2025 (12) TMI 326 - AT - Customs

Penalty under s.112(a) quashed for lack of proof of confiscable goods and knowledge under Courier Regulations

DHL Express (India) Pvt. Ltd Versus The Principal Commissioner of Customs, Bangalore

The CESTAT Bangalore allowed the appeal and set aside the penalty enhanced under s.112(a) of the Customs Act, 1962. The Tribunal held that invocation of ... Enhancement of penalty imposed u/s 112(a) of the Customs Act, 1962 on the appellant - penalty not being equal to the value of the impugned goods, without even a murmur from respondent-Commissioner about non-acceptability thereof, for lack of being legal and proper - HELD THAT:- The penalty itself, as imposed by the original authority appeared to have been prompted by alleged infractions in systems deployed for operation of activities as licencee under Courier Imports and Exports (Clearance) Regulation, 1998. Invoking of section 112 of Customs Act, 1962 for imposition of penalty for acts of omission or commission does not stand on any evidence of goods being liable to confiscation owing to which consequence of section 111 of Customs Act, 1962 does not follow. There is no evidence on record that lack of diligence in handling ‘courier packages’ was restricted only to the consignment intercepted or even to the other thirty-nine consignments; the breach, if at all, would appear to have been uniform and, in the absence of cause for confiscation of each and every package handled by the appellant, did not have to be tested for breach for subjecting to proceedings under section 111(d), 111(i), 111(l) and 111(m) of Customs Act, 1982. There is nothing on record to demonstrate that appellant was aware of ‘gold’ having been concealed in the packages, and even thereof to be penalised for failure to declare ‘unknowable’ contents in the courier bill of entry. In the lack of any finding on such acts of omission or commission, penalty fails to sustain. The imposition of penalty of Rs. 25,00,000/-, even if not merged within the enhanced penalty in the impugned order, is not sustainable in law - the impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the first appellate authority was competent, under section 128(3) of the Customs Act, 1962, to enhance the penalty imposed under section 112(a) without issuing prior notice of such intention and without examining the reasons of the original authority for imposing a lesser penalty. 1.2 Whether imposition of any penalty under section 112(a) of the Customs Act, 1962, on the appellant was legally sustainable in the absence of evidence of liability of the goods to confiscation under section 111 and of knowledge or involvement of the appellant in the concealment of gold in the courier consignments. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Power of first appellate authority to enhance penalty under section 128(3) without notice Legal framework 2.1 The Tribunal considered section 128(3) of the Customs Act, 1962, which empowers the first appellate authority to enhance fine and/or penalty, subject to fulfillment of the pre-requisite of putting the appellant on notice of such intent as set out in the first proviso to that provision. Interpretation and reasoning 2.2 The Tribunal noted that the original authority had imposed a penalty of Rs. 25,00,000/- under section 112(a) on goods valued at Rs. 2,14,27,000/-, and that there was no challenge by the respondent-Commissioner to the legality or propriety of that quantum. 2.3 The Tribunal found that the first appellate authority enhanced the penalty to an amount equivalent to the value of the confiscated goods solely on the ground that the penalty should match such value, and did so 'without even a murmur' from the respondent-Commissioner regarding inadequacy of the original penalty. 2.4 The Tribunal held that the statutory empowerment to enhance penalty is conditional: (i) the appellant must be specifically put on notice of the intention to enhance, and (ii) the reasons which weighed with the original authority in imposing a lesser penalty must be considered and set out. Both these elements were found to be 'patently absent' in the record. Conclusions 2.5 The Tribunal concluded that the enhancement of penalty by the first appellate authority, merely to bring it on par with the value of the confiscated goods and without issuance of the mandatory notice or examination of the original reasons, was beyond the scope of the appellate jurisdiction under section 128(3) and hence unsustainable in law. Issue 2: Sustainability of penalty under section 112(a) in absence of proof of confiscability under section 111 and knowledge or involvement Legal framework 2.6 The Tribunal examined section 112 of the Customs Act, 1962, which provides for penalty for acts of omission or commission in relation to goods liable to confiscation, and section 111, which sets out the circumstances in which goods become liable to confiscation, including clauses (d), (i), (l) and (m). 2.7 The Tribunal also adverted to the Courier Imports and Exports (Clearance) Regulation, 1998, under which the appellant was a licensee, noting that the lower authorities had relied on alleged infractions of systems and procedures thereunder. Interpretation and reasoning 2.8 The Tribunal observed that the basis for the original penalty under section 112(a) was the alleged deficiency in the operational systems deployed by the appellant as a licensed courier, such as lack of verification of customer details and use of a single customer account for multiple consignments. 2.9 It was held that such systemic infractions, even if relevant for action under the Courier Imports and Exports (Clearance) Regulation, 1998, did not, by themselves, establish liability of the particular goods to confiscation under section 111, which is a necessary foundation for penalty under section 112. 2.10 The Tribunal found no evidence on record that the appellant was aware of the concealment of gold in the intercepted consignment or in the other thirty-nine consignments, nor any finding that the appellant was involved in, or had knowledge of, the attempt to smuggle gold. 2.11 The Tribunal emphasised that there was also no evidence that the alleged lack of diligence was confined only to the intercepted consignments; if such breach of procedure were uniform across all courier packages, it would not automatically render each and every package liable to confiscation under section 111(d), 111(i), 111(l) or 111(m). 2.12 The Tribunal held that, in the absence of demonstrable liability of the concerned goods to confiscation and in the absence of any finding of specific acts of omission or commission by the appellant in relation to the concealed gold, invocation of section 112 was not justified. 2.13 The Tribunal further held that, without evidence of knowledge of the contents, the appellant could not be penalised for failure to declare 'unknowable' contents in the courier bill of entry. Conclusions 2.14 The Tribunal concluded that the essential legal pre-conditions for imposing penalty under section 112(a)-namely, proof that the goods were liable to confiscation under section 111, and proof of culpable acts or omissions by the appellant-were not met. 2.15 Consequently, the original penalty of Rs. 25,00,000/- under section 112(a), even if treated independently of the enhanced penalty, was held to be not sustainable in law. 2.16 On this basis, the Tribunal set aside the impugned order in toto and allowed the appeal.