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Case Law Details

Case Name : Sarvesh Sharma Sales Executive Vs Commissioner of Customs (CESTAT Delhi)
Appeal Number : Customs Appeal No. 52111 of 2022 (SB)
Date of Judgement/Order : 13/07/2023
Related Assessment Year :

Sarvesh Sharma Sales Executive Vs Commissioner of Customs (CESTAT Delhi)

CESTAT Delhi held that penalty u/s. 112 and 114AA of the Customs Act not leviable in absence of any knowledge of goods of prohibited nature being imported.

Facts- Based on a specific intelligence in respect of five containers imported at Inland Container Depot, Tughlakabad, New Delhi under the master bill of lading, (said to contain 13000 cartons of A4 paper reams consigned to M/s Codognotto Logistics India Pvt Ltd), upon contacting the freight forwarding firm found that the said consignment was originally booked in the name of Ashtvinayak International, Delhi, however later changed to Global World Traders, Delhi. This was based on E mail instructions sent by Shri Anil Batra. The other two sets of house bills produced before the authorities, however, indicated the consignee name as ‘Global World Traders’. DRI upon examination of said containers found that concealed behind the declared cargo of paper reams were firecrackers of Chinese origin that were seized vide panchnama dated 22/23.04.2017 along with other goods imported.

Shri Sarvesh Sharma in his voluntary statement recorded by the authorities u/s. 108 of the Customs on 24.04.2017 admits that based on the E-mail referred to supra, received from Shri Anil Batra, requesting to change the consignee name, he managed to get the consignee name changed at his company’s end in China.

In so far as the case relating to the two appellants herein is concerned, the entire case made out against the appellants is with regard to deliberate connivance with the main noticees in changing the name of the consignee without due diligence and verification from M/s Global World Traders and its proprietor Vinod Kumar and without NOC from the consignee M/s Hong Kong Jofa Paper Limited and M/s Guangzhou BMPAPER Paper Company Limited. It is emphasised that the lapse was deliberately undertaken to help Anil Batra and the clearance of the said containers under the guise of a new IEC, so as to avoid the alerts imposed by the department on Ashtvinayak International. Accordingly, both Codognotto Logistics India Pvt Ltd and Sarvesh Sharma, Sales Executive of Codognotto Logistics India Pvt Ltd vide their acts of omission and commission have rendered themselves liable to imposition of penalty u/s. 112 and 114AA of the Customs Act.

Conclusion- Existence of conscious knowledge on the part of the accused on whom such penalty is levied is therefore essential to be demonstrated. Unfortunately, there is nothing in the adjudication order to even remotely suggest that the appellant had prior knowledge of the confusability of the import goods while undertaking the exercise of change in the consignee name at the behest of the original importer.

In the case of Parag Domestic Appliances vs. Commissioner of Customs it was held that for subjecting one to penalty u/s. 114AA, the existence of knowledge or intention on the part of such person while carrying out any or all of the necessary actions stated therein is a must. Without demonstrating such an existence of knowledge no such penalty is leviable.

Held that no penalty under Section 112 and Section 114AA is leviable on Codognotto Logistics India Pvt Ltd as well Sarvesh Sharma.

FULL TEXT OF THE CESTAT DELHI ORDER

The present appeals have been filed by the appellants herein namely Sarvesh Sharma Sales Executive Codognotto Logistics India Pvt Ltd and by the freight forwarding firm M/s Codognotto Logistics India Pvt Ltd challenging the Order-in-Appeal No. CC(A) Cus/D-II/Import/ICD/TKD/346-347/2022-23 dated 13.05.2022 passed by the learned Commissioner of Customs (Appeals), New Customs House, New Delhi, in respect of the show cause notice no. DZU/34/ENQ-03-2017 dated 17.10.2017.

2. Vide the impugned order, the learned Commissioner (Appeals) has upheld the Order-in-Original No. 141/2019 passed by Sh. Kiran Kumar/JC/ICD/Import/TKD dated 05.09.2019, whereby the learned adjudicating authority has imposed penalty of Rs. 10 lakh on each of the two appellants under Section 112 and 114AA of the Customs Act, 1962.

