2024 (2) TMI 321 - AT - Customs

Customs broker partner's penalty under Section 114(i) overturned for lack of evidence in red sanders smuggling case

CESTAT Kolkata set aside penalty imposed under Section 114(i) of Customs Act, 1962 against customs broker partner in red sanders smuggling case. Court ... Levy of penalty u/s 114(i) of the Customs Act, 1962 - smuggling of red sanders - prohibited goods or not - HELD THAT:- It is evident that nothing specific alleging a positive role played by the opponent in the attempted export of red sander wood is forthcoming from the order of the learned adjudicating authority least of all carrying out an act or omission to render the seized goods liable to confiscation. In fact in para 10.1 of his order reproduced supra, there is a certain reference to the wrong doings on part of the exporter, undoubtedly pinning the blame on the exporter and not the Customs Broker - It may also be pertinent that for imposition of penalty under Section 114(i), it is necessary to show contumacious action with regard to the subject goods, as the opening clause itself of the section as well as subclause (i) talks of and concerns the goods for which a violation or a contravention arises leading to the imposition of penalty therein. There is nothing to impute by way of a categorical assertion the conspiring of, or an express omission or commission, leading to the fraud on the part of the appellant. There is nothing in the findings of the learned Commissioner to assert a positive role or to impute abetment on the part of the appellant in the attempt to smuggle out Red Sander Wood. Thus, in view of anything specific on the part of the appellant being brought on record, it would be completely inappropriate to subject the appellant to penal provisions under Section 114(i) - in order to take penal action against the present appellant, a partner of the Customs Brokerage firm, it is necessary in law to show that the appellant had in any way connived in the substitution of the declared cargo, or was in the knowledge of the fact that the declared cargo loaded in the container was substituted with prohibited goods. There is no such finding by the adjudicating authority in the matter. It is on record that the bottle seals were intact when the goods were subjected to examination in the docks. Further, the container was factory sealed, where the Customs Broker had no role to play. It be noted that in terms of the obligations under the CHALR,- i.e. Violation of Regulation 11(n), no case remains any further in view of the said proceedings, having attained finality. It is expressly incumbent on the department to have pointed out the role played by the appellant herein for imposition of penalty on them under Section 114(i) of the Customs Act - there is no finding by the adjudicating authority to indicate any beneficial consideration having been passed on to the appellant by way of a monetary reward or otherwise for his assumed role for which the appellant has been penalised by the adjudicating authority. The order of the learned adjudicating authority cannot be sustained and needs to be set aside - Appeal allowed. Issues Involved:1. Imposition of penalty under Section 114(i) of the Customs Act, 1962.2. Adherence to principles of natural justice.3. Role of the Customs Broker in the attempted smuggling.4. Applicability of previous Tribunal orders and case laws.Summary:Imposition of Penalty under Section 114(i) of the Customs Act, 1962:The appellant challenged the Order in Original No. KOL/CUS/COMMISSIONER/PORT/06/2019, dated 14.02.2019, which imposed a penalty of Rs.10 lakh under Section 114(i) of the Customs Act, 1962. The penalty was imposed for the appellant's alleged role in the attempted smuggling of 8940 kgs of red sanders wood concealed under 7260 kgs of HC Binding Wire. The goods were seized under Section 110 of the Act, and a show cause notice was issued under Section 124 of the Act.Adherence to Principles of Natural Justice:The appellant had previously filed a petition before the Hon'ble High Court of Calcutta for cross-examination of other noticees, which was granted. The adjudication process included this cross-examination, and no grievance was raised regarding the adherence to principles of natural justice.Role of the Customs Broker in the Attempted Smuggling:The adjudicating authority held the appellant liable for penal consequences under Section 114(i) of the Customs Act, citing the appellant's failure to verify the credentials of the exporter and the involvement of dubious middlemen. However, the Tribunal found that there was no specific evidence or finding to impute a positive role or abetment by the appellant in the smuggling attempt. The Tribunal noted that the container was factory sealed and the seals were intact, indicating no role of the Customs Broker in the substitution of the declared cargo.Applicability of Previous Tribunal Orders and Case Laws:The Tribunal referenced its earlier order, which revoked the Customs Broker License of the appellant firm but cautioned the firm to be vigilant in the future. The Tribunal also cited several case laws to emphasize that for imposing a penalty, it is necessary to establish a positive role or mens rea on the part of the concerned person. Vague allegations of negligence or non-verification do not suffice for penal action.Conclusion:The Tribunal concluded that the adjudicating authority's order lacked specific findings of the appellant's complicity or abetment in the smuggling attempt. Therefore, the order imposing a penalty under Section 114(i) was set aside, and the appeal was allowed with consequential relief, if any, in law.