had no knowledge of the contraband nature of the goods substituted in the containers, and punishment for a lifetime cannot be imposed.

Issue 2: Penal action under Section 114(i) of the Customs Act, 1962

The proceedings concerned the initiation of action against the appellant for penal action under Section 114(i) of the Customs Act, which deals with penalties for attempts to export goods improperly. The show cause notice alleged that the appellant failed to comply with responsibilities as a Custom House Agent, facilitated the attempted smuggling of red sanders, and did not report discrepancies regarding container seals.

The learned Commissioner's findings indicated that the appellant did not actively participate in the attempted export but failed to exercise necessary precautions, which facilitated the attempted smuggling. However, the Tribunal found no categorical assertion of conspiracy or express omission/commission leading to fraud on the part of the appellant. There was no evidence of the appellant's positive role or abetment in the attempt to smuggle red sanders.

The Tribunal noted that the appellant's failure to check bottle seals was primarily the responsibility of Customs Officers, not the Customs Broker. The Tribunal emphasized that for penal action, a positive role or mens rea must be established, which was not done in this case. The Tribunal relied on several case laws to support the proposition that vague allegations and negligence cannot be assumed to mean abetment for invoking penal action.

The Tribunal concluded that the department's case fell short of substantiating the invocation of penalty under Section 114(i) of the Customs Act. The impugned order was set aside, and the appeal was allowed with consequential relief.

Conclusion:

The Tribunal allowed the appeal, setting aside the order passed by the learned Adjudicating Authority, and provided consequential relief to the appellant. The operative part of the order was pronounced in the open Court.

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