3. Briefly, the DRI/DZU, based on a specific intelligence in respect of five containers no. MRKU 2371072/40, MRKU 2806832/40, MRKU 3022964/40, MRKU 5180716/40 and MSKU 1859790/40 imported at Inland Container Depot, Tughlakabad, New Delhi under masterbill of lading no. 958926604 dated 13.01.2017, (said to contain 13000 cartons of A4 paper reams consigned to M/s Codognotto Logistics India Pvt Ltd), upon contacting the freight forwarding firm found that the said consignment was originally booked in the name of Ashtvinayak International, Delhi, however later changed to Global World Traders, Delhi. This was based on E mail instructions sent by Shri Anil Batra. The House Bill No. WST1612256 dated 30.12.2016, mentioned the consignee name as Ashtvinayak International. The other two sets of house bill produced before the authorities dated 05.01.2017, however indicated the consignee name as ‘Global World Traders’. DRI upon examination of said containers found that concealed behind the declared cargo of paper reams were fire crackers of Chinese origin that were seized vide panchnama dated 22/23.04.2017 alognwith other goods imported. Investigation conducted by the DRI pointed out that as per master bill of lading referred to supra, the said containers had originally been booked by Shri Anil Batra (co-noticee) and proprietor of M/s Ashtvinayak International and for which M/s Codognotto Logistics India Pvt Ltd acted as a freight and forwarding agent. It was pursuant to the E mail dated 27.01.2017 sent from E mail ID anilbatra1977@gmail.com to Shri Sarvesh Sharma the Sales Executive of freight forwarding firm at his E mail Id sarveshsharma@codognotto.net that the consignee name was changed from Ashtvinayak International to M/s Global World Traders. It is also pointed out in the show cause notice based on the statement of Shri Rajeev Ranjan Singh, Field Executive of Codognotto Logistics India Pvt Ltd that Anil Batra had earlier imported in the name of M/s Yashika International, bearing the same address as Ashtvinayak International (Shri Praveen Batra being the proprietor of Yashika International).

4. Shri Sarvesh Sharma in his voluntary statement recorded by the authorities under Section 108 of the Customs on 24.04.2017 admits that based on the E mail referred to supra, received from Shri Anil Batra, requesting to change the consignee name, he managed to get the consignee name changed at his company’s end in China. He mentioned in his statement that Anil Batra had supplied to him the KYC document of Global World Traders on whatsapp, inter alia also mentioning that Vinod Kumar was his relative. The investigation also points out that Vinod Kumar proprietor of Global World Traders however disowned having knowledge of the subject import as also of handing over of the KYC documents to Anil Batra or any of the representative of Codognotto Logistics India Pvt Ltd, adding that he never met Anil Batra nor did he know them. He also disowned the signature on the documents on the basis of which the consignee name was changed.

5. In so far as the case relating to the two appellants herein is concerned, the entire case made out against the appellants is with regard to deliberate connivance with the main noticees in changing the name of the consignee without due diligence and verification from M/s Global World Traders and its proprietor Vinod Kumar and without NOC from the consignee M/s Hong Kong Jofa Paper Limited and M/s Guangzhou BMPAPER Paper Company Limited. It is emphasised that the lapse was deliberately undertaken to help Anil Batra and the clearance of the said containers under the guise of a new IEC, so as to avoid the alerts imposed by the department on Ashtvinayak International. Accordingly, both Codognotto Logistics India Pvt Ltd and Sarvesh Sharma, Sales Executive of Codognotto Logistics India Pvt Ltd vide their acts of omission and commission have rendered themselves liable to imposition of penalty under Section 112 and 114AA of the Customs Act.

