2025 (7) TMI 92 - AT - Customs

Levy of penalty u/s 114 (i) of the Customs Act 1962 - Smuggling - attempt to export red sanders wood in the guise of Ragi - reliability of statement recorded u/s 108 of the Customs Act 1962 - HELD THAT - The penalty imposed on the appellant is under Section 114(i) i.e. in case of goods in respect of which any prohibition is in force. Thus when the offending goods here is Red Sanders Logs it is the act or omission of the appellant in relation to Red Sanders Logs or abetment of such act or omission in relation to Red Sanders Logs which act or omission would render such Red Sanders Logs liable to confiscation under Section 113 that would make the appellant liable to penalty under Section 114 (i). It is also apposite to notice that the Honourable Supreme Court has in Union of India v Mustafa Najibai Trading Co 1998 (7) TMI 90 - SUPREME COURT held that the distinction between penalty in rem and penalty in personam has been maintained in the Customs Act 1962. When the act of abetment has a prerequisite of mens rea it cannot be a harmonious construction of Section 114 that the 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 can be visited with a penalty even in the absence of proof of mens rea . Abetment thus means a positive act on the part of the appellant and as can be seen from the facts and circumstances there is no evidence forthcoming to show that the appellant had intentionally given any assistance in the attempted export of red sanders. Thus it can be seen that Section 114 has a penal character of being a penalty in personam and therefore necessarily the burden of proof is on the Customs authorities to bring home the guilt with respect to a person alleged to have done or omitted to do an act or abetted the doing or omission of doing an act in relation to the goods liable to confiscation by adducing satisfactory evidence. Establishing mens-rea is also a prerequisite to attribute attempt. In this case there has been no evidence let in of any intentional act or omission of the appellant in relation to the Red Sanders Logs that has been confiscated. The exculpatory statement of the appellant remained uncontroverted. The Department has also failed to adduce evidence to show that the appellant had actually assisted in loading red sanders or in tampering with the container or was even aware that red sanders is being loaded in the container. In these facts and circumstances to my mind preponderance of probability weighs in the appellant s favour. The penalty imposed on the appellant in the impugned order in original cannot sustain and is required to be set aside - Appeal allowed.

Summary

The core legal questions considered by the Tribunal in this appeal revolve around the imposition of penalty under Section 114(i) of the Customs Act, 1962 on the appellant, who was an Assistant Manager (Sales) at a shipping agency. The issues include whether the appellant had knowledge or intentionally abetted the attempted illegal export of prohibited goods (Red Sanders logs) concealed in a container declared to contain "Ragi"; whether the acts or omissions of the appellant in relation to the goods rendered them liable to confiscation under Section 113; and the applicability and interpretation of Section 114(i) concerning mens rea and abetment in the context of penal liability for attempted smuggling.

Regarding the appellant's alleged involvement, the Tribunal examined the factual matrix where the container, sealed and transported under customs supervision, was found to contain Red Sanders logs instead of the declared Ragi. The appellant admitted to forwarding export documents received from the exporter's manager to an authorized Custom House Agent (CHA) for customs clearance and arranging container bookings and transport but denied any knowledge of the smuggling attempt. The investigation revealed irregularities in the container's sealing, but no direct evidence connected the appellant to the illicit stuffing of Red Sanders logs.

The Tribunal analyzed the relevant legal framework, primarily Section 114 of the Customs Act, 1962, which imposes penalties for acts or omissions relating to goods that render them liable to confiscation under Section 113, or for abetment of such acts. Section 114(i) specifically addresses prohibited goods, allowing penalties up to three times the declared or assessed value. The Tribunal emphasized the distinction between penalties in rem (against goods) and penalties in personam (against persons), citing authoritative Supreme Court precedents that penal liability under Section 114 requires proof of the person's involvement or abetment with mens rea.

In interpreting "abetment," the Tribunal referred to the Indian Penal Code's definition under Section 107 and relevant Supreme Court rulings, underscoring that abetment necessitates intentional aid or facilitation of the prohibited act. Mere negligence or omission without conscious knowledge or intent does not suffice to establish abetment. The appellant's uncontradicted statement under Section 108 of the Customs Act, asserting lack of knowledge about the Red Sanders logs, was given significant weight, and no evidence was produced to rebut this claim or to show his participation in tampering with the container or loading of prohibited goods.

The Tribunal also scrutinized the submissions and evidence regarding the appellant's role in preparing export documents and forwarding them for customs clearance. While the adjudicating authority presumed the appellant's active role in preparing invoices and packing lists and faulted him for not verifying authorization from the exporter, these findings were based on assumptions rather than concrete proof. The appellant's presence during offloading of the declared cargo and the documented stuffing of Ragi at the container freight station (CFS) were consistent with his claim of good faith business transactions.

Competing arguments from the Revenue emphasized the appellant's preparation of export documents and active facilitation as grounds for penalty. However, the Tribunal found these arguments insufficiently supported by evidence, noting that the mere forwarding of documents or arranging shipment without knowledge of illicit goods does not constitute abetment under Section 114(i). The Tribunal distinguished the present facts from cited precedents where penalties were imposed on persons with clear roles in illegal exports or misuse of CHA licenses.

In conclusion, the Tribunal held that the penalty under Section 114(i) could not be sustained against the appellant absent proof of mens rea or intentional abetment. The Tribunal observed that suspicion and conjecture cannot substitute for evidence in imposing a personal penalty. The appellant's acts were found to be negligent at most, but not criminally culpable under the statutory provision invoked. The penalty order was therefore set aside, and the appeal was allowed with consequential relief.

Significant holdings include the following verbatim legal reasoning:

"Section 114 has a penal character of being a penalty in personam, and therefore necessarily the burden of proof is on the Customs authorities to bring home the guilt with respect to a person alleged to have done or omitted to do an act or abetted the doing or omission of doing an act, in relation to the goods liable to confiscation, by adducing satisfactory evidence. Establishing mens-rea is also a prerequisite to attribute attempt."

"Mere proof that the crime charged could not have been committed without the interposition of the alleged abettor is not enough compliance with the requirements of Section 107."

"Suspicion however great, cannot take the place of proof is a dictum that is always worth being borne in mind."

Core principles established include the necessity of mens rea and positive act or omission with knowledge for imposition of penalty under Section 114(i), the distinction between penalties in rem and in personam under the Customs Act, and the requirement that abetment entails intentional facilitation of the prohibited act.

Final determinations are that the appellant's penalty under Section 114(i) is unsustainable due to lack of evidence of intentional involvement or abetment; that forwarding export documents and arranging shipment without knowledge of smuggling does not attract penalty under the provision; and that the appeal is allowed with the penalty set aside.