2024 (6) TMI 853 - AT - Customs

Section 112 penalty cannot survive once confiscation liability is set aside by Tribunal

CESTAT Mumbai held that penalty under section 112 of Customs Act, 1962 cannot be imposed on individuals once liability to confiscation has been set aside ... Confiscation under Customs Act, 1962 - Penalty under section 112 of the Customs Act, 1962 - Liability to confiscation as precondition for penalty - Abetment and acts of omission or commissionPenalty under section 112 of the Customs Act, 1962 - Liability to confiscation as precondition for penalty - Confiscation under Customs Act, 1962 - Whether penalty under section 112 can be sustained against persons when confiscation of the impugned goods has been set aside by the Tribunal in respect of the principal parties - HELD THAT: - The Tribunal observed that confiscation is a consequence qua goods while penalty under section 112 is consequential qua persons. Section 112 applies to persons who do or omit acts which render goods liable to confiscation under section 111 or who abet such acts. Therefore, imposition of penalty under section 112 necessarily presupposes a finding that the goods were liable to confiscation. As the Tribunal in the appeals of M/s Rashtriya Chemicals & Fertilizers Ltd and M/s ICICI Bank Ltd has set aside liability to confiscation in respect of the impugned consignments, there remains no foundational finding that the goods were liable to confiscation which could support penalty proceedings against the two individual appellants. Consequently, nothing survives in the impugned order insofar as penalty under section 112 is concerned in relation to these individuals. [Paras 5, 6]Penalties under section 112 cannot be sustained against the two individual appellants once confiscation of the goods has been set aside; the appeals are allowed.Final Conclusion: The appeals are allowed: in view of the Tribunal's setting aside of confiscation in the appeals of the principal parties, penalty under section 112 cannot be sustained against these two individuals and the impugned penalties do not survive. Issues involved:The issues involved in this case are related to the confiscation of goods under section 111(o) of the Customs Act, 1962, and the imposition of penalty under section 112(a) for improper importation of goods and abetment.Confiscation of Goods:The appeals were filed by individuals in connection with the clearance of goods imported without the required certifications for availing exemption under notification no. 84/1997-Cus. The Commissioner of Customs held that the clearances were permitted against forged certificates, leading to confiscation under section 111(o) of the Customs Act, 1962. The individuals were found liable for penal action u/s 112(a) for their involvement in the fraud. The Tribunal set aside the confiscation order, which had consequences for the penalty imposed on the individuals, as penalty cannot be imposed without goods being liable for confiscation.Role of Other Parties:The Tribunal delinked the appeals of other parties involved in the act of obtaining forged certificates, directing them to be considered separately based on their roles. It was emphasized that penalty under section 112 of the Customs Act, 1962 is applicable only when goods are liable for confiscation. The Tribunal clarified that penalty is related to persons responsible for acts leading to confiscation, and in the absence of confiscation as determined in the appeals of other parties, penalty cannot be imposed on any person in relation to the impugned goods.Decision and Conclusion:The Tribunal allowed the appeals of the individuals, as the confiscation of goods had been set aside, rendering the penalty unjustified. It was established that penalty under section 112(a) could not be retained once the liability to confiscation had been removed. Therefore, the impugned order did not stand in relation to the individuals, and their appeals were allowed.