No Penalty u/s 112(b)(ii) of Customs Act without proving Nexus with Goods under Seizure Liable for Confiscation: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that no penalty under Section 112(b)(ii) of Customs Act without proving nexus with goods under seizure liable for confiscation.

The appellant in the present matter is Ajay Sarawagi. The present appeal has been filed against the order, whereby the Commissioner of Customs (Preventive), has imposed a penalty of Rs.50.00 Lakhs under Section 112(b)(ii) of the Customs Act, 1962 in relation to his role in the alleged smuggling of miscellaneous contraband goods.

A Show Cause Notice was issued to the Appellant and others proposing confiscation of the seized goods under Section 111(b) and (d) and imposition of penalty under Section 112 (b)(ii) of the Customs Act on the appellant.

The Counsel for the appellant submitted that the appellant is not connected even remotely with the goods found and the question of ownership is a far-fetched thought. He has no financial capacity to trade in goods valued at Rs.4.00 Crores and that since the appellant was not examined in the offence, any punitive action is violative of principles of natural justice. The Counsel further submitted that no follow up action was conducted for Zuber Ali, who have supplied the goods either.

The Tribunal of PK Choudhary, Judicial Member observed that “Past offence can be at best enhancer of civil and/or criminal liabilities, but no penalty can be imposed on any concurrent alleged offence. It is well settled law that no penalty under section 112(b)(ii) of the Customs Act, 1962, can be imposed without proving the nexus with the goods under seizure which are liable for confiscation.”

The Bench also noted that it is now well established that mens rea is an important ingredient for imposing penalty on the persons enumerated in Section 112(b) of the Customs Act, 1962 and that the evidence brought out by the department nowhere suggests that the Appellant was aware that the goods in question were smuggled into the country.

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