Sale of Goods by Importer to Another not Legally Prohibited: CESTAT quashes Penalty [Read Order]

The CESTAT, Chennai bench has held that there is no prohibition on the selling of goods by the importer to another to attract proceedings under section 112(a) of the Customs Act, 1962.

The department, under an impression that the appellant, M/s Freight Link Logistics, was trying to evade customs duty, initiated proceedings. Show cause notice was issued against the importer as well as the appellant who is the Customs Broker. It was alleged that the appellant dealt with an unauthorized person instead of dealing with the actual IEC holder thereby violated KYC norms.The department further alleged that the goods were imported by Shri A. Govindaraj using the IEC code of M/s.Vaaraahi Traders. The appellant has absolutely no knowledge about the business dealings between M/s.Vaaraahi Traders and Shri A. Govindaraj. When the IEC code as well as the KYC documents are clear, the appellant cannot be said to have violated any provisions of the Customs Act merely for the reason that the consignment contained goods which are undeclared.

The appellant contended that they had no knowledge about the excess weight or undeclared goods. The documents have been prepared and filed as per the declaration contained in the import documents.

Ms. Sulekha Beevi C.S., Member (Judicial) observed thatit is not disputed that M/s.Vaaraahi Traders are licensed to import goods and that their IE Code is valid.

“The case set up by the department is that the goods imported are for the use/purchase of Shri A. Govindaraj and not for the use of M/s.Vaaraahi Traders. There is no law which prohibits the importer to sell the goods to another after importing the same. It is also brought from evidence that the appellant has nothing to do with excess weight or undeclared goods in the consignment. The penalty imposed on the allegation that the goods imported are not for use of the importer but for the use / sale to another person would not attract ingredients of section 112 (a) of the Customs Act, 1962,” the Tribunal said.

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