Legal principle

Penalty under Section 114AA of the Customs Act is sustainable only where the department proves, by credible evidence including enquiries with the certificate-issuing authorities as contemplated by Rule 6 of the CAROTAR Rules, 2020, that the person knowingly or intentionally used false or incorrect documents; mere statements or suspicion, and penalties conflation of strict-liability Section 112(a) with mens-rea-based Section 112(b), cannot sustain the penalty.

Court decision

The Tribunal allowed the appeals of all six individual appellants (Anil Agarwal, Kush Agarwal, Chandan Chaudhary, Manoranjan Kumar, Pankaj Khanna and Pratul Khanna), setting aside the penalties imposed on them under Sections 112(a)/(b) and 114AA, holding the impugned order unsustainable to the extent it related to them. No appeal had been filed by the importer M/s Navarshi Overseas or its proprietor, so the order stood unchallenged in their case.

Facts

DRI, Lucknow received specific intelligence that M/s Navarshi Overseas (Agra) imported dry chopped dates through Bills of Entry at ICD Dadri, mis-declaring Pakistan-origin goods as UAE-origin to evade the 200% customs duty imposed on Pakistani goods by Notification No. 05/2019-Cus dated 16.02.2019 (declared under CTH 0808041030 at 20% instead of CTH 98060000 at 200%). The consignment, valued at Rs.22,40,132 in two containers, was purchased on High Sea Sales basis from M/s Venkat Traders (Kanpur) and was accompanied by a Certificate of Origin issued by the Ajman Chamber, UAE. Examination revealed labelling violative of the FSS (Packing and Labelling) Regulation, 2011, and an expert (ARDPL, Jodhpur) opined the goods were of 'Indian Sub Continent' origin; statements under Section 108 recorded admissions that the dates were Pakistani-origin, re-routed through Dubai by Shri Kush Agarwal of M/s GVO Global FZC, who allegedly arranged the UAE COO. The goods were seized under Section 110, and the Commissioner of Customs (Preventive), Noida by Order-in-Original dated 29.07.2022 re-determined origin as Pakistan, confiscated the goods under Section 111(m), imposed redemption fine under Section 125(1), and imposed penalties under Sections 112(a)/(b) and 114AA on the importer, its proprietor, traders and employees.

Key provisions

• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Rule 6, Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 — Verification request
• Section 12(a), Customs Act, 1962 — Dutiable goods
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 114(aa), Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 8A, Customs Tariff Act, 1975 — Emergency power of Central Government to increase import duties
• Section 110, Customs Act, 1962 — Seizure of goods, documents and things
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 46, Customs Act, 1962 — Entry of goods on importation