CESTAT Sets Aside ₹2.18-Crore Joint Customs Demand And ₹4.18-Crore Penalties Against High-Sea-Sale Firm Director, Finds He Was Not Importer

In brief

The question

Whether customs duty could be demanded jointly and severally from Jain when he was not the person who filed the Bills of Entry or paid duty

The court held

The Tribunal held that Jain was not the importer of the goods covered by the 13 Bills of Entry and set aside the joint-and-several duty demand against him, as well as the penalties imposed under Sections 112(a) and 114AA; the appeal was disposed of on those terms.

It also directed

Paragraph 8 contains an apparent drafting inconsistency: it describes the penalties as “sustainable” immediately before stating that they are set aside. The final operative order expressly sets them aside.

01Facts

M/s Kamla Exports imported 13 consignments of fabric through Kolkata under advance licences. It filed the Bills of Entry and paid the assessed duty.

pp. 2–5

Three consignments had been purchased by Kamla Exports on high-seas-sale basis from companies of which the appellant, Rajendra Jain, was a director.

pp. 2–5

Customs alleged that Jain was behind the imports, relying principally on a statement by Shammi Chanana that an advance licence had been sold to “Raju Bhai.” The adjudicating authority confirmed customs duty of approximately ₹2.17 crore jointly and severally against Jain and others, and imposed penalties on Jain under Sections 112(a) and 114AA of the Customs Act, 1962. Jain appealed.

pp. 2–5

02Issues

i.Whether customs duty could be demanded jointly and severally from Jain when he was not the person who filed the Bills of Entry or paid duty

pp. 12–16

ii.Whether the evidence established that Jain was the importer or otherwise liable to penalties under Sections 112(a) and 114AA of the Customs Act

pp. 16–20

03Law Applied

Section 28 of the Customs Act provides for recovery of duty from the person legally liable for it; the Tribunal held that it does not authorise a joint-and-several duty demand against multiple persons where the liable importer has not been identified.

pp. 12–14

The Tribunal relied on *Baba Baidya Nath Trading Company v. Commissioner of Customs*, holding that the Act contains no general authority for joint-and-several demands of duty or penalties.

pp. 13–14

*Commissioner of Customs v. Virendra Hans Raj Gandhi* and *Mohan Kumar More v. Commissioner of Customs, Kolkata*, which support the principle that duty is recoverable from the importer, not merely from a high-seas seller.

pp. 14–15

Sections 112(a) and 114AA require evidence establishing the relevant conduct or use of false or incorrect documents; a penalty cannot be sustained without proof of the statutory ingredients.

pp. 19–20

Provisions in the judgment · 5 · Linked ones open on LawLens

Customs Act,1962 Section 2 Section 28 Section 108 Section 111 Section 112

04Reasoning

The Bills of Entry were filed in Kamla Exports’ name, and the record showed that the customs broker received import documents from Kamla Exports, arranged clearance and delivery to it, and obtained transit permissions on its documents. The Tribunal therefore treated Kamla Exports as the importer and found no basis to recover duty from Jain, who was not shown to have filed a Bill of Entry or owned the goods after clearance.

pp. 16–19

His directorship in two high-seas-sale companies did not establish that he was the importer. Nor did Chanana’s reference to “Raju Bhai” prove that the person was Jain; the Tribunal found no evidence identifying them as the same person.

pp. 17–18

The record also did not establish that a licence allegedly sold to Jain was used to clear the goods or that Jain dealt with the goods or relevant import documents. The statutory grounds for penalties were therefore not made out.

pp. 18–20