When the goods are not confiscated then the penalty under Section 114 is not imposable.

PJ/Case Laws/2012-13/1249

Case:- Mr VIKRAM JAIN Vs CC, BANGALORE

Citation: - 2012-TIOL-1080-CESTAT-BANG

Brief fact: - The goods declared as ‘Silk fabrics' were exported under the DEEC scheme by M/s Texworth International of Shri Vikram Jain (appellant) and the very same goods were brought back into India by them in the pretext of importing ‘Mulberry raw silk yarn' under Advance License and duty-free clearance claimed under the said scheme, and this process was ‘recycled'.The show-cause notice alleged against M/s. Texworth International, inter alia, thus:

"They appear to have render themselves liable to pay interest at 20% on the said duty under Section 28AB of the Customs Act, 1962 and liable to penalty under Section 112 & 114 of the Customs Act, 1962. Shri Vikram Jain, Proprietor of M/s. Texworth International appears to have rendered himself liable for penalty under Section 112 & 114 of the Customs Act, 1962 inasmuch as he misused the DEEC concession granted and also colluded with Shri H. Bhaskar, Shri B. Prasad, Shri Raviprakash and Shri Srinivasa Rao and Shri Lalit Jain in fraudulently importing the exported goods and clearing the same in the name of 100% EOUs in order to clear the goods without payment of duty and took delivery of the consignments and re-exported the same to create an impression that export obligation was being fulfilled."

The Appellant Shri Vikram Jain, Proprietor of M/s Texworth International, challenges the penalty of Rs.20 Lakhs imposed on him under Section 114(i) of the Customs Act by the Commissioner of Customs vide Order-in-Original No.35/2000 dt. 06/09/2000. This Bench vide Final OrderNo.624/2006 Dt. 13/02/2006 set aside the Order-In-Original with consequential relief to the appellant. Against the Tribunal's order, the Department filed an appeal (CSTA No.35/2006) in the High Court of Karnataka and the Hon'ble High Court vide judgment Dt. 19/03/2010 remanded the matter to the Tribunal without answering the question of law raised by the Department.Para-4 of the Hon'ble High Court's judgment is reproduced below:

"4. After hearing, we are of the view that even if a wrong provision of law has been quoted by the Revenue in the show- cause notice, if the pith and substance of the show-cause notice fulfill the provisions of S.114 of the Customs Act, it was for the Tribunal to consider the case of the parties on merits and to find out whether the Revenue has made out a case under S.114 of the Act so as to levy penalty. If there is any typographical error in mentioning the correct provision of law or even otherwise by oversight if a wrong provision of law is mentioned, the same cannot be a ground for the Tribunal to set aside the order without examining the case of the parties on merits. Therefore, we are of the view, only on this short ground without answering the question of law, we have to set aside the order of the Tribunal and the matter requires to be reconsidered by the Tribunal afresh on merits, in accordance with law."

When the matter subsequently came up before this Bench, the counsel for the appellant submitted that they wanted to move the Hon'ble High Court for clarification of its remand order, for which purpose hearing on the appeal stood adjourned from time to time. Ultimately, on 05/03/2012, the learned counsel for the appellant informed the Bench that they would not pursue the matter before the Hon'ble High Court and both sides reached a consensus for agitating the penalty-related issue before us. Accordingly, final hearing was held on09/04/2012.

