Personal penalties imposed on co-noticees cannot be recovered from appellant's refund under Section 142 Customs Act 1962

CESTAT Bangalore allowed the appeal and set aside the impugned order regarding adjustment of penalties from refund amount in a foreign currency smuggling case. The tribunal held that personal penalties imposed on co-noticees cannot be recovered from the appellant's refund under Section 142 of the Customs Act 1962, as such penalties are penalty in personam against individuals and cannot be adjusted against refunds sanctioned to another party. The Revenue's attempt to recover co-noticees' personal penalties by treating the appellant as a defaulter was deemed beyond the scope of Section 142.

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Issues Involved:

1. Legality of confiscation of foreign currency and imposition of penalties under Customs Act, 1962 and Foreign Exchange Management Act (FEMA), 1999.
2. Appropriateness of adjusting penalties imposed on co-noticees from the refund amount sanctioned to the appellant under Section 142 of the Customs Act, 1962.

Summary:

1. Legality of Confiscation and Penalties:

Mr. Afsar Ulla Shariff (appellant) was found carrying foreign currencies valued at Indian Rs.29,37,702/-, which were smuggled out of India in violation of the Customs Act, 1962, and FEMA, 1999. The adjudicating authority ordered confiscation of the foreign currency u/s 113(d), 113(e), and 113(h) of the Customs Act, 1962, and imposed penalties on the appellant and co-noticees under Section 114 and 114AA of the Customs Act, 1962. The Commissioner (A) allowed the appellant to redeem the seized foreign currency on payment of redemption fine and penalty. The appellant complied and filed a refund claim.

2. Adjustment of Penalties from Refund:

The original authority sanctioned a refund but adjusted penalties imposed on co-noticees from the refund amount. The Commissioner (A) upheld this adjustment under Section 142 of the Customs Act, 1962. The appellant argued that personal penalties on co-noticees cannot be recovered from his refund.

Legal Analysis:

Section 142 of the Customs Act, 1962, permits recovery of sums due from any person from money payable to him, provided he is a defaulter. The appellant was not liable for the personal penalties of co-noticees. The Supreme Court in Union of India vs. Mustafa & Najibai Trading Co. and other cases distinguished between penalties in rem (against goods) and in personam (against individuals). Personal penalties cannot be enforced against others or their refunds.

Judgment:

The Tribunal found no justification for adjusting co-noticees' penalties from the appellant's refund. The Commissioner (A)'s reliance on Section 142 was beyond the scope of the Order-in-Original. The Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellant.

(Order pronounced in Open Court on 22.03.2024.)

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