2024 (6) TMI 198 - AT - Customs

Freight forwarder faces Rs. 5 lakh penalty under Section 112(a) for smuggling cigarettes worth Rs. 3.32 crore without proper verification

Mukhtar Shaikh Versus Commissioner of Customs (Import – I), Maharashtra

CESTAT Mumbai upheld penalty of Rs. 5,00,000/- under Section 112(a) of Customs Act, 1962 against freight forwarder for smuggling foreign origin cigarettes ... Levy of penalty u/s 112(a) of the Customs Act, 1962 on the appellant - smuggling of foreign origin cigarettes - sufficient opportunity for personal hearing was not given - principles of natural justice. Levy of penalty u/s 112(a) of the Customs Act, 1962 on the appellant - smuggling of foreign origin cigarettes - sufficient opportunity for personal hearing was not given - HELD THAT:- From plain reading of the legal provisions under Section 112(a) of the Customs Act, 1962, it is clear that it is in relation to ‘goods’ which are liable to confiscation under Section 111 ibid, and that such penalty is liable to be imposed on ‘any person’. It also transpires that the provision under Section 112(a) ibid is attracted under the following situations viz. (a) when ‘any person’ does or omits to do any act which act or omission would render such goods liable to confiscation, or (b) when ‘any person’ abets the doing or omission of such an act. The factual matrix of the case also clearly provide that the appellant acting as the freight forwarder, undertook the task of collecting/ receiving various import documents, act of preparing the checklist for filing the bill of entry, and as their entity not being a CHA/customs broker, had forwarded such documents to the CHA/CB M/s P.N. Shipping Agency, for filing the bill of entry to enable clearance of such smuggled goods. Further, no proper verification of the importer, existence of the importer, the authenticity of authorisation to handle such documents received from unknown or unconnected person having no authority, was done by the appellant - in terms of legal provisions under Section 112(a) ibid, this case fits in the four corners of the situations mentioned in such provision where the proper authority could impose penalty. Further, the value of smuggled foreign origin cigarettes at Rs.3,32,62,160/- which were attempted to be cleared by various persons involved in the offence including the appellant is very high and significant. Thus, it is found that the above acts done by the appellant clearly prove that it is a planned action on their part to conceal the smuggled foreign origin cigarettes, right from the stage of preparation of documents for filing bill of entry, filing the declarations including B/E, manner of payment of customs duties and other dues etc. so that the act of smuggling is not detected by customs authorities - The penalty imposed for Rs.5,00,000/- is upheld. Violation of principles of natural justice - HELD THAT:- It is not the case of appellant that sufficient opportunity for personal hearing was not given to them to explain their position and to defend their stand. It is found that the Original authority has given personal hearing to all the noticees on 01.03.2016 & 02.03.2016, and again on 16.08.2016, 17.08.2016 & 18.08.2016. In respect of the appellant, one Advocate Shri Ashwini Jadhav had appeared to explain their stand before the Original authority on 01.03.2016 and Shri Mukhtar Ismail Shaikh, himself also appeared on 17.08.2016 before the original authority explaining their case. Further, the appellant had also appeared before the Commissioner of Customs (Appeals) for personal hearing on 05.10.2017 and had reiterated the grounds of appeal filed against the original order - thus, sufficient opportunity for personal hearing has been given to the appellant, both at the original stage of adjudication of the appellant’s case and at the first appeal stage, therefore the impugned order fulfils the requirement of adhering the principles of natural justice in arriving at a decision and passing a speaking order on the disputed issue. It is found that in a similar case of smuggling of foreign origin cigarettes in SHRI ASHOK T SADARANGANI VERSUS COMMISSIONER OF CUSTOMS (PREV) , MUMBAI. [2024 (2) TMI 1387 - CESTAT MUMBAI], the Tribunal had passed an order upholding the imposition of penalty under Section 112(a) of the Customs Act, 1962. The provisions of Section 112(a) ibid does apply to the present case of the appellant conoticee who is a Proprietor in a Freight Forwarding firm - the imposition of penalty under Section 112(a) ibid can be upheld in the present case of the appellant. The impugned order dated 28.02.2018, to the limited extent of imposition of penalty of Rs. 5,00,000/- on Shri Mukhtar Shaikh, Proprietor of M/s Fast Forward Logistics Solutions under Section 112(a) of the Customs Act, 1962 - appeal dismissed. Issues Involved:1. Legality of the imposition of penalty u/s 112(a) of the Customs Act, 1962.2. Role of the appellant in the smuggling of foreign origin cigarettes.3. Adherence to principles of natural justice.Summary:1. Legality of the imposition of penalty u/s 112(a) of the Customs Act, 1962:The Tribunal examined whether the imposition of penalty on the appellant u/s 112(a) of the Customs Act, 1962, was legally sustainable. The relevant legal provisions under Section 112(a) were cited, which state that any person who does or omits to do any act rendering goods liable to confiscation under section 111, or abets such acts, is liable for penalty. The Tribunal found that the appellant's actions fit within these provisions, justifying the penalty imposed.2. Role of the appellant in the smuggling of foreign origin cigarettes:The appellant, as a proprietor of a logistics firm, was involved in the illegal clearance of smuggled foreign origin cigarettes camouflaged as trolley bags. The appellant received import documents from an unauthorized person and forwarded them to a Customs House Agent (CHA) without proper verification. The investigation revealed that the appellant played an active role in the smuggling operation, including the preparation of documents and payment arrangements, which indicated complicity in the illegal act. The Tribunal upheld the penalty, noting that the appellant's actions were part of a planned scheme to smuggle cigarettes.3. Adherence to principles of natural justice:The Tribunal confirmed that the principles of natural justice were adhered to, as the appellant was given sufficient opportunities for personal hearings at both the original adjudication and first appeal stages. The appellant's presence and explanations were duly considered, fulfilling the requirement of a fair hearing process.Conclusion:The Tribunal upheld the imposition of a penalty of Rs. 5,00,000/- on the appellant u/s 112(a) of the Customs Act, 1962. The appeal filed by the appellant was rejected, and the impugned order dated 28.02.2018 was confirmed as legally sustainable.