Mens Rea Not Prerequisite For Imposing Penalty U/S 117 Of Customs Act: Karnataka High Court

Section 117 of the Customs Act, 1962, addresses penalties for contraventions not specifically mentioned elsewhere in the Act.

Justices S.G. Pandit and K.V. Aravind stated that a plain reading of Section 117 of the Act makes it clear that whenever any person contravenes any provision of the Act or fails to comply therewith, a penalty is attracted. Reading a requirement of mens rea into the provision would amount to rewriting the statute, which is impermissible. Since Section 117, in its plain language, does not indicate the necessity of mens rea. The contrary finding recorded by the CESTAT is incorrect and unsustainable.

In this case, the respondent-assessee was granted permission to operate as an Authorised Courier at the International Courier Terminal of the Airport and Cargo Commissionerate, Devanahalli, Bengaluru.

Such permission is governed by the Courier Imports and Exports (Clearance) Regulations, 1998 and the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010.

The assessee engages in the clearance of goods imported from overseas through its courier service on behalf of Indian importers/customers.

During the course of the investigation, it was found that Sri M. Elias, an employee of the assessee/respondent, had created a GSTIN in the name of Ms. Kajal Thakur, whose trade name is M/s. K. T. Technologies.

A show-cause notice was issued to the assessee for the alleged violations under the 2010 Regulations and for the imposition of a penalty under Section 117 of the Customs Act, 1962.

The assessee preferred an appeal before the CESTAT. The CESTAT, while modifying the penalty of Rs 50,000/- to Rs 25,000/- levied under Regulation 14 of the 2010 Regulations, set aside the penalty imposed under Section 117 of the Customs Act, 1962 and also set aside the order of revocation of the authorised courier license and enforcement of the Bond and Bank Guarantees.

The revenue/appellant submitted that the CESTAT recorded the involvement of the assessee in the alleged illegal imports and violations of Regulation 12 of the 2010 Regulations. The CESTAT, having recorded such findings, misdirected itself in holding that there was no mens rea on the part of the assessee to violate the 2010 Regulations.

The assessee/respondent argued that a penalty under Section 117 of the Customs Act, 1962, can be levied only when no penalty is provided under any other Act or Regulations. Since Regulation 14 specifically provides for the levy of a penalty, the imposition of a penalty under Section 117 of the Customs Act would amount to a double levy for the same violation, which is impermissible.

The bench disagreed with the CESTAT that the presence of mens rea is a prerequisite for imposing a penalty under Section 117 of the Customs Act, 1962.

The bench stated that, irrespective of the acceptance of the explanation, once the foundational basis of the proceedings no longer exists, the imposition of suspension or revocation of the registration of the authorised courier would be disproportionately harsh.

The bench held that in view of the penalty provided under Regulation 14 of the 2010 Regulations, the imposition of a penalty under Section 117 of the Customs Act is not permissible.

The CESTAT committed an error in setting aside the penalty levied under Section 117 of the Customs Act, 1962, stated the bench.

The bench restored the penalty of Rs. 50,000/- under Section 117 of the Customs Act, 1962.

In view of the above, the bench partly allowed the appeal.

Case Title: Principal Commissioner of Customs v. M/s Pigeon International

Case Number: CUSTOMS APPEAL No. 7 OF 2024

Counsel for Appellant/Department: Unnikrishnan M.

Counsel for Respondent/Assessee: Maya Menon

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