Matter remanded to re-look non-imposition of penalty u/s 114

Penanshin Shipping India Pvt. Ltd Vs Commissioner of Customs (CESTAT Chennai)

CESTAT Chennai held that adjudicating authority has ordered confiscation of red sander but refrained from confiscation of container u/s 119 and accordingly penalty u/s 114 on the appellant was not imposed. Matter remanded to re-look into the non-imposition of penalty.

Facts- The Directorate of Revenue Intelligence, Chennai Zonal Unit received specific intelligence that red sander logs are being smuggled out in the export consignment filed in the name of M/s. Polyhose India (Rubber) Pvt. Ltd. in a 20 feet container in which the goods are declared as ‘wire braided rubber hydraulic hose’.

On examination it was found that the container was loaded with red sander wooden logs. After investigation, Show Cause Notice was issued to various persons including the appellant herein. After due process of law, the original authority vide OIO dated 31.5.2019 ordered for confiscation of the red sander logs and saw dust totalling to 11,750 MTs valued at Rs.5,28,75,000/-. However, he refrained from confiscation of the container and also refrained from imposing penalty on the appellant herein.

Against this order, the department filed appeal before the Commissioner (Appeals) raising the ground that the appellant has abetted the act of smuggling of red sanders and by their act of omission / commission has rendered themselves liable for penalty u/s. 114 of the Customs Act, 1962. They prayed for modification of the OIO to the extent of non-imposition of penalty on the appellant. The Commissioner (Appeals) vide order impugned herein remanded the matter to the adjudicating authority for consideration of modification of the OIO to the extent of non-imposition of penalty u/s. 114 of the Customs Act, 1962. Hence this appeal.

Conclusion- In the present case, the role of the appellant as brought out from the evidence is in arranging the container. The said goods namely ‘container’ has not been confiscated. Further, the learned counsel for the appellant has raised argument on the basis of the recent Notification No. 56/2015-2020 dated 18.2.2019. Therefore, whether the items namely red sanders was restricted item (license needed for export) during the relevant time has to be examined, I am of the view that as the Commissioner (Appeals) has only remanded the matter to relook into the non-imposition of penalty. The appellant would be getting sufficient chance to put forward documents and arguments to establish their innocence. I do not find any ground to interfere with the view taken by the Commissioner (Appeals) in remanding the matter.

FULL TEXT OF THE CESTAT DELHI ORDER

Brief facts are that the Directorate of Revenue Intelligence, Chennai Zonal Unit received specific intelligence that red sander logs are being smuggled out in the export consignment filed in the name of M/s. Polyhose India (Rubber) Pvt. Ltd. in a 20 feet container in which the goods are declared as ‘wire braided rubber hydraulic hose’. The port of discharge declared was Shanghai, China and the overseas buyer declared in the shipping bill was M/s. Xiangtan Bai State Trade Co. Ltd. China. On examination it was found that the container was loaded with red sander wooden logs. After investigation, Show Cause Notice was issued to various persons including the appellant herein. After due process of law, the original authority vide Order in Original dated 31.5.2019 ordered for confiscation of the red sander logs and saw dust totalling to 11,750 MTs valued at Rs.5,28,75,000/-. However, he refrained from confiscation of the container and also refrained from imposing penalty on the appellant herein. Against this order, the department filed appeal before the Commissioner (Appeals) raising the ground that the appellant has abetted the act of smuggling of red sanders and by their act of omission / commission has rendered themselves liable for penalty under sec. 114 of the Customs Act, 1962. They prayed for modification of the Order in Original to the extent of non-imposition of penalty on the appellant. The Commissioner (Appeals) vide order impugned herein remanded the matter to the adjudicating authority for consideration of modification of the Order in Original to the extent of non-imposition of penalty under sec. 114 of the Customs Act, 1962. Hence this appeal.

