Knowledge & Intention Must Be Present Before Imposing Penalty U/S 114AA Of Customs Act For Obtaining Undue Export Advantage: CESTAT

The Bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that “Knowledge and intention is sine qua non for imposing penalty under section 114AA of the Customs Act. The department has not been able to establish knowledge on part of the assessee or intention on the part of the assessee to help the exporter in obtaining the alleged undue export advantage. In such circumstances, penalty under section 114AA of the Customs Act cannot be imposed upon the assessee.”

In this case, the assessee/appellant is engaged in the manufacture and export of Ready-Made Garments. It entered into contracts for supplying Ready Made Garments with Lagoon Trading LLC, Lagcy Trading LLC, and Royal Readymade Garments based in U.A.E.

Out of the 211 shipping bills, the assessee carried the goods pertaining to only five shipping bills. The assessee claims that there were no amendments carried out in TR-1/TR-2.

According to the department, the assessee had filed the Export General Manifest for transportation of the container stuffed with the export goods covered under the five shipping bills to Panama, as the “Port of Discharge” but the said container was actually discharged at Jebel Ali, a port in United Arab Emirates.

A finding has been recorded in the order that the “Port of Discharge” and “Country of Destination” in the five shipping bills were not amended, but the goods were diverted to Jebel Ali, a country which was not notified under the Focus Market Scheme.

The Commissioner of Customs imposed penalty of Rs. 10 lakhs upon the assessee under section 114 (iii) of the Customs Act, 1962 as also a penalty of Rs. 10 lakhs under section 114AA of the Customs Act.

It is the case of the assessee that it is merely a shipping line engaged in carrying goods as per the booking receipts and instructions given. The assessee had no knowledge that any benefit was likely to arise to the exporter out of the transaction and the finding recorded by the Commissioner that the exporter and the appellant connived with each other in diverting the container containing the goods under the five shipping bills is without any basis.

The container was booked to export the goods to Colon Free Zone, Panama and the same was mentioned in the Shipping Bill as well. It is a fact that there were no fraudulent amendments in the five Shipping Bills pertaining to goods carried by the assessee, observed the Tribunal.

The bench noted that penalty has been imposed upon the assessee for the reason that it had not complied with the particulars mentioned by them in the Export General Manifest in as much as the goods were delivered at Jebel Ali instead of Panama.

The Tribunal observed that the assessee also filed e-mail communication and the container tracking report to show that the charges for carrying the shipment after it had arrived at Panama to Jebel Ali was negotiated and invoices were raised by the assessee.

Knowledge and intention is sine qua non for imposing penalty under section 114AA of the Customs Act. The department has not been able to establish knowledge on part of the assessee or intention on the part of the assessee to help the exporter in obtaining the alleged undue export advantage, opined the bench.

In view of the above, the Tribunal allowed the appeal.

Case Title: Evergreen Shipping Agency India Pvt Ltd. v. Commissioner of Customs (Export)

Case Number: CUSTOMS APPEAL No. 51117 of 2022

Counsel for Appellant/ Assessee: G.K. Sarkar and Prashant Shrivastava

Counsel for Respondent/ Department: Rakesh Kumar

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