2024 (7) TMI 870 - AT - Customs

Tribunal Overturns Penalties for Lack of Evidence, Emphasizes Mere Non-Diligence Doesn't Justify Customs Act Fines.

The tribunal concluded that the penalties imposed on the appellants under Section 117 of the Customs Act, 1962, were unsustainable due to a lack of ... Levy of penalty u/s 117 of the Customs Act, 1962 - only allegation in the SCN against these appellants is that as a CHA, the appellant did not exercise due diligence - HELD THAT:- The findings in the impugned order for imposing penalty is that the appellants have not been diligent enough to verify antecedents of the exporter and thereby facilitated the fraudulent export and availment of undue draw back. Being a CHA, the appellant has filed shipping bill on behalf of the exporters. Needless to say, that the details of value of the goods are entered in the shipping bill as per the instructions given by the exporter. It is not brought out from evidence that the CHA had in any manner assisted the exporter in over invoicing the goods so as to facilitate the availment of ineligible draw back. The act of not being diligent enough in verifying the antecedents of the exporter would attract the provisions of CBLR, 2018 and it cannot be a ground for imposing penalty under Section 117 of the Customs Act, 1962 - In the case of MOHAK ENTERPRISE VERSUS COMMISSIONER OF CUSTOMS, AHMEDABAD [2024 (2) TMI 1262 - CESTAT AHMEDABAD], the Tribunal held that the penalty imposed alleging that the KYC of the exporter was not verified cannot sustain. The penalty imposed on the appellants under Section 117 of Customs Act, 1962 cannot sustain - the impugned order is modified to the extent of setting aside the penalty imposed on the appellants herein - Appeal allowed. Issues:Penalties imposed under Section 117 of the Customs Act, 1962 on the appellants.Analysis:Issue 1: Penalties Imposed on the AppellantsThe case involved penalties imposed on the appellants under Section 117 of the Customs Act, 1962 for their alleged involvement in facilitating fraudulent exports and overvaluation of goods to obtain undue drawback. The appellants, who were Clearing & Shipping Agents (CHAs), were accused of not exercising due diligence in verifying the antecedents of the exporters, leading to the imposition of penalties by the Original Authority. The appellants challenged this decision before the Commissioner (Appeals) who partially reduced the penalty on one of the appellants. The tribunal was tasked with determining the sustainability of the penalties imposed on the appellants.Issue 2: Diligence of CHAs in Verifying AntecedentsThe appellants argued that there was no evidence to suggest their active involvement in connivance with the exporters to overvalue goods for fraudulent exports. They contended that as CHAs, they merely followed the instructions provided by the exporters regarding the value of the goods to be exported. The Department's conclusion of overvaluation was primarily based on a report by an individual who was not an approved expert in valuing goods subject to examination. The tribunal noted that the act of not being diligent in verifying the antecedents of the exporter could not be a ground for imposing penalties under Section 117 of the Customs Act, 1962.Issue 3: Legal Precedents and InterpretationIn its analysis, the tribunal referred to legal precedents, including the case of M/s. Mohak Enterprises Vs. Commissioner of Customs and Kunal Travels (Cargo) Vs. Commissioner of Customs, to emphasize that penalties cannot be imposed on CHAs without evidence of active facilitation in fraudulent transactions. The tribunal highlighted that no punitive measures could be imposed on the appellants without proof of their active participation in overvaluing goods for the benefit of the exporters. Ultimately, the tribunal concluded that the penalties imposed on the appellants were not sustainable under Section 117 of the Customs Act, 1962.In conclusion, the tribunal modified the impugned order by setting aside the penalties imposed on the appellants and allowed the appeals with consequential reliefs as per the law. The judgment was pronounced in open court on 15.07.2024.