2025 (11) TMI 1115 - AT - Customs

Penalties under Customs Act and FTDR Act quashed where transporters' lack of knowledge of forged documents not proven

CESTAT held that penalties imposed for alleged smuggling were unsustainable and allowed the appeal. The tribunal found appellants acted as transporters ... Levy of penalty - smuggling - appellants were having knowledge about the fabricated documents or the consignment carrying are contravened goods or not - contravention of provisions of Sections 7, 77, 46 and 47 of the Customs Act, 1962 read with Section 3 (2) of the Foreign Trade (Development & Regulation) Act, 1992 - HELD THAT:- It is a fact on record that the appellants are the transporters of goods and on the basis of the documents given by the seller to the appellants, the consignments are booked, which were carrying the necessary documents for transportation of goods. In view of that, it is the duty of the Revenue to establish that the appellants were having knowledge about the fabricated documents or the consignment carrying are contravened goods. As the Revenue has failed to discharge their onus that the appellants were any knowledge with the parcel van that the consignments are of contravened goods of foreign origin. The said duty of revenue has failed to discharge. In that circumstances, all the allegations made against the appellants are only assumption and presumption. In that circumstances, no penalties are imposable on the appellants. Accordingly, the penalties imposed on the appellants in the impugned order are set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether penalties under the Customs Act, 1962 and the Foreign Trade (Development & Regulation) Act, 1992 can be imposed on persons who are transporters or contractually engaged with Indian Railways for carriage of consignments, absent proof of knowledge or control over contraband goods. 2. What is the burden of proof on the Revenue to establish that appellants (transporters/railway employees/supervisory staff) had knowledge of fabricated documents or that consignments carried contravened/foreign-origin goods. 3. Whether mere performance of contractual or supervisory duties (booking, loading, unloading, administration) by the appellants suffices to attract penalties for alleged smuggling. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Liability of transporters and railway personnel for contraband carried in parcel vans Legal framework: The impugned order alleged contravention of provisions of the Customs Act, 1962 (Sections 7, 77, 46 and 47) read with Section 3(2) of the Foreign Trade (Development & Regulation) Act, 1992, as applied to persons implicated in smuggling or carriage of contraband goods. Precedent Treatment: No precedent was cited or applied by the Tribunal in the impugned order or in the present proceedings; the Court proceeded on statutory framework and evidence on record. Interpretation and reasoning: The Tribunal examined the factual matrix that appellants were transporters/leaseholder of the parcel van or occupied administrative or supervisory roles connected with booking, loading or unloading. It was held that the appellants acted pursuant to contractual obligations and routine duties and that consignments were booked on the basis of documents provided by the seller. The Court emphasized that mere carriage or supervisory involvement, without evidence of knowledge, control, or participation in smuggling, cannot form the basis for penal liability under the Customs Act or FT(D&R) Act. Ratio vs. Obiter: Ratio - The Court held that penal liability cannot be fastened on transporters/railway staff solely on account of carriage or supervisory roles absent proof of knowledge or control; this is the operative legal principle applied to set aside penalties. Obiter - Observations on routine contractual duties and absence of access to contents are explanatory and not additional legal rules. Conclusions: Penalties imposed on persons who merely provided transportation services or performed administrative/supervisory duties were not sustainable where no evidence established their knowledge of or control over contraband consignments; penalties were set aside. Issue 2 - Burden of proof on the Revenue to establish knowledge of fabricated documents or contravention Legal framework: The allocation of the evidentiary onus in proceedings alleging contravention under customs and foreign trade statutes requires the Revenue to prove culpable knowledge or participation by the person sought to be penalized. Precedent Treatment: The judgment does not rely on or distinguish any prior judicial authority; it applies the general evidentiary principle that the prosecuting authority must discharge its onus. Interpretation and reasoning: The Court found that consignments were accompanied by transportation documents supplied by the seller and that appellants acted on those documents. The Tribunal held that it was the duty of the Revenue to establish that the appellants had knowledge of fabricated documents or that the consignments were contravened goods of foreign origin. The Revenue failed to discharge this burden; allegations against appellants remained based on assumption and presumption rather than evidence demonstrating knowledge, control, or active involvement. Ratio vs. Obiter: Ratio - The Revenue bears the onus of proving that a transporter or person in supervisory/administrative capacity knew of or was party to contravention; failure to discharge that onus precludes imposition of penalties. Obiter - The Court's characterization of allegations as 'assumption and presumption' is explanatory of the evidentiary failure. Conclusions: In the absence of proof of knowledge or control, penalties cannot be imposed; the Revenue's failure to meet its evidentiary onus warranted setting aside penalties. Issue 3 - Sufficiency of evidence arising from discovery of contraband in a parcel van to infer individual culpability of contractual carriers or supervisory staff Legal framework: Criminal/penal consequences under customs and foreign trade law require a causal and mental link between the accused's conduct and the contravention; mere proximity to contraband or employment-related presence is insufficient. Precedent Treatment: No specific authorities were invoked to broaden or curtail the inference that may be drawn from discovery of contraband; the Tribunal treated the question factually against the statutory burden. Interpretation and reasoning: The record showed a search of the parcel van and discovery of goods alleged to be of foreign origin. The Court distinguished the physical presence of contraband in a vehicle from proof of individual culpability. It noted appellants' lack of access, control or knowledge of the goods, and that consignments were booked based on seller-provided documents. Given these facts, the Court declined to draw the inference of culpability required to sustain penalties, finding the allegations rested on speculation rather than evidence. Ratio vs. Obiter: Ratio - Discovery of contraband in a vehicle does not automatically establish individual liability of transporters or supervising employees; concrete evidence of knowledge or participation is required. Obiter - Descriptions of respective appellants' duties (leaseholder, administrative capacity, supervisor) explain why inference of knowledge was unreasonable on the facts. Conclusions: The mere discovery of contraband in the parcel van was insufficient to impose penalties on the appellants in the absence of evidence showing their knowledge, control, or involvement; penalties were therefore unsustainable and set aside. Overall Disposition The Court concluded that the Revenue failed to discharge its onus to prove that the appellants had knowledge of fabricated documents or that the consignments were contravened goods of foreign origin. As a result, allegations against the appellants amounted to assumption and presumption; penalties imposed under the impugned order were set aside and the appeals were allowed with consequential relief.