6. The learned Adjudicating Authority in his findings as regards the appellants, has inter alia held as under :

32. Lastly on the question of penalty on various persons I find that it is not disputed fact that the original Master bill of lading was in the name of M/s Codognotto Logistics India Pvt. Ltd., as consignee and M/s Sun Star Industrial Limited as Shipper but as per the freight forwarder M/s Codognotto Logistics India Pvt. Ltd., the containers were booked in the name of consignee M/s Ashtvinayak International as evident from HBL No. WHT1612256A and WHT1612256B both dated 30.12.2016. I also find it as an established fact that both the brothers Anil and Praveen Batra were arrested by the Customs SIIB in similar case and it is also evident beyond doubts that Shri Anil Kumar Batra has fraudulently obtained KYC documents of another importer M/s Global World Traders owned by Shri Vinod Kumar who filed police complaint against them. Using these fraudulently obtained KYC Shri Anil Batra got the consignee name changed from M/s Ashtvinayak International to M/s Global World Traders which is evidenced by two HBL dated 15.01.2017. I find it is a fact that that for amendment of HBL Shri Anil Batra contacted Shri Sarvesh Sharma for such amendment who without any verification carried out such changes forwarded the same to the shipping line for carrying out such changes. So I find that there was intent, for such forgery, to conceal that the imports are made by M/s Ashtvinayak International to escape detection by the customs or DRI so that they can fraudulently clear the goods. I find that Shri Rajeev Ranjan Singh field executive of the freight forwarder in his statement dated 22.04.2017 disclosed that the containers were originally booked by Shri Anil Batra proprietor of M/s M/s Ashtvinayak International. So role of Shri Anil Batra in import of said 5 containers is well evident and it is also evident that he procured KYC of M/s Global World Traders fraudulently and by such fake documents he got the HBL issued in the name of M/s Global World Traders. This is admitted by Shri Anil Batra in his confessional statement dated 01.06.2017 as mentioned in para 11.2 of the notice. So I find that Shri Anil Batra has not only imported prohibited and other goods liable for confiscation but at the same time used and caused to be made HBL which were falsely carrying on them wrong information in act dealing with Customs. For such act I find that Shri Anil Batra is liable for penalty under section 112(a) and 114AA of the Customs Act 1962. Since the proprietor of a firm does not have separate identity than the firm and it is well settled that simultaneous penalty on the proprietor and firm cannot be imposed so I also hold the same view. This shows that the actual importer in the case was M/s Ashtvinayak International and in which Shri Anil Batra has active role and such prohibited imports were made with active connivance of freight forwarder as it is evident from statement of Shri Sarvesh Sharma dated 24.04.2017

“that Sh. Anil Batra also submitted KYC documents for M/s. Global World Traders (IEC No.0514062037) and stated that this is also his company and Sh. Vinod Kumar is his relative. Then as per Anil Batra’s request he managed to get the consignee name changed at his company’s agent’s end in China since IGM was not filed till then. On demand Sh. Sarvesh Sharma could not produce the KYC of M/s Ashtvinayak International. On being asked as to why the mandatory documents were not taken when the consignment was booked in the name of M/s. Ashtvinayak International, he stated that since they had already worked for Sh. Anil Batra and there was enough time to hand over the delivery Order (D.O.) and that in a very short span of time the consignee name was changed from M/s. Ashtvinayak International to M/s. Global World Traders, they did not take any document related to M/s. Ashtvinayak International. He further stated that they had received Rs. 3 lakhs in cash as freight payment in mid-February 2017 from an elderly person whom he believed to be Sh Anil Batra’s father at his residence at Rohini and Rs 5,61,000/- was still outstanding”.

