Karnataka High Court Partially Overturns CESTAT Ruling in Customs Penalty Case
Court Restores Penalty Imposed Under Customs Act, 1962 While Upholding CESTAT’s Revocation Decision
In a significant ruling, the Karnataka High Court has partially overturned the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding penalties imposed on M/s Pigeon International for customs violations. The division bench, comprising Justices S.G. Pandit and K.V. Aravind, reinstated the penalty of Rs. 50,000 under Section 117 of the Customs Act, 1962, which had been set aside by the CESTAT. However, the court upheld the tribunal's decision to revoke the suspension of the authorized courier license of the respondent, deeming it disproportionately harsh given the circumstances.
The appeal, filed by the Principal Commissioner of Customs, questioned the CESTAT's decision which had reduced the penalty under the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010, and dismissed the penalty under the Customs Act. The case stemmed from an investigation revealing that an employee of M/s Pigeon International had created a fraudulent GSTIN and filed incorrect import documentation.
The court observed that the CESTAT erred in interpreting Section 117 of the Customs Act as requiring mens rea, clarifying that the provision does not stipulate such a requirement. Furthermore, the court highlighted that penalties under Section 117 and Regulation 14 of the 2010 Regulations operate in separate domains and can coexist for distinct violations. The court restored the original penalties and emphasized that the revocation of the courier license was unwarranted as the foundational basis of the proceedings had ceased to exist when the ownership of goods was accepted and duties paid.
The verdict underscores the independent applicability of penalties under different statutory provisions and reaffirms the necessity of proportionality in administrative penalties.
Bottom Line:
Penalty under Section 117 of the Customs Act, 1962 is applicable independently even when penalty under Regulation 14 of the Courier Imports and Exports (Electronic Declaration and Processing) Regulation, 2010 is imposed - Mens rea is not required for imposing penalty under Section 117 of the Customs Act.
Statutory provision(s): Customs Act, 1962, Section 117; Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010, Regulation 14
