2026 (3) TMI 932 - AT - Customs

Misuse of Import Export Code upheld as rendering imports liable to confiscation; penalties sustained on admitted lending of IEC.

Voluntary admission that an IEC was lent for monetary consideration satisfies elements of confiscation liability and false-declaration offences: allowing ... Liability to confiscation and penalty under Section 112(a) and 114AA for permitting use of an IEC - Mis-declaration of description and value leading to evasion of customs duty - syndicate used 16 Import Export Codes for committing the alleged act of misdeclaration out of which 12 IEC holders were found non-existent - knowingly making, signing or using false or incorrect declarations - prohibition on third party use of Import Export Code under Foreign Trade (Development and Regulation) Act and Rules. Liability to confiscation and penalty under Section 112(a) of the Customs Act for permitting use of an IEC - HELD THAT: - The tribunal accepted the appellant's voluntary admission that he let his IEC be used by the importer and his syndicate. The court held that such use of the IEC, contrary to the requirements of the Foreign Trade (Development and Regulation) Act and Rules and the Foreign Trade Policy, rendered the imported goods liable to confiscation under Section 111 and thereby attracted penalty under Section 112(a) of the Customs Act. The decision emphasised that an admission, when voluntary, may form the basis for the finding and that the IEC cannot be lawfully used by third parties other than the allotted holder. [Paras 14, 15, 16] Penalty under Section 112(a) was correctly imposed and is upheld. Penalty under Section 114AA of the Customs Act for knowingly making, signing or using false or incorrect declarations - HELD THAT: - The tribunal found on record that the appellant admitted that his IEC was used by the importer and syndicate and that such use involved false or incorrect material declarations to customs. The court concluded that, on the basis of the appellant's admission and statutory provisions, he knowingly allowed false declarations to be made or used for the purposes of the Act, satisfying the ingredients of Section 114AA and justifying imposition of the penalty. [Paras 13, 14, 16] Penalty under Section 114AA was rightly imposed and is upheld. Final Conclusion: The tribunal upheld the adjudicating authority's findings that the appellant voluntarily lent his IEC, thereby violating foreign trade requirements and enabling false declarations; the penalties under Sections 112(a) and 114AA of the Customs Act were correctly imposed and the appeal is dismissed. Issues: Whether the penalties imposed under Section 112(a) and Section 114AA of the Customs Act, 1962 on an IEC holder who admitted to lending his Import Export Code for monetary consideration, but who disclaimed involvement in misdeclaration or import transactions, are valid.Analysis: Section 112(a) penalizes acts or omissions rendering imported goods liable to confiscation under Section 111. Section 114AA penalizes knowingly or intentionally making, signing or using declarations or documents which are false or incorrect in any material particular for purposes of the Act. Section 7 of the Foreign Trade (Development and Regulation) Act, 1992 read with Rule 12 of the Foreign Trade (Regulation) Rules, 1993 and relevant Foreign Trade Policy provisions restrict use of an IEC to the allotted holder. The appellant made a voluntary admission that he had allowed his IEC to be used by others and had procured an IEC for an employee to be similarly used. That admission, un-retracted and voluntary, establishes that the IEC was lent for monetary benefit and was used by third parties to effect imports which rendered the goods liable to confiscation. Admissions can form the basis for penal liability where they show knowledge or intent to enable the prohibited use. The tribunal applied these statutory provisions to the appellant's admitted conduct and found the elements of Sections 112(a) and 114AA satisfied.Conclusion: Penalties under Section 112(a) and Section 114AA of the Customs Act, 1962 are upheld against the appellant for having knowingly allowed use of his Import Export Code; the appeal is dismissed and the penalty of Rs.25,00,000 stands confirmed.