From the above statement it is clear that neither Shri Sarvesh Sharma nor the freight forwarder asked for KYC of M/s. Ashtvinayak International nor asked much about M/s Global World Traders which create doubt on their submissions. Further as per above statement he stated that they have collected 3 lakhs as freight and Rs. 5,61,000/- is still outstanding which shows that the freight was collected by the freight forwarder in cash in India but on perusal of the HBL amended by the freight forwarder it is evident that the said HBL are issued with freight prepaid. These two are opposite. Since it is admitted by Shri Sarvesh Sharma that they have collected Rs. 3,00,000/ already as freight so this proves that the terms freight prepaid on the HBL are wrong and manipulated and it shall be freight collect rather than freight prepaid. This also proves that the said HBL are manipulated and forged document and the same is prepared by the freight forwarder in which Shri Sarvesh Sharma played important role that too in connivance of Shri Anil Batra. So the submission made by him that he was not aware of the contents of the container is apparently mis-statement when it is clearly evident that they are involved in forgery of HBLs. It is Shri Sarvesh Sharma who asked the freight forwarder wheeltopn to change the HBL and that too only consignee name. These episodes show that they were aware of all the misdeeds of Shri Anil Batra and they knowingly done all these above act. So due to above reasons I find that the freight forwarder is equally responsible for not only mentioning of A4 paper reams in the IGM but which lead to confiscation of goods under various section but also involved in forgery in bill of lading in submission to the Customs. Accordingly, I hold that the freight forwarder M/s and Shri Sarvesh Shrama in his personal capacity are liable for penalty under section 112 and 114AA of the Customs Act, 1962. On the issue of penalty of Shri Praveen Kumar Batra under section 112 and 114AA of the act I find that in this whole illegal import Shri Parveen Kumar Batra is the main conspirater and he helped him in daily work and Shri Praveen Batra was undeclared equal partner in the firm and this has been submitted by Shri Anil Kumar Batra in his statement dated 01.06.2017. The relevant portion of the statement is as under: –

“He further stated that Sh. Praveen Batra helped him to look after the day to day affairs of his firm and was the undeclared equal partner in the firm, M/s Ashtvinayak International, owned by him on paper”.

So from the facts of the case it appears that Shri Praveen Batra has not co-operated in investigation and not divulged anything deliberately though Shri Anil Batra said that Shri Praveen Batra being actual owner of impugned goods. Therefore, Shri Praveen Batra is equally responsible for such forgery and act of importation of goods which are liable for confiscation under section 111 of the Customs Act, 1962. I find that they caused the freight forwarder to made forged documents which are to be dealt in transaction with Customs purposes so I find for such act the Shri Praveen Batra as liable for penalty under section 112 and 114AA of the Customs Act 1962.”

7. Based on the said findings a penalty of Rs. 10 lakh has been imposed on Sarvesh Sharma and also a penalty of Rs. 10 lakh on M/s Codognotto Logistics India Pvt Ltd under Section 112 under Section 114AA of the Customs Act.

8. The learned Commissioner (Appeals) in appellate proceedings did not find any infirmity with the impugned order and therefore upheld the Order-in-Original dated 05.09.2019.

9. It is the case of the appellants that there is no mensrea on their part and that they had no knowledge of prohibited goods concealed in the subject imports of A4 paper reams. It is their case that the said amendments in the name of the consignee was changed at the behest of Anil Batra on receipt of KYC documents viz IEC, Pan card and voter card and Shri Sarvesh Sharma got the consigner name changed at their agents end in China since IGM was not filed by that time. The learned Advocate submits that the department has brought out no evidence on record that Sarvesh Sharma had undertaken an act relating to the import of impugned goods with knowledge that the subject goods were liable to confiscation. Also it is their case that there is nothing to show in the show cause notice that forgery had been undertaken so as to attract penalty under Section 114AA. Learned Advocate therefore submits that no penalty was imposable on either the company M/s Codognotto Logistics India Pvt Ltd or Sarvesh Sharma, Sales Executive of the company. Pointing out to the charge as made out in the show cause notice that M/s Codognotto Logistics India Pvt Ltd had deliberately connived with Anil Batra and Praveen Kumar Batra in changing the name of consignee without due diligence and verification from M/s Global World Traders and Vinod Kumar proprietor thereof, the learned advocate referring to the finding in the Order-in-Original states that, it is their case, that the finding of the adjudicating authority is beyond the scope of the show cause notice. He submits that as Sarvesh Sharma had obtained the KYC documents of Global World Traders there was no further requirement to verify the antecedents, therefore the impugned finding needs to be quashed. Further, the finding relating to the conclusion of House bill of lading HBL as manipulated and a forged document, is without any substance, as there is no evidence and allegation in the show cause notice regarding the forgery of the house HBL and therefore, the Order-in-Original is beyond the scope of the show cause notice. The learned Advocate also dismisses the findings on this ground of the learned Adjudicating Authority on the basis of Sarvesh Sharma’s statement dated 24.04.2017 categorically asserting and denying any knowledge about concealment of any restricted item in the impugned goods. Assailing the adjudication order, the learned Advocate contends that mere asking the freight forwarder to change the consignee’s name in the HBL cannot be concluded to hold that Sarvesh Sharma was aware of the misdeeds of Anil Batra and had therefore undertaken the exercise of the amendment of the Bill of lading. He submits that this is a contrary finding of the Adjudicating Authority viz. a claim to issuance of the forged and manipulated HBL. He therefore pleads that the penalty imposed on them are not sustainable and needs to be quashed.