Appellant Contention: - The learned counsel for the appellant submits that the penalty imposed under Section 114 of the Act was beyond the scope of the show-cause notice wherein the specific proposal was to impose a penalty on the appellant under Section 112(b)(ii) of the Acts Even though Section 114 of the Act was also cited in para 30 of the show-cause notice, no grounds whatsoever was alleged therein for invoking the said Section of the Act against the appellant. It was further submitted that, for a penalty to be imposed on a person under Section 114 of the Act, he should be found to have, by some commission or omission, rendered any export goods liable to confiscation under Section 113 of the Act. In the present case, there was not even an allegation in the show-cause notice that any export goods were liable to confiscation and the appellant rendered it so liable. In the circumstances, according to the learned counsel, the penalty imposed on the appellant under Section 114 of the Act was only liable to be set aside. The learned counsel claimed support from certain decisions.
1). Castrol India Ltd. vs. CCE,
2). Vapi [2008(222) ELT 408 (Tri. Mumbai)] = (2007-TIOL-1826-CESTAT-MUM) and
3). M.N. Shah vs. CCE, Surat [2008(232) ELT 110 (Tri. Mumbai)] = (2008-TIOL-2687-CESTAT-MUM).

Respondent Contention:- The learned Additional Commissioner (AR) pointed out that, in another similar case of the appellant, this Bench vide Final Order No.775/2006 Dt. 10/04/2006 in appeal No. C/11/2001 rejected his contention that no penalty could be imposed on him as the goods were not confiscated. As the modus operandi of the appellant in the present case was not different from the case considered by this Bench in appeal No.C/11/2001, the penalty imposed on him is only liable to be sustained. The learned Additional Commissioner (AR) also claimed that the relevant facts set out in the show-cause notice constituted an offence which invited penalty and therefore, notwithstanding the non-mention of Section 113 or Section 114 of the Customs Act in the operative part of the notice, it was open to the adjudicating authority to invoke these provisions against the appellant. In this connection, reliance was placed on Tribunal's decision in T.S. Naryana Rao vs. CC [1990(50) ELT 328 (Tri.)].

Reasoning of Judgment:A penalty under Section 114 of the Act is attracted by a person who, in relation to any goods, does or omits to do any act which act or omission would rendered the goods liable to confiscation under Section 113, or abets the doing or omission of such an act. As rightly submitted by the learned Additional Commissioner (AR), the non mention of Section 113 in the show-cause notice would not per se invalidate the penalty imposed under Section 114 if the penalty otherwise supported by the essential facts alleged and proved. In the present case, the learned Commissioner imposed the penalty on the appellant under Section 114 of the Act "for fraudulently exporting the goods". Tribunal has not found in the show-cause notice any allegation of "fraudulent" export. Moreover, any goods were not alleged to be liable to confiscation in terms of Section 113 of the Act, nor were the appellant alleged to have rendered the goods liable to confiscation. Obviously, in these circumstances, the learned Commissioner was not in a position to hold the goods liable to confiscation. The non availability of the goods on account of "complete exportation" did not stand in the way of the Department alleging its confiscability for valid reasons or in the way of the adjudicating authority holding it to be liable to confiscation on valid grounds. In the present case, the show-cause notice did not allege the essential, and consequently the adjudicating authority could not hold any goods to be liable to confiscation in terms of Section 113 of the Act. In this scenario, nobody could have been held to have rendered the goods liable to confiscation so as to attract a penalty under Section 114 of the Act in the present case. This view is supported by the decisions cited by the learned counsel. In the Excise case of Castrol India Ltd. (supra), no goods was held liable to confiscation and therefore the penalty imposed on the party under Rule 26 of the Central Excise Rules, 2002 was set aside by the Tribunal. In the Customs case of M.N.Shah (supra), the penalty imposed on the party under Section 112(b) of the Customs Act was set aside in the absence of any finding that any goods were liable to confiscation. The case of the appellant covered by Final Order No.775/2006 ibid cited by the learned Additional Commissioner (AR) is clearly distinguishable on facts. The questionwhether Section 114 of the Act could be invoked against the appellant did not arise in that case.In the result, the penalty on the appellant gets set aside.

Decision:- Appeal Allowed.

Comments:-This is very important decision specifically holding that when the shoe cause notice does not hold goods liable for confiscation then the penal action 114 cannot be invoked. It is essential ingredients in the impugned section that the goods should be liable for confiscation. The same provision under Rule 26 of Central Excise Rules also exists.

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PJ/Case Laws/2012-13/1249

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