Case Law Details
Damodar Nayak Vs Commissioner of Customs (Export Promotion) (CESTAT Mumbai)
In absence of any positive knowledge, penalty imposed under Section 112(b) of the Customs Act on co-noticee cannot be sustained just because they knew the main accused
CESTAT Strikes Down Order-In-Original Issued Under Section 112(B) of The Customs Act on Co-Noticee Just Because They Were Relatives of The Main Accused.
Summary of Judgment
1. Appeal is filled challenging O-I-O CAOno.29/2012/CAC/CC/BKS dtd 25/06/2012 passed by Commissioner of Customs (Adjudication), Mumbai, wherein a penalty of Rs 1,00,000/- has been imposed on the appellant under section 112(b) of Customs Act 1962.
2. Investigation was initiated from 18/10/2007 against M/s Sumira Plastics for diversion of good imported under the DEEC Scheme, which were diverted without fulfillment of export obligation.
3. SCN dtd 24.09.2019 was issued against M/s Sumira Plastics and other 7 Co-noticee.
4. Appellant is one of the co-noticee. Appellant did Job work for conversion of Raw material into final products.
5. The appellant is the brother in law of M/s Sumira Plastics and purchased some machinery long before this issue raised on the basis of this section 112(b) of customs act 1962 was invoked.
6. Custom appeal no 907 of 2012 one of the other co-noticee No4 (SHRI Kumar SAYANI) which has similar issue decided in favor of that notice on 13/05/2022.
Appellant’s Stand:-
Shri Mayur Shroff, Advocate alongwith
Shri Saurabh Mashelkar, Advocate for the Appellant
1. Detailed statement of appellant revels that he was not aware that the materials which he received for job work were imported duty free, his wife was a dormant partner from 1989 to 1996 during which also they were not aware of the same. And the machinery was also purchased in 1996 for different purpose and just because machinery been purchased appellant done not become liable.
2. The officers have carried out detailed investigation and recorded various statement and there is no evidence that appellant as aware of duty free nature of goods.
3. Further the evidence clearly indicates that after receiving the raw material and carrying out conversion the resultant goods were returned back by the appellant to M/s Sumira Plastics.
4. The conclusion drawn by the learned authority do not flow from facts on record and are based on presumptions, conjectures and fallacious reasoning.
5. The learned authority based his assumption that just because appellant is brother in law of the M/s Sumira Plastics he was aware of the contravening nature of the raw material. This is totally hypothetical and based on presumptions and the machinery was also purchased in 1996 for different purpose and just because machinery been purchased appellant done not become aware contravening nature of the raw material this is presumption and suffers from bias.
6. The learned authority completely ignored the legal provision of section 112(b).
7. There is no finding against appellant that he was aware or had reason to believe that materials received for conversion are liable to be confiscation.
8. Secondly the learned authority failed to identify the clause (out of i-v under which present case is covered.
9. The original authority has acted in an arbitrary manner by imposing penalty without quantification of either the value or duty sought evaded in respect of materials handled by the appellant.
10. The authority has clearly acted beyond the law and passed improper order which is liable to be set aside
Respondent’s stand
- Appellant is a relative of the partners of main Appellant-Manufacturer and had done the act with full knowledge and information, for which penalty under Section 112(b) of the Customs Act was rightly imposed that needs no interference by this Tribunal.
Court’s Analysis:
Definition
Section 112(b) of the Customs Act provides as under:-
“112(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 the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater;
(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 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 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 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.”
Court’s Judgement :-
1. It is evident that positive knowledge or mens rea is an active ingredient for imposition of penalty under Section 112(b).
2. In absence of any positive knowledge, penalty imposed under Section 112(b) of the Customs Act cannot be sustained.
3. It is nowhere recorded that the appellant had any knowledge with regard to the fact of importation of the goods claiming the benefit under DEEC scheme. Only because the co-noticee was the brother in law of the main appellant and he did some job work will not attract imposition of penalty under Section 112(b).
4. It is not even the case of the Revenue that certain documents or certain evidences have been received showing that the appellant could be attributed with a positive knowledge about the imported nature of the goods.