10. The learned DR on the other hand pleads on the fact of collusion and deliberate manipulation of the HBL amendment on the instruction of Anil Batra by Sarvesh Sharma. It is his submission that the fact that the HBL status gets changed from to collect to prepaid basis speaks volumes and is suggestive about the imputation of knowledge on the part of Sarvesh Sharma and also through the freight forwarder. He therefore substantiates the imposition of penalty both under Section 112 and 114AA.

11. For greater clarity on the subject and the circumstances of imposition of penalty under Section 112 and 114AA it would be necessary to reiterate the two sections viz. Section 112 and 114AA of the Customs Act, 1962.

SECTION 112. Penalty for improper importation of goods, etc. – Any person, –

(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or

(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111,

shall be liable, –

(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for whichever is the greater;

the time being in force, to a penalty 1[not exceeding the value of the goods or five thousand rupees],

2[(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent of the duty sought to be evaded or five thousand rupees, whichever is higher:

Provided that where such duty as determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the penalty so determined;]

3[(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty 4[not exceeding the difference between the declared value and the value thereof or five thousand rupees], whichever is the greater;

(iv) in the case of goods falling both under clauses (i) and (iii), to a penalty 5[not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest;

(v) in the case of goods falling both under clauses (ii) and (iii), to a penalty 6[not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest.]

SECTION [114AA. Penalty for use of false and incorrect material. – If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods.]

12. For imposition of penalty under Section 112 of Customs Act, 1962, it can be noted that a person is liable for penal consequences under Section 112 of the Customs Act for committing an act or failure to do so an act as would render such goods liable to confiscation. Penalty under Section 112 is also imposable on a person who is concerned with in any manner in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchase of or dealing in any other manner with goods for which knowledge about their liability to confiscation exists with the person concerned with regard to any of the aforesaid activities.

12.1. In the aforesaid backdrop, for levy of penalty under Section 112 of Customs Act ibid, the imputations of conduct as brought out in the show cause notice and as analysed in the Order-in-Original and the Order-in-Appeal have to be gone into to ascertain the correctness or otherwise of the imposition of such penalty. Thus, it is an undisputed fact that the impugned five containers found to contain prohibited goods, concealed amids cartons of A4 paper reams, were initially booked in the name of Ashtvinayak International, however later changed to M/s Global World Traders. This change has been undisputedly brought out in the investigations that it was so done at the behest of Shri Anil Batra who had also tendered to the representives of M/s Codognotto Logistics India Pvt Ltd, Sarvesh Sharma, the requisite KYC documents, the house bill of lading of the same number, indicating no date of issue, but stating laden on board the vessel on 30.12.2016 mentions the original consignee name i.e. Ashtvinayak International, B-7/151/Sector 4, Rohini, Delhi-110085 while vide house bill of lading of the very number dated 05.01.2017, it came to be incorporated as Global World Traders B-131A, Ground floor Khasra No. 13/11, Block B, Village Libaspur, Saroop Nagar, Delhi-110042. The testimony of Shri Rajeev Ranjan Singh, Field Executive of Codognotto Logistics India Pvt Ltd merely affirms the said factual position. Shri Sarvesh Sharma has gone about facilitating the necessary change in the consignee name based on his previous business association with Shri Anil Batra and the latter informing Sarvesh Sharma that Vinod Kumar who owned Global World Traders (IEC No. 0514062037) is his relative. It is on strength of this proposition that Sarvesh Sharma in view of the directions received from Anil Batra got the consignee name changed at his companies agent’s end in China as the IGM had not been filed by then. Thus it is wrong to infer, contrary to what has been done by authorities below that the said change in consignee name, meant to deceive the authorities is clearly a case of connivance. In fact, as it comes out from the testimonies of the various persons including Sarvesh Sharma, Anil Batra & others, this change is clearly on account of misrepresentation by Anil Batra and there is not a fig leaf of evidence led in the show cause notice to conclude the same is attributable to connivance. The authorities below have failed to disengage what they indicate as a failure in exercising due diligence with what they conclude as connivance. Any failure, if so, of due diligence certainly cannot be a case of connivance. Connivance is required to be led by positive evidence and mere surmise or presumption or the failure to do a particular thing leading automatically to the other cannot in itself be a given. Also any observation beyond that charged or alleged in the show cause notice is clearly a violation of the principle of natural justice being in excess of the charge made out and therefore beyond the scope of the show cause notice. In fact what is stated in the order in so many words is not at all stated in the show cause notice. Thus, there is considerable force in the contention of the learned advocate when they assail the order to have been passed in excess of the show cause notice prescriptions.

