Appeal challenging penalty of Rs. 5,00,000/- under Customs Act, 1962 for importing prohibited Red corals misdeclared as Shilajit Stone. Tribunal upheld penalty, ruling no mens rea needed for Section 112 penalty. Appeals dismissed.
Impugned order reduced the penalty to Rs. 5,00,000/- under Section 112. The appeal challenging this reduction was dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL NEW DELHI
PRINCIPAL BENCH, COURT NO. 1
CUSTOMS APPEAL NO. 51591 OF 2022
[Arising out of Order-in-Appeal No. CC(A)/Customs/D-II/IMP/ICD/TKD/200/2021-22 dated 27.05.2021 passed by the Commissioner of Customs (Appeals) New Delhi]
M/S VIJAY SONS ….Appellant
483, Katra Ishwar Bhawan, Khari Baoli, Old Delhi-110006
Vs.
COMMISSIONER OF CUSTOMS(APPEALS)….Respondent NEW DELHI
New Customs House, Near IGI Airport, New Delhi-110037
Appearance:
Shri Salil Arora and Sh. Divya Ratna Singh, Advocates for the appellant
Shri Girijesh Kumar, Authorised Representative for the revenue
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P. V. SUBBA RAO, MEMBER ( TECHNICAL )
FINAL ORDER NO. 58600/2024
Date of Hearing/Decision : 05/09/2024
P. V. SUBBA RAO:
1 the appellant
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penalty imposed under section 114AA of the Customs Act, 19622 and ordered that the seized cash may be released to the appellant after recovering dues, if any. He also reduced the penalty under section 112 from Rs. 50,00,000/- to Rs. 5,00,000/-.
2 Act
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of the Red corals was assessed as Rs. 1,200/- per kg totaling Rs. 1,85,40,000/-.
“1. I determine the value of non-declared goods i.e. Red Coral (Organ Pipe Coral (Tubiporidae) packed in 333 bags and totally weighing 15450 Kgs as Rs. 1,85,40,000/- under rule 9 of the Customs Valuation (determination of value of imported goods) rules 2007 framed under section 14 of the Customs Act 1962. I order absolute confiscation of non-declared goods i.e. Red Coral (Organ Pipe Coral (Tubiporidae) packed in 333 bags and totally weighing 15450 Kgs having determined value of Rs.1,85,40,000/- under Section 111 (d), (1) & (m) of the Customs Act, 1962 for contraventions discussed above.
3 ICD
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under Bill of Entry No. 4159010 dated 05.02.2016 under Rule 12 of the Customs Valuation (Determination of Value of Import Goods) Rules, 2007 and re-determine the value as Rs. 3.54.818/-under Rule 5 of Customs Valuation (determination of value of imported goods) rules 2007 framed under section 14 of the Customs Act 1962.
Submissions by the learned counsel for the appellant.
(a) Penalty under section 112 cannot be imposed as there was no mens rea. The appellant had placed an order for shilajit stone but the overseas supplier sent Red corals also. In the absence of mens rea, no penalty can be imposed under section 112;
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(b) The appellate authority’s order shows lack of proper application of mind as it did not specify under which clause of section 112 the penalty was imposed;
(c) Mere filing of Bill of Entry on the basis of the documents available does not amount of any act or omission as envisaged in section 112(a).
Submissions on behalf of the Revenue.
4 2007 (207) ELT 346 (Mad.)
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“112. Penalty for improper importation of goods, etc.
- Any person,-
(a)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 111, or abets the doing or omission of such an act, or
(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
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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 hereinafter 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.
(iv)in the case of goods falling both under clauses (i) and (iii), to a penalty not exceeding 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”
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and prohibitions on imports and the duty payable are on the goods imported and not the goods said to be imported in the documents. Nobody will were ever declare that he imported prohibited goods in its documents. However, so long as the imported goods are prohibited goods, the importer is liable for all the consequences. Mens rea can only be inferred from the facts of the case. If the importer had any doubts regarding the consignment which was sent by the overseas supplier, he could have asked for examination of the goods before filing the Bill of Entry and if the goods were not as per his order, he could have abandoned the goods under section 23(2). However, once the importer imports certain goods and declares something else in the Bill of Entry, the importer has to face the full consequences of such imports. If the argument of the learned counsel for the appellant that simply because he had not placed order for prohibited goods he should be get ride of from the responsibility of the import is accepted, it will open floodgates of smuggling in the country. Any prohibited goods including drugs, explosives, arms and engendered species can be imported into India if the importer simply does not mention it in his papers. Customs Act cannot be read in a manner to allow such smuggling.
