Export attempt of 19650 kg Red Sanders in Violative of FTP: CESTAT sets aside Penalty on Customs Broker in absence of Mensrea

In a recent judgement, the Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside the penalty under the Customs Act, 1962 which was imposed on the Customs Broker. The Penalty proceedings were initiated on an attempt toexport 19650 kg Red Sanders which was Violative of Foreign Trade Policy (FTP).

Shri Chandan Chatterjee partner of M/s. Shuvam Enterprises, the appellant is a Customs Brokers firm that challenged the order of the Commissioner of Customs (Port). The aforesaid order has been passed under a show cause notice issued under Section 124 of the Customs Act, 1962 to the appellant amongst others. The issue concernsthe attempted export of 19650 kgs of red sanders-the export of which is prohibited as per Foreign Trade Policy 2009–2014.

It was pointed out by theadvocate that in addition to the impugned show cause notice they were also issued a show cause notice under the provisions of the Customs Brokers Licensing Regulations, 2004 which has since been adjudicated upon and whereby in appeal the Custom Brokers license has since been restored and they were allowed to function as a Customs Broker regularly.

The Tribunal held that the appellant was found wanting in discharging his obligations under Regulation 13(a), (b) and (o) of the CHALR, 2004 and accordingly orders passed by the adjudicating authority under Regulation 20(1) of CHALR, 2004 are upheld. 

It was evident that the appellant had no knowledge of the contraband nature of the goods substituted in the containers and in view of the ratio of the relied upon case law, punishment for a lifetime cannot be imposed upon the appellant. The revocation ordered by the adjudicating authority should be for a limited period. As there is no irregularity committed by the appellant from the date of offence detected by DRI, the revocation ordered by the adjudication authority is made effective up to 31.03.2016 and with effect from 01.04.2016 CHA Licence of the appellant and forfeiture of the Security deposit will be restored.”

Any penal consequence will befall a person who commits an act or fails to do an act as would render the concerned goods liable to confiscation under Section 113 of the Customs Act. It is nobody‘s case that the red sander woods logs seized were not liable for confiscation under the said section, therefore all that remains to be examined, is the omission or the commissioning of action/act, performed/non-performed by the present appellant about the said export of red sander wood logs.

It was settled law that for the imposition of penalty, it is necessary to establish a positive role on the part of the concerned person or the establishment of mensrea on the part of such a person is a must. Vague allegations and negligence, if any, howsoever grave cannot be assumed to mean abetment to invoke penal action.

A two-member bench comprising Mr Ashok Jindal Member (Judicial) and Mr Rajeev Tandon  Member (Technical) held that the department case falls woefully short of substantiating the invocation of penalty under Section 114(i) of the Customs Act and set aside the order passed by the Adjudicating Authority. The appeal of the assessee was allowed.

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