12.2 As for not obtaining the KYC documents of Ashtvinayak International, it is on record that Sharvesh Sharma had not taken the same for Ashtvinayak Interanationl, having already worked with Anil Batra in the past and for the stated reason that within a very short span, the consignees name was got amended and therefore, the need to do so did not exist anymore. Thus, for imposition of penalty on the two appellants, it is imperative to establish knowledge about the liability of the goods dealt with, to confiscation under Section 111 of the Customs Act, or the undertaking/not undertaking of an act on their part that would render such goods liable to confiscation under Section 111 ibid. It is observed that the show cause notice as also the impugned orders in the matter fails to impute and address comprehensively the acquisition/ existence of such knowledge of goods of prohibited nature being imported and therefore, subject the two appellants to penal consequences under Section 112. No penalty is imposable based on mere presumption of knowledge. There is nothing at all in the show cause notice that could clearly demonstrate existence of either prior knowledge or mens rea on the part of Sarvesh Sharma and through him the freight forwarding firm Codognotto Logistics India Pvt Ltd. The impugned order fails to demonstrate the existence of malafides or ulterior motives leading to imposition of penalty in the matter. The facilitation of a mere change in the consignees name, address etc. without any conscious knowledge- of the liability of the imported goods to confiscation, cannot under the given circumstances be held sufficient enough for imposition of penalty under Section 112 of the Act. I find nothing of significance to sustain the penalty under Section 112 in the order.

12.3 While the facts of the case have been elaborately dealt with in the order of the Adjudicating Authority, there is nothing of substance with regard to the sustenance of penalty on the two appellants. It may be noted that the subject goods (fire crackers being prohibited concealed in A4 paper reams), were certainly liable for confiscation and mere change of the consignee name in the Bill of Lading or facilitating such a change or getting such a change would have been is of no material consequence on this legal consequence of the import of prohibited goods. The said goods imported in whichever consignee name are liable to confiscation and continue to remain liable to confiscation, and therefore unless there is anything in the show cause notice to impute specific knowledge about import of said goods on the part of the appellants and that such change was being undertaken in order to con/ defy the authorities (as later separately also admitted by Anil Batra in his statement) no penalty is imposable. Thus, there can be no ground, for subjecting the appellants to penalty under Section 112 of the Customs Act. Existence of conscious knowledge on the part of the accused on whom such penalty is levied is therefore essential to be demonstrated. Unfortunately there is nothing in the adjudication order to even remotely suggest that the appellant had prior knowledge of the confiscability of the import goods while undertaking the exercise of change in consignee name at the behest of the original importer.

