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of <h1>Penalties for alleged false export documents u/s114AA, s.158(2) and Reg.12(8) quashed for appellants as unsustainable</h1> Dominant issue - validity of penalties under Section 114AA: s.114AA applies only where a person knowingly or intentionally makes, signs or uses false or ... Imposition of penalties under Section 114AA, 117 & 158(2) of the Act and Regulation 12(8) of the Regulations - transportation and handling of containers - shipping line for export off-loading of loaded containers - dummy Export Application and Shipping Bill which were generated by the employees for calculation of dues and additional charges - HELD THAT:- The reason given in the impugned order that dummy export application and shipping bill were not required to be generated when there was no permission of customs, also overlooks the fact that the Appellants were acting under the bona fide impression that the containers are to be shifted to All Cargo Logistics after permission of customs. In this view of the matter, the reason given by the Appellants for generation of dummy export application and dummy shipping bill merits acceptance. Having not followed this procedure and not invoked Section 138B, the Adjudicating Authority has clearly relied on inadmissible evidence. The penalty under Section 114AA can be imposed only where a person knowingly or intentionally makes, signed or uses, false and incorrect material, in the transaction of any business under the Act. No evidence on record that the dummy export application or dummy shipping bill were used for any purposes in the transaction of any business under the Act. At any rate, Section 114AA can be invoked only against the fraudulent exports as per the 27th report of the Standing Committee on Finance and the Appellants, not a fraudulent exporter, no penalty under Section 114AA can be imposed on the Appellants. Imposition of penalty under Section 158(2) is also not warranted as Section 158(2) is merely an enabling provision and not a penal provision as held in Sunil Kumar Jain vs. Commissioner of Customs, [2016 (12) TMI 430 - CESTAT NEW DELHI] As regards penalty under Section 117, the same is a residual provision which can be invoked for imposition of penalty for any contravention, in respect of which no express penalty is elsewhere provided under the Act. Since the impugned order imposes simultaneous penalty under Section(s) 114AA, 158(2) and also under Regulation 12(8), invocation of residuary penal provision under Section 117 is clearly not permissible. The present case is also not a case where penalty under Regulation 12(8) is warranted for violation of any regulation. On the contrary, the facts of the present case when seen in entirety clearly show that the entire case is that of an inadvertent mistake not involving any mala fide on the part of the Appellants. Once the entire case against the Appellant No.1 is not sustainable in law, than the imposition of penalties against the Appellant No.2 & 3 also cannot be sustained. Thus, the impugned order, to the extent the same relates to the present Appellants, is set-aside and all the three appeals are allowed with consequential reliefs to the Appellants, as per law. Issues: (i) Whether penalties imposed under Regulation 12(8) of the Handling of Cargo in Customs Area Regulations, 2009 and Sections 114AA, 117 and 158(2) of the Customs Act, 1962 are sustainable; (ii) Whether the Adjudicating Authority was entitled to rely on statements recorded during investigation without following the procedure mandated by Section 138B of the Customs Act, 1962; (iii) Whether penalties imposed on the officers (individual employees) are sustainable in view of the findings on the custodian's liability.Issue (i): Whether penalties under Regulation 12(8) and Sections 114AA, 117 and 158(2) of the Customs Act, 1962 are sustainable.Analysis: The Tribunal examined the timeline of events and found that the gate-in of containers occurred prior to creation of the export application and dummy shipping bill. There was no finding or allegation that the dummy shipping bill was used in trade transactions or that the custodian derived any benefit. The Tribunal further considered the object and scope of Section 114AA, noting its purpose to target fraudulent exporters, and observed that Section 158(2) is an enabling provision and cannot independently impose penalty absent a rule framed thereunder. Invocation of Section 117 as a residuary penal provision alongside specific penal provisions was also assessed and found impermissible where specific penalties were invoked simultaneously.Conclusion: Penalties under Regulation 12(8), Section 114AA, Section 117 and Section 158(2) are not sustainable and are set aside. The conclusion is in favour of the assessee.Issue (ii): Whether the Adjudicating Authority could rely on statements recorded during investigation without complying with Section 138B of the Customs Act, 1962.Analysis: The Tribunal applied the statutory procedure under Section 138B and the judicial principle that statements recorded during investigation acquire evidentiary relevance only if admitted in evidence in accordance with the statutory mechanism or if clause (a) of the provision applies. The impugned order relied extensively on investigative statements without either invoking the exception or admitting those statements in evidence as required.Conclusion: Reliance on such statements without following Section 138B rendered the evidence inadmissible; this conclusion is in favour of the assessee.Issue (iii): Whether penalties on the individual officers are sustainable given the decision on the custodian's liability.Analysis: The Tribunal held that once the underlying penalties against the custodian are not sustainable and the case facts reflect an inadvertent mistake without mala fide, corresponding penalties against individual employees cannot be sustained. The Tribunal also noted absence of any specific evidence showing intentional or knowing misuse by the officers.Conclusion: Penalties imposed on the individual officers are not sustainable and are set aside. The conclusion is in favour of the assessee.Final Conclusion: The appeals are allowed and the penalties challenged in the appeals are set aside, resulting in relief to the appellants as a matter of law.Ratio Decidendi: Statements recorded during investigation are inadmissible for adjudication unless admitted in evidence or an exception under the statutory provision applies; Section 114AA targets fraudulent exporters and cannot be invoked against custodians/agents absent evidence of fraudulent export; enabling provisions like Section 158(2) cannot independently sustain penalty without enabling rules.
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