2025 (7) TMI 1873 - AT - Customs

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 ... Levy of tax and penalty u/s 117 of the Customs Act, 1962 - mis-declaration on the Airway Bills for multiple times in respect of 43 consignments - HELD THAT:- As could be seen from the show-cause notice dated 06.07.2021 and Order-in-Original, only provision of Foreign Trade Policy 2015-20 has been allegedly violated by the freight forwarding agent of the Appellant, who might have done it at the instance of Appellant but Section, 117 is restricted to imposition of penalties for contravention of provisions of Customs Act only or for its abetment or for failure to comply with the provision of this Act (means of the Customs Act, 1962). No such violation is noticeable here except that learned Commissioner (Appeals) has dragged Sub-Section 3 Clause (b) instead of Clause (a) of Section 50 of the Customs Act (introduced through an Amendment made in 2018) in his order which prescribes for authority and validity of documents instead of ensuring of accuracy and correctness of information in the Bill of Export. Even if it is accepted to be made applicable to the Appellant in the absence of any provision referred in the show-cause notice, there is no mis-declaration made in the shipping bills furnished by the Appellant, since it is admitted by the Respondent that shipping bills invoices etc. were all containing correct description, apart from the fact that in view of decision of the Hon'ble Supreme Court passed in the case of M/s. Amrit Foods Vs. Commissioner of Central Excise, U.P. [2005 (10) TMI 96 - SUPREME COURT], on which heavy reliance is placed by learned Counsel for the Appellant, that without Assessee being put on notice as to the exact nature of contravention for which it was liable, such penalty is not sustainable. Thus, no provision of the Customs Act has been violated nor even alleged to have been violated by the Appellant-Exporter, for which it can be made liable to penalty under Section 117 of the Customs Act, 1962. The impugned order is set aside - appeal allowed. 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.