The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that penalty under section 114 AA of Customs Act, 1962 is not imposable unless mens rea is established beyond doubt. The Tribunal held that the penalty under section 114 AA of Customs Act is not imposable as the department failed to either prove that goods had originated in Iran or prove role of the Appellant or its Directors in the alleged Mis-declaration.
M/s Amglo Resources Private Limited, the main Appellant (Appellant), challenged the Order by which penalties under Section 112(a) and 114AA of the Customs Act respectively have been imposed along with a redemption fine. Two other appeals have been filed by Mr. Vishal Amlani and Satish Amlani, the directors of the Company (the Director and/or Directors) against the same Order.
The main issue in the present case relates to the country of origin of goods. The case of the department is that the Appellant herein had misdeclared the country of origin ( COO ) of goods as Zambia instead of Iran. It is relevant to note that the present proceedings have no duty implication as the Appellant admittedly never intended to avail any duty benefit basis the country of origin certificates ( COO certificates ) and has paid duty at proper value determined based on LME price prevalent on the date of assessment.
The Appellant during the Normal course of business had raised Purchase Order on NBJ International FZ-LLC, Dubai, UAE (the supplier) for supply of Copper Cathode on CFR, Nhava Sheva. Accordingly, it was the duty of the supplier to supply the goods to the Buyer (Appellant) at the destination port viz., Nhava Sheva.
Four Bills of Entry were filed by the Appellant based on documents provided by the supplier which included COO Certificates showing goods to be of Zambian Origin. The COO certificate contains the stamp of Zambian Revenue Authority.
While filing the Bills of Entry, the Appellant always intended to clear the imported goods on payment of duties of customs at the applicable rate, without claiming any FTA benefits basis the COO Certificates. The said fact has not been disputed by the department in the show cause notice. Also, the value of goods was declared basis LME and there is no issue of valuation in the present case.
Since the product imported by the Appellant was covered under DGFT notification No. 61/2015-20 dated 31.03.2021, the Appellant registered the import of goods under Non-Ferrous Metal Import Monitoring System and appropriate certificate was issued by the DGFT in this regard. We have been informed that the registration/certification is valid till date and has not been disturbed by the DGFT.
Investigation was initiated by the department in relation to alleged mis-declaration of COO of goods by the Appellant. In terms of the examination order, the goods imported vide Bill of Entry No. 7078197 dated 14.01.2022 were examined wherein it was suspected that the Appellant had submitted false/fabricated COO Certificate and had wrongly mentioned Zambia as country of origin in Bill of Entry. Examination of the goods was undertaken under Panchnama dated 28.01.2022 and it was observed that the said goods appear to be of Iranian Origin and not Zambia.
A two-member bench comprising of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) that viewed that in relation to Section 112 (a) of the Act it has been held in various ruling that mens rea is not a requirement for imposition of penalty, however the same cannot be a standard principle in all matters. In cases where there is absolutely no involvement of assessee and where there is no evidence produced to show their role in the alleged fraud/misdeclaration, then imposition of penalty in our view will amount to injustice as far as the assessee is concerned.
In Commissioner v/s Trinetra Impex Pvt. Ltd., the Delhi High Court held that while mens rea for imposition of penalty under Section 112 (a) of the Act is not a condition precedent, however, said ingredient is necessary for imposition of penalty under the said section.
It was submitted that the “knowingly‘ and “intentionally” mentioned under section 114 stated that unless mens-rea is established beyond doubt Penalty under the said section cannot be imposed.
Since the department failed to either prove that goods had originated in Iran or prove role of the Appellant or its Directors in the alleged Mis-declaration. Penalty under Section 114AA cannot be imposed. The CESTAT set aside the impugned order and allowed the Appeals with consequential relief.
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