2025 (7) TMI 1344 - AT - Customs

Levy of penalty u/s 114 (iii) and u/s 117 of the Customs Act 1962 - export of waste clothes chindis in the guise of Ladies Fancy Scarves in 7 containers to avail the benefit of duty draw back - HELD THAT - The impugned order passed by the learned Commissioner regarding imposition of penalty under Section 114 (iii) and 117 of Customs Act 1962 is against his own observations made at page no. 53 para 24.3 of the impugned order. It is pertinent to mention here that at page 53 para no. 24.3 the learned Commissioner has observed except for small negligence on the part of the said noticee which attracts action under CBLR 2013 if any there are no evidence against the said noticee in the abetment or omission to do any act which rendered the goods liable to confiscation or in contravention of any of the provisions of Customs Act 1962. Hence it warrants leniency from the proposed penal action under Section 114 (iii) and 117 of Customs Act. Therefore penalty under Section 114 (iii) can be imposed only if the person concerned does or omits to do any act which would render the goods liable to confiscation under section 113 or abets the doing of such act or omission. In this case the learned Commissioner has himself concluded at page 53 para 24.3 that he did not find any evidence against the appellant in the abetment or omission of any act which rendered the goods liable to confiscation. Therefore in these circumstances penalty under Section 114 (iii) against the appellant is not sustainable and is liable to be set aside. From the provision of Section 117 it is clear that penalty under Section 117 can be imposed upon the person who contravenes any provision of Customs Act or abets such contravention of any provision or who fails to comply with any provision of this Act. However learned Commissioner has observed at page 53 in para 24.3 of his impugned order that he did not find any evidence against appellant regarding contravention of any of the provisions of Customs Act 1962. Therefore penalty under 117 of the Customs Act cannot be sustained and it is liable to be set aside. As appellant has been found guilty of negligence which attracts action under CBLR 2013 therefore proceedings under CBLR 2013 may be undertaken by the department regarding suspension or revocation of its license. With these observations the appeal is liable to be allowed. The impugned order regarding the imposition of penalty of Rs. 25, 000/- on the appellant under Section 114 (iii) of Customs Act and imposition of penalty under Section 117 of the Customs Act are set aside - Appeal allowed.

Summary

ISSUES:

Whether penalty under Section 114(iii) of the Customs Act, 1962 can be imposed without evidence of act or omission rendering goods liable to confiscation or abetment thereof.Whether penalty under Section 117 of the Customs Act, 1962 is sustainable in absence of evidence of contravention or abetment of any provision of the Act.Whether negligence in supervision and failure to report expiry of H Card by Customs House Agent (CHA) attracts penalty under Customs Brokers Licensing Regulations (CBLR), 2013 or under the Customs Act.

RULINGS / HOLDINGS:

Penalty under Section 114(iii) of the Customs Act is not sustainable as the Commissioner himself concluded "except for small negligence... no evidence... in the abetment or omission to do any act which rendered the goods liable to confiscation."Penalty under Section 117 cannot be imposed where there is no evidence against the appellant regarding contravention of any provisions of the Customs Act, 1962, as observed by the Commissioner.Negligence relating to failure to supervise and inform about expiry of H Card attracts action under CBLR, 2013 but does not warrant penalty under Sections 114(iii) or 117 of the Customs Act.

RATIONALE:

The Court applied the statutory framework of Sections 114 and 117 of the Customs Act, 1962, which require proof of act or omission rendering goods liable to confiscation or contravention of the Act, respectively, to impose penalties.Section 114(iii) penalizes "any person, who... does or omits to do any act which would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act."Section 117 provides a residual penalty for contraventions not expressly covered elsewhere, requiring proof of contravention or failure to comply.The Commissioner's own findings negated the presence of such evidence, creating an internal inconsistency in imposing penalties under these provisions.The Court recognized that the appellant's negligence falls within the regulatory scope of CBLR, 2013, which governs licensing and conduct of Customs Brokers, and suggested departmental proceedings under those regulations rather than penal action under the Customs Act.No dissent or doctrinal shift was noted; the judgment emphasized strict adherence to statutory requirements for penalty imposition under the Customs Act.