Customs Act | Mens Rea Mandatory For Penalty U/S 114AA; Assessee Cannot Be Punished On Assumptions: CESTAT Chennai
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that a penalty under Section 114AA of the Customs Act cannot be imposed unless the department proves mens rea and a clear act of abetment with cogent evidence. The Tribunal clarified that Section 114 has a penal character of being a penalty in personam, placing the burden squarely on the...
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that a penalty under Section 114AA of the Customs Act cannot be imposed unless the department proves mens rea and a clear act of abetment with cogent evidence.
The Tribunal clarified that Section 114 has a penal character of being a penalty in personam, placing the burden squarely on the Customs Department to establish the guilt.
Section 114AA of the Customs Act, 1962, penalises the use of false or incorrect declarations, statements, or documents in any transaction related to customs business. Specifically, it applies to individuals who knowingly or intentionally make, sign, use, or cause to be made, signed, or used such false documents.
Ajayan T.V (Judicial Member) and Ajit Kumar (Technical Member) stated that Section 114 has a penal character of being a penalty in personam, and hence 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 the case at hand, Shri Uthaman/appellant, was working as Assistant Manager, Operations of Air Cargo Helpers, Customs House agents.
Laxmi Fabrics, a proprietorship firm that had declared itself as a manufacturer and exporter, was engaged in the import of raw silk yarn and plain silk fabrics and in the export of printed silk fabrics / made-ups.
Laxmi Fabrics obtained advanced authorisation or Duty Exemption Entitlement Certificate (DEEC) and Duty-Free Import Authorisations (DFIA) to import goods duty-free.
During the period 2009-2013, the firm imported several consignments of silk fabrics, availing the benefit of applicable notifications and by utilising the AA / DEEC / DFIA licenses through Chennai Seaport. It made its exports through inland container Depot, Bangalore (ICD).
A show-cause notice was issued alleging that Laxmi Fabrics had, with malicious intentions, obtained the aforesaid licenses and diverted the imported duty-free raw silk yarn and plain silk fabrics to the local market for monetary consideration without utilising such duty-free goods for the manufacture of goods which were required to be exported in terms of conditions imposed under the foreign trade policy.
The SCN also alleged that Shri Uthaman/appellant, while working as Assistant Manager, Operations of Air Cargo Helpers, Customs House agents, has actively involved himself in the violations of the provisions of the Customs Act, 1962, committed by Laxmi Fabrics.
The Adjudicating Authority confirmed the duty demand made in the show cause notice. A penalty of Rs. one lakh under Section 114 and Rs. one lakh under Section 114 AA were imposed on the appellant.
The bench observed that abetment means a positive act on the part of such a person. Hence, 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.
The Tribunal opined that the requirement of mens rea is explicit on a plain reading of the provision, and hence the burden of proof that the person is liable for a penalty under Section 114AA rests heavily on the Department.
The bench noted that neither the SCN nor the impugned order discusses how the appellant has abetted Laxmi Fabrics in the alleged misdeclaration of goods in the shipping bills. None of the statements available in the Appeal records implicate the appellant in any manner with respect to the said misdeclaration of goods.
Imposition of penalty under Section 114AA without rendering a specific finding in this regard is indicative of a non-application of mind, and penalties thus imposed are wholly untenable on this count too, added the bench.
In view of the above, the Tribunal allowed the appeal.
Case Title: J Uthaman v. Commissioner of Customs
Case Number: Customs Appeal No. 40567 of 2016
Counsel for Appellant/ Assessee: B. Venugopal
Counsel for Respondent/ Department: Anoop Singh