5. Hence appealed allowed by and the order passed by the Commissioner of Customs (Adjudication), Mumbai vide Order-inOriginal No. CAO No. 29/2012/CAC/CC/BKS dated 20.06.2012 is hereby set aside with consequential relief, if any
FULL TEXT OF THE CESTAT MUMBAI ORDER
Penalty of ₹1,00,000/- imposed on Appellant under Section 112(b) of the Customs Act, 1962, as co-noticee to principal violator M/s. Sumira Plastic of the terms of DEEC schemes by diverting imported goods to local market without fulfilment of export obligation, is assailed in this appeal.
2. Fact of the case, in brief, is that one M/s Sumira Plastic, a partnership firm of present Appellant’s sister and brother-in-law had obtained advance licenses under DEEC scheme as manufacturer- export had imported three consignments of plastic granules on 04.2004, 03.08.2004 and 06.05.2004 but violated the terms of advance license and ultimately sold away the finished goods to local market without following export obligation. It was put to show-cause notice, matter was adjudicated that resulted in imposition of duty, interest and penalty for those consignments and other consignments imported up to January, 2007. Appellant who claims itself to be job worker was also penalised under Section 112(b) of the Customs Act, 1962 for an amount of ₹1,00,000/-, which is assailed by him in the present appeal.
3. During course of hearing of the appeal, learned Counsel for the Appellant submitted that there were two co-noticees who stood on the same footing and penalised for the same amount for carrying out job work on behalf of the main noticee, whose appeal got dismissed for non-compliance of stay order, but this Tribunal vide its order No. A/85516/2022 dated 05.2022 in Appeal No. C/907/2012 had absolved liability of other co-noticees by setting aside penalty of ₹1,00,000/- imposed on him also as a job worker for which Appellant case is required to be determined in conformity to the same finding in which the case of other Appellant/co-noticee was decided.
4. In response to such submission learned Authorised Representative for the Respondent-Department submitted that this Appellant is a relative of the partners of main Appellant-Manufacturer and had done the act with full knowledge and information, for which penalty under Section 112(b) of the Customs Act was rightly imposed that needs no interference by this Tribunal. Responding to this learned Counsel for the Appellant submits that there was no iota of proof either in the form of oral or documentary evidence to justify the stand and relationship alone would not automatically make a person liable for any violation by the other related person to justify imposition of penalty.
5. I have gone through the case record and the judgment passed by this Tribunal in respect of the other co-noticee/job-worker but before going to the findings made by this Tribunal on the issue, it would be worthwhile to place it on record the findings of learned Commissioner made at para 3.8.5.3 that in view of the relationship, the Appellant was well aware of the fact that the raw materials supplied, for moulding buckets and shutter cones were meant for export and raw materials were imported duty free under DEEC scheme was not based on any reasoning as this observation of the Commissioner, as found from his order is not based on any other corroborative evidence to the effect that such blood relationship had made the Appellant easily accessible to the modus operandi of the manufacturing company namely M/s. Sumira Plastic, who allegedly violated the terms of DEEC Appellant has demonstratively stated during his examination that after the payment made through cheque was bounced back, he served his relationship with the partnership firm M/s. Sumira Plastic from where her sister herself had resigned long back in 1996. Be that as it may, the relevant finding of this Tribunal in respect of other co-noticee Shri Kumar Sayani passed on dated 13.05.2022 runs as follows:
“… Only because the appellant knew Shri G.N. Pai cannot be a reason for claiming that the appellant was in hand in glove for the fraud committed by Shri Pai in diverting the goods imported by him under DEEC scheme. Appellant’s company was acting in normal job work activities on the material provided by Shri G.N. Pai. It is not even the case of the Revenue that certain documents or certain evidences have been received showing that the appellant could be attributed with a positive knowledge about the imported nature of the goods…”
In view of the above findings of this Tribunal in respect of other co- noticee and having regard to the fact that relationship would not automatically establish knowledge about any clandestine activity of the other related person, there is no point in taking a different view. I am, therefore, of the firm opinion that the observation made by this Tribunal in respect of the other co-noticee Shri Kumar Sayani would also apply to the present Appellant in absolving his liability since relationship could only be taken as a factor in valuation of goods and not in every other situation and therefore, in carrying forward the judicial precedent set by this Tribunal in this proceeding the following order is passed.
THE ORDER
6. The appeal is allowed and the order passed by the Commissioner of Customs (Adjudication), Mumbai vide Order-in- Original CAO No. 29/2012/CAC/CC/BKS dated 20.06.2012 is hereby set aside with consequential relief, if any.
(Order pronounced in the open court on 26.09.2024)
Author Bio
