Customs Act | CESTAT Chennai Holds S.117 Penalty Cannot Be Imposed Without Finding Of Contravention

The CESTAT, Chennai has set aside the ₹4 lakh penalty imposed on Dahnay Logistics Pvt. Ltd. under Section 117 of the Customs Act, finding that there was no established contravention warranting penalty.

A Bench comprising Ajayan T.V., Member (Judicial) found that 100% examination of the cargo had revealed nothing objectionable and that the documents furnished by Dahnay Logistics were not found wanting.

The Tribunal held that Section 117 could not be invoked mechanically and that a penalty required an established contravention or failure to comply with a statutory obligation. It observed:

“The Appellant was not only subjected to the maximum penalty despite the absence of any established contravention, but was also compelled to incur further consequences arising from the continued detention of the goods till the time of its re-export and also to pursue litigation contesting the imposition of such penalty.”

The dispute arose from a 104.416 MT consignment of Mono Ammonium Phosphate, valued at about ₹91.59 lakh, which was manifested for Tuticorin through Kattupalli. Since a coastal vessel was unavailable, the shipper sought re-export of the consignment.

Customs itself recorded that the request was bona fide, there was no hold on the goods and the consignment remained at the IGM stage.

The Tribunal noted that the adjudicating authority had itself accepted that the request for re-export was bona fide and that the goods had been imported contrary to the original shipping arrangements due to circumstances beyond the appellant's control.

The absence of any Customs hold or objectionable finding on examination further weakened the basis for imposing the penalty.

It also found that imposing the maximum penalty in the absence of a recorded finding of contravention, followed by delay in permitting re-export, had caused avoidable prejudice to the assessee.

The Tribunal accordingly directed that its order be forwarded to the Revenue Secretary and CBIC Chairperson for examination of the adjudication and review process.

The Tribunal ultimately set aside the ₹4 lakh penalty and allowed the appeal with consequential relief.

Counsel for the Appellant: Hari Radhakrishnan, Advocate

Counsel for the Revenue: N. Satyanarayana, Authorised Representative