2. On behalf of the appellant, learned counsel Dr. R. Sunita Sundar appeared and argued the matter. She submitted that the appellant had filed detailed cross-objections to the appeal filed by the department before the Commissioner (Appeals). There were no new documents produced by the department to alter the view taken by the adjudicating authority so as to remand the matter to the adjudicating authority. The Commissioner (Appeals) has not considered any new documents or even existing documents before remanding the matter to consider non-imposition of penalty. She submitted that the adjudicating authority has correctly observed that the appellant had not involved in the attempt of export of prohibited goods and was only a freight forwarder who provided the service of obtaining container for the exporter. The learned counsel submitted that the Show Cause Notice was issued only to the appellant (freight forwarder), CHA and the CFS. Surprisingly, those persons who were the actual parties in the attempt to smuggle, have been not made party to the proceedings and they have not been issued any notice. Since there are no proceedings against the actual parties who committed the offence, the appellant cannot be charged the offence of abetting the attempt to export the red sanders. In the absence of prosecution of parties who have actually committed the offence, the allegation against this appellant is not sustainable.

3. In the Order in Original, it is clearly stated that the shipping bill was field by M/s. Polyhose India (Rubber) Pvt. Ltd. and the seals were intact when the DRI examined the container. However, instead of the declared cargo, red sander logs were found and the same were seized. The container was released and there was no order of confiscation of the container. The appellant having only arranged the container cannot be liable for penalty in the absence of order for confiscation of the container.

4. The learned counsel adverted to the recent Notification No. 56/2015-2020 dated 18.2.2019. to argue that the Export Policy of red sander has been amended whereby the prohibitions and restrictions have been relaxed. The said notification has come into force before the date of passing of the Order in Original and the same has to be considered in case the issue of imposing penalty on the appellant is revisited. She prayed that the appeal may be allowed setting aside the order to remand the matter.

5. The learned AR Shri M. Ambe supported the findings in the impugned order. He argued that the Commissioner (Appeals) has only remanded the matter to look into the non-imposition of penalty. The appellant would be getting further chance to argue the matter on all points and therefore the apprehension of the appellant with regard to the remand of the matter is baseless. He prayed that the appeal may be dismissed.

6. Heard both sides.

7. The appellant is aggrieved by the direction of the Commissioner (Appeals) remanding the matter to the adjudicating authority to reconsider the non-imposition of penalty on the appellant under sec. 114 of the Customs Act, 1962. From the facts narrated above, it can be seen that the adjudicating authority had absolved the appellant from imposing penalty. The discussion made by the adjudicating authority in regard to reason for non-imposition of any penalty is as under:-

“I find there is force in the argument of the advocate to the extent there was nothing on record to show that Shri Jagadeesan had wilfully abetted the illegal export of red sanders in this case. I observe that though he was the contact point for Shri Sabarivasan in this case, h is role is limited only to arranging empty container for the declared export goods and referring the customs documentation filing work to the customs broker M/s. Behog Overseas. Considering the fact that the transportation was arranged by Shri Sabarivasan himself and usage of fake customs and liner seal after substitution of export cargo with red sanders enroute to Port, I hold that Shri Jagadeesanof M/s. Penanshin Shipping India P. Ltd. has no role in the smuggling plan of Shri Sabarivasan and hence not liable for penalty under sec. 114 of the Customs Act, 1962”.

8. It would also be worthwhile to notice the discussion made by the Commissioner (Appeals) for remanding the matter to reconsider the non-imposition of penalty.

“I find that one consignment was already cleared earlier and this is the second consignment that was intercepted by DPI. The respondent company’s sales executive herein is neither a Customs Broker nor the exporter, hence he or his company is not legally authorized to handle customs clearance work in terms of CBLR, 2013. From the above, it is obvious that the respondent abetted Shri Sabarivasan and his aides in misusing the IEC of M/s. Polyhose India (Rubber) Pvt. Ltd. in filing the shipping bills, hence they are liable for penalty under sec. 114 of the Customs Act, 1962 for having acted in a careless and reckless manner, which act had paved the way for smuggling of red sanders, thus for such omission and commission, they are liable for penalty under sec. 114 of the Customs Act, 1962 as well.