“4. At the outset, we are of the view that the questions of law referred to above have not been happily framed, as the entire issue in this appeal revolves on the intention of the assessee in making such a misdeclaration with a view to evade duty, and accordingly, we reframe the question as under :
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“Whether the element of mens rea is required for imposition of punishment under the Customs Act?”
5. Learned Counsel appearing for the appellant submits that the Tribunal has failed to consider the reasonings given by the original authority on the basis of evidence on record, but, on the other hand, the Tribunal has merely observed that it is inclined to accept the reasonings given by the assessee and hence, the order of the Tribunal is liable to be set aside.
6. We have gone through the order of the Tribunal. It is true that the Tribunal has recorded a finding of fact that it is inclined to accept the reasons given by the assessee that it was the supplier who by mistake loaded tin sheets waste which were not ordered by the assessee and that the Revenue has not shown that there was any flow back of funds for the purpose of tin sheets waste. However, a perusal of the order impugned shows that the Tribunal proceeded on the basis that the assessee had no intention to evade duty. We are deliberately quoting the order of the Tribunal in the following words :
“.... the Revenue has not shown that appellant had wilfully suppressed the facts and had mis-declared the goods with intention to evade duty and the fact that he had consciously committed the act of misdeclaration...”
7. It is oft-repeatedly held that mens rea is not an essential ingredient for contravention of the provisions of a civil law. The Apex Court recently in Chairman, SEBI v. Shriram Mutual Fund [(2006) 5 SCC 361] held as under :-
“ Mens rea is not an essential ingredient for contravention of the provisions of a civil Act. Unless the language of the statute indicates the need to establish the element of mesn rea , it is generally sufficient to prove that a default in complying with the statute has occurred and it is wholly unnecessary to ascertain whether such a violation was intentional or not. The breach of a civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not.”
8. Applying the above ratio to the facts of the case, we find that though the Tribunal has recorded a finding of fact that it was the supplier who by mistake loaded tin sheets waste which were not ordered by the assessee, the Tribunal rendered its decision on the basis that the Revenue has not shown that the assessee had wilfully suppressed the facts and had misdeclared the goods with intention to evade duty. The order of the Tribunal mainly proceeded on the footing of intention of the assessee to evade duty, which, in our view, is not correct in the matter of breach of a civil obligation attracting levy of penalty. Therefore, the order of the Tribunal is liable to be set aside.
9. Accordingly, the question as reframed by us is answered in the negative and against the assessee. The appeal is allowed and the order of the Tribunal is set aside and the matter is remitted back to the Tribunal for fresh disposal on merits and in accordance with law. No costs. Connected C.M.P. is closed.”
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(Order pronounced in open court)
(JUSTICE DILIP GUPTA) PRESIDENT
(P. V. SUBBA RAO) MEMBER ( TECHNICAL )
Tejo
3 issues framed by the court
Whether mens rea is required to impose penalty under Section 112 of the Customs Act, 1962 for prohibited goods.
Whether the penalty of Rs. 5,00,000/- imposed on the appellant is justified in view of the confiscation of Red corals.
Whether the appellant can be absolved of liability for importing prohibited goods merely because they were not specifically ordered.
Colour shows how this judgement treated each authority
Commissioner of Customs (Export,) Chennai-I vs. Bansal IndustriesExplained¶17
(2007) 207 ELT 346 (Mad.)
Chairman, SEBI v. Shriram Mutual FundApplied¶17
[(2006) 5 SCC 361] · Who else cites this
3 provisions across 1 enactments
M/S VIJAY SONS
COMMISSIONER OF CUSTOMS(APPEALS)
DILIP GUPTA
P. V. SUBBA RAO
As recorded by the court registry
An appeal in a customs matter before the Customs, Excise and Service Tax Appellate Tribunal.
Judgements on the same questions, provisions and authorities, from every court