13. For invoking of penalty under Section 114AA of the Customs Act, as evident from the language of Section 114AA of the Customs Act, quoted above in para 11, it can be noted that for levy of such penalty, it is imperative that there has to be a deliberate/knowing usage of false or incorrect material in the transaction. There is nothing on record to impute knowledge about the usage of false or incorrect material in the transactions undertaken as regards the present two appellants. The learned Adjudicating Authority has tried to sustain this charge and imposed penalty under Section 114AA by pointing out the difference in the two bills of lading no. WHT1612256A & WHT1612256B both undated but indicating “laden on board the vessel” dated 30.12.2016 “freight to collect” and WHT1612256A & WHT1612256B both as dated 05.01.2017 as “freight prepaid”, and issued after amendment with the change in the consignee name and address. This, according to the department, therefore is enough to substantiate the penalty on the appellants. As per the fact on records, in the intervening time, the requisite payments were made to their principle overseas, that accounts for the change in status from freight “collect” to “prepaid” and this fact cannot be given a go by. The said difference pointed out by the learned Adjudicating Authority cannot be therefore held sufficient enough to uphold the charge of forgery and use of fact forged/fictitious documents. In fact, the show cause notice does not remotely alleges and castigates the two appellants herein for manipulation and forgery in the bill of lading. Any finding to say so is thus perverse of the show cause notice and thus is clearly not sustainable. The penalty therefore under Section 114AA is not leviable.

14. The department has pointed this difference in freight character as sufficient enough to indicate forgery and therefore to suggest the said waybill to be a forged one. However, the appellants have pointed out and have also submitted evidence by way of bank remittance made supplying the bank remittance details for enabling payment to their overseas principles. The time lag in the two dates and the utilisation of the intervening time to make the requisite payments to the overseas shipping line, are said to account for the difference in description of the freight, as stated above.

15 (i) This Tribunal in the case of V. Lakshmipathy vs. Commissioner of Customs -2003(153) E.L.T. 640T in respect of invocation of penalty under Section 112 had held the existence of mens rea as an essential ingredient to invoke the same. This pre supposition is non-existing in the present matter as show cause notice leads no evidence to indicate a guilty mind on part of the appellant.

(ii) In the case of Iliyas vs. Commissioner- 2018 (362) ELT A 218 SC the honourable Apex Court had held the penalty under Section 114AA, as not leviable (among other reasons) for no discussion being made as to the type of false /incorrect material. Similar is however the position in the present case.

(iii) Moreover, in the case of Parag Domestic Appliances vs. Commissioner of Customs, Cochin 2018(360) ELT 547 Tri-Bang, it was held that for subjecting one to penalty under Section 114AA, the existence of knowledge or intention on the part of such person while carrying out any or all of the necessary actions stated therein is a must. Without demonstrating such an existence of knowledge no such penalty is leviable. Also it is necessary to discuss the nature of false and incorrect material made use of as held in a slew of cases.

16. Under the circumstances, no penalty under Section 112 and Section 114AA is leviable on Codognotto Logistics India Pvt Ltd as well Sarvesh Sharma. The impugned order in asmuch as it concerns the imposition of the penalty on the two appellants can therefore not be sustained and is therefore set aside.

17. The appeal filed by the appellants is allowed.

(order pronounced in the open Court on 13.07.2023)

Notes

1 Substituted (w.e.f. 11-5-2001) for the words “note exceeding five times the value of the goods or one thousand rupees” by s. 107 of the Finance Act, 2001 (14 of 2001).

2 Substituted (w.e.f. 14-5-2015) by s. 83 of the Finance Act, 2015 (20 of 2015).

3 Inserted by s. 3 of the Customs, gold (Control) and Central Excises and Salt (Amendment) Act, 1973 (36 of 1973).

4 Substituted (w.e.f. 11-5-2021) for the words “not exceeding the difference between the declared value and the value thereof or five thousand rupees” by s. 107 of the Finance Act, 2001 (14 of 2001).

5 Substituted (w.e.f. 11-5-2001) for the words “not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees” by s, 107 of the Finance Act, 2001

6 Substituted (w.e.f. 11-5-2001) for the words “not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees”

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