Therefore, for the above discussions, the impugned Order in Original insofar as it relates to non-imposition of penalty under sec. 114 of the Customs Act, 1962 on M/s. Pennashin Shipping India Pvt. Ltd., Freight Forwarders is set aside and the case is remanded back to the adjudicating authority for consideration of modification of the impugned Order in Original to the extent of non-imposition of penalty under sec. 114 of the Customs Act, 1962 on M/s. Penanshin Shipping India Pvt. Ltd., Freight Forwarders and pass appropriate orders as deemed fit within 30 days of receipt of this order.”

9. The facts reveal that one Shri S. Sabarivasan approached Shri S. Jagadeesan of M/s. Penanshin Shipping India Pvt. Ltd. (appellant herein) by introducing himself as the proprietor of M/s. Om Logistics. The said Sabarivasan had arranged for the export consignment in the name of M/s. Polyhose India (Rubber) Pvt. Ltd. He utilized the services of appellant to arrange for the container. The appellant arranged for filing of shipping bills through the Customs Broker M/s. Behag Overseas on the basis of the documents received from Shri Sabarivasan. In the statements, Shri Jagadeesan had stated that he had not arranged for transport of the container and Shri Sabarivasan had himself arranged for trailer and transported the empty container from the container yard to CWC Madhavaram as well as from CWC Madhavaram to Port Terminal. The report of surveyor who inspected the container after its seizure by the department had observed that there was no evidence of tampering of the seal of the container. Later, it was found that the seal was fake one and it is not the one manufactured and supplied to Chennai Customs. It was also seen that the port of entry temporary pass recommendation letter head of the company was not genuine and the General Manager of M/s. KSB Manian & Bros P. Ltd. disowned the recommendation letter. The mobile numbers purported to have been used by Sabarivasan who claims to be the proprietor of M/s. Om Logistics was subscribed in the name of one Shri Chinnadurai, an illiterate construction worker and he never obtained the said mobile number. Verification of mobile number reported to have been used by Shri P Govindan owner cum driver of the trust revealed that the same was subscribed in the name of Shri Balakrishnan who never lived in the given address. On the basis of various facts and evidences, it appeared to the department that it was a well hatched plan for smuggling red sanders. The attempt was to export the red sanders in the guise of wire braided rubber hydraulic hose in the name of M/s. Polyhose India (Rubber) Pvt. Ltd.

10. On perusal of the impugned order, it is seen that after appreciating the facts, the Commissioner (Appeals) has noted that one consignment was already cleared and this was the second consignment that was intercepted by the DRI. She has taken a view that it is obvious that the appellant has abetted Shri Sabarivasan and his aides in misusing the IEC of M/s. Polyhose India (Rubber) Pvt. Ltd. and therefore is liable for penalty under sec. 114 of the Customs Act, 1962.

11. Interestingly, though the adjudicating authority has ordered for confiscation of the red sander logs / saw dust, he has refrained from confiscation of the container under sec. 119 of the Customs Act, 1962. So also he has refrained from imposing penalty under sec. 114 of the Customs Act, 1962 on the appellant. Section 114 reads as under:-

SECTION 114. Penalty for attempt to export goods improperly, etc. –

Any person 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 113, or abets the doing or omission of such an act,  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 the time being in force, to a penalty [not exceeding three times the value of the goods as declared by the exporter or the value as determined under this Act]], whichever is the greater;

(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 o f 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;]

(iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater.]

12. In the present case, the role of the appellant as brought out from the evidence is in arranging the container. The said goods namely ‘container’ has not been confiscated. Further, the learned counsel for the appellant has raised argument on the basis of the recent Notification No. 56/2015-2020 dated 18.2.2019. Therefore, whether the items namely red sanders was restricted item (license needed for export) during the relevant time has to be examined, I am of the view that as the Commissioner (Appeals) has only remanded the matter to relook into the non-imposition of penalty. The appellant would be getting sufficient chance to put forward documents and arguments to establish their innocence. I do not find any ground to interfere with the view taken by the Commissioner (Appeals) in remanding the matter.

13. From the foregoing, I uphold the decision of the Commissioner (Appeals). However, it is directed that the adjudicating authority shall give opportunity of personal hearing to the appellant as well as opportunity to produce any further documents. The appeal is dismissed accordingly.

(Pronounced in open court on 17.10.2022)