Penalty under Section 117 Customs Act not imposed for Foreign Trade Policy violation without Customs Act breach

The CESTAT Mumbai held that the penalty under Section 117 of the Customs Act, 1962 could not be imposed on the appellant for alleged mis-declaration in airway bills since the violation pertained only to the Foreign Trade Policy, not the Customs Act. The tribunal noted that no provision of the Customs Act was contravened by the appellant, and the shipping bills contained correct information. The reliance on Section 50(3)(b) instead of (a) was misplaced, and without specific notice of the contravention, penalty was unsustainable. Consequently, the impugned order imposing penalty was set aside and the appeal was allowed.

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ISSUES:

Whether penalty under Section 117 of the Customs Act, 1962 can be imposed for mis-declaration in the Airway Bills when correct description is provided in shipping bills, invoices, and packing lists.Whether Section 117 of the Customs Act, 1962 applies to contraventions of provisions of the Foreign Trade Policy or only to contraventions of the Customs Act itself.Whether the penalty under Section 117 can be sustained without the appellant being put on notice as to the exact nature of the contravention.Whether the provisions of Section 50(3)(b) of the Customs Act, 1962 (introduced in 2018) relating to authority and validity of documents apply to ensuring accuracy and correctness of information in the Bill of Export.

RULINGS / HOLDINGS:

The penalty under Section 117 of the Customs Act, 1962 cannot be imposed for mis-declaration in Airway Bills when the shipping bills, invoices, and packing lists contain the correct description of goods, as the Airway Bills are not governed under the Customs Act but under Foreign Trade Policy provisions.Section 117 is "restricted to imposition of penalties for contravention of provisions of Customs Act only" and does not extend to violations of the Foreign Trade Policy; hence, no penalty under Section 117 is sustainable for such contravention.The penalty is not sustainable without the appellant being "put on notice as to the exact nature of contravention" for which it is liable, consistent with the Supreme Court precedent relied upon.The learned Commissioner (Appeals) erred in applying Section 50(3)(b) of the Customs Act, which relates to authority and validity of documents, rather than provisions ensuring accuracy of information in the Bill of Export; thus, this section is not applicable for imposing penalty in the present facts.

RATIONALE:

The Court applied the statutory framework of Section 117 of the Customs Act, 1962, which prescribes penalty only for contraventions of the Customs Act or abetment thereof, where no express penalty is provided elsewhere.The Court distinguished violations under the Foreign Trade Policy, which do not attract penalties under Section 117, emphasizing the requirement of statutory authority for penalty imposition.The Court relied on the precedent that penalty imposition requires clear notice to the party of the contravention alleged, citing the Supreme Court decision in M/s. Amrit Foods Vs. Commissioner of Central Excise.The Court noted a misapplication of Section 50(3)(b) of the Customs Act, introduced in 2018, clarifying that this provision concerns "authority and validity of documents" and not the correctness of information in export documentation.

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