2026 (3) TMI 1094 - AT - Customs

Invalid Pre Shipment Inspection Certificates do not justify confiscation or penalties absent prohibited import or active abetment.

Invalid pre shipment inspection certificates (PSIC) alone do not render imported goods liable to confiscation or redemption fine where there is no ... Confiscation under Section 111(d) for non-compliance with PSIC conditions - guilty of issuance and use of fake PSIC - import of Aluminum scrap was in violation of the guidelines of Foreign Trade Policy and para 2.32.2 of the Hand Book of Procedure - mis-declaration in inspection certificate - joint and several liability​​​​​​​ - penalty under Section 112(a) for abetment in issuance of invalid PSIC. Confiscation under Section 111(d) for non-compliance with PSIC conditions - HELD THAT: - The Tribunal accepted that both PSICs produced by the importer were later found to be invalid, but held that mere non-compliance with DGFT/PSIC requirements, in the absence of importation of prohibited or incriminating material, does not amount to 'improper import' warranting confiscation under Section 111(d). The Court relied on the regulatory scheme in the Handbook of Procedure which places responsibilities on PSIA and importer/exporter and on precedents distinguishing non-compliance (which may attract inspection or administrative action) from prohibited importation that triggers confiscation. Applying those principles to the facts, the Tribunal found insufficient basis to treat the consignment as improperly imported and set aside confiscation and redemption fine. [Paras 5] Confiscation of the goods and the redemption fine were set aside because invalid PSICs, without evidence of prohibited content, do not justify confiscation under Section 111(d). Penalty under Section 112(a) for abetment in issuance of invalid PSIC - HELD THAT: - The Tribunal examined the material and found no sufficient evidence that the appellants abetted the issuance or use of fraudulent PSICs. In the absence of proof of abetment or mens rea required to attract penal liability under Section 112(a), and having held that the import was not an improper import warranting confiscation, the imposition of penalties on the importer, its director and the indenting agent could not be sustained and were therefore set aside. [Paras 5] Penalties imposed under Section 112(a) on the appellant company, its director and the indenting agent were set aside for lack of evidence of abetment. Final Conclusion: The Tribunal allowed the appeals of the importer, its director and the indenting agent, setting aside confiscation, redemption fine and penalties because invalid PSICs, without evidence of prohibited import or abetment, do not warrant confiscation under Section 111(d) or penalty under Section 112(a). Issues: (i) Whether the imported goods were liable to confiscation under Section 111(d) of the Customs Act, 1962 and liable to redemption fine where pre-shipment inspection certificates (PSIC) produced were subsequently found invalid; (ii) Whether penalty under Section 112(a) and Section 114AA of the Customs Act, 1962 could be imposed on the appellants for abetment or involvement in issuance/use of invalid PSICs.Issue (i): Whether the goods were liable to confiscation under Section 111(d) of the Customs Act, 1962 and to redemption fine on account of submission of invalid PSICs.Analysis: The legal framework requires submission of PSICs for specified scrap imports and places responsibility on the importer and exporter for correctness of PSIC. Established decisions accept that non-compliance with procedural/PSIC conditions may require 100% examination but does not automatically convert the import into an improper import warranting confiscation unless there is evidence of contravention making the import prohibited or improper. On the facts, both PSICs were found invalid but there is no evidence that incriminating material was imported or that the consignment constituted a prohibited import.Conclusion: Confiscation of the goods and redemption fine are not sustainable; confiscation and redemption fine are set aside in favour of the appellants.Issue (ii): Whether penalties under Section 112(a) and Section 114AA could be sustained against the appellants for abetment or involvement in issuance/use of invalid PSICs.Analysis: Penalty for abetment or mis-declaration requires proof of active involvement or culpable conduct. The record does not furnish sufficient evidence that the appellants actively abetted issuance of invalid PSICs or intentionally mis-declared the consignment. Reliance on inspection-agency failures without proof of mens rea or active participation is insufficient to sustain penalty measures against the appellants.Conclusion: Penalties under Section 112(a) and Section 114AA as imposed on the appellants are not sustainable; penalties are set aside in favour of the appellants.Final Conclusion: The decision results in allowance of the appeals and setting aside of orders of confiscation, redemption fine and penalties as against the appellants, with consequential benefits if any.Ratio Decidendi: Where invalidity of pre-shipment inspection certificates is not accompanied by evidence of prohibited import or proof of active abetment or mis-declaration by the importer, non-compliance with PSIC conditions may warrant examination but does not justify confiscation or penalty against the importer.