Penalties on customs brokers set aside under Section 114(i) for drug smuggling without proof of knowledge

CESTAT Chennai set aside penalties imposed on customs brokers under Section 114(i) of Customs Act, 1962 in a case involving smuggling of prohibited drugs (pseudoephedrine and ketamine hydrochloride) concealed in pomegranate fruit cartons. The tribunal found no evidence that the brokers had knowledge of contraband items being concealed in the export consignment. Despite violations of Customs Brokers Licensing Regulations and license revocation proceedings, the tribunal held that penalty imposition without proof of knowledge was unjustified and harsh. Appeals were allowed with consequential relief.

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Issues involved: Attempted export of contraband goods concealed in cartons, imposition of penalties u/s 114(i) of Customs Act, 1962 on appellants

The judgment of the Appellate Tribunal CESTAT CHENNAI dealt with two appeals arising from a common impugned order regarding the attempted export of contraband goods concealed in cartons and the imposition of penalties under Section 114(i) of the Customs Act, 1962 on the appellants.

Attempted Export of Contraband Goods:
The Customs Intelligence Officers were informed about suspected contraband concealed in cardboard cartons of pomegranate fruits. Upon examination, it was found that 60 cartons contained white crystalline powder identified as Pseudoephedrine and Ketamine Hydrochloride. Investigations revealed that the cartons were handed over by Shri V. Radhakrishnan to Sri S. Murugaram, who filed the export documents. The original exporter, M/s.A.M. Exporters, had no knowledge of the export. The appellants were alleged to have abetted in the export of prohibited goods.

Imposition of Penalties:
The original authority imposed a penalty of Rs.1 lakh on G. Seenivasan and Rs.50,000 on S. Murugaram under Section 114(i) of the Customs Act, 1962 for their alleged involvement in the attempted export. The appellants contended that they had no knowledge of the contraband and had not violated any regulations. They argued that the penalties were unjustified and should be set aside.

Decision and Reasoning:
The Tribunal found that there was no evidence to show that G. Seenivasan had knowledge of the prohibited items in the cartons. The penalty imposed on him was deemed unjustified and not legal, especially considering the revocation of his license under Customs Brokers Licensing Regulations. Similarly, S. Murugaram had no knowledge of the contraband and had only accepted the cartons based on false information provided by Shri V. Radhakrishnan. The penalty of Rs.50,000 imposed on him was set aside. The Tribunal cited precedents where penalties were set aside due to lack of evidence of active involvement or knowledge of the illegal activities.

In conclusion, the Tribunal allowed the appeals, setting aside the penalties imposed on G. Seenivasan and S. Murugaram under Section 114(i) of the Customs Act, 1962.

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