No Penalty for Innocent Facilitation of Improper Importation: Delhi High Court Sets Precedent

Introduction

The present case of Rajeev Khatri v Commissioner of Customs[i] involves an appeal filed before the High Court of Delhi ('the Court') challenging an order passed by the Customs, Excise & Service Tax Appellate Tribunal (‘CESTAT’). The appellant, a licensed Customs Broker, unknowingly facilitated the import of prohibited goods, resulting in the imposition of a penalty under s. 112(a) of the Customs Act, 1962 (‘the Act’). The key question before the Court was whether a penalty could be imposed on an accused who unknowingly abetted the import of prohibited goods by filing the Bill of Entry without proper verification.

The Court analyzed the definition of abetment and differentiated between penalties for acts of omission or commission from penalties for abetment. It concluded that penalty could not be imposed on innocent facilitation highlighting the requirement of mens rea for abetment. This decision brings clarity to penalties in cases of unintentional facilitation of illegal imports.

Facts

• The appellant, in this case, filed an appeal before the Court under s. 130 of the Act, challenging an order passed by the CESTAT.

• The appellant was a G-Card holder of M/s GND Cargo Movers who filed a Bill of Entry for the import of certain goods that were later found to be prohibited and thus liable for confiscation. The Adjudicating Authority (‘AA’) by the order-in-original imposed a penalty of Rs. 34,14,020/- on the appellant under s. 112(a) of the Act.

• Aggrieved by the said order, the appellant appealed to the CESTAT, which reduced the penalty imposed on the appellant from Rs. 34,14,020/- to Rs. 10,00,000/- on the ground that the appellant had no knowledge of the illegal import of prohibited goods and no connivance with the actual importer.

• Thereafter the appellant preferred this appeal and the primary question of law before the Court was whether a penalty under s. 112(a) of the Act could be imposed on an accused who unknowingly abetted the import of prohibited goods.

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Held

• The Court answered the question framed in negative and set aside the penalty imposed on the appellant under s. 112(a) of the Act.

• The Court held that s. 112(a) of the Act includes two categories of persons who may be liable for a fine. The first category includes those who perform or fail to perform an act that renders the goods liable for confiscation under s. 111 of the Act. The second category comprises individuals who aid or abet the commission or omission of such acts.

• It noted that in the present case, the appellant’s role in the illegal importation was confined to the ministerial act of filing the Bill of Entry and the penalty was imposed on the appellant based on the allegation that he had abetted the acts of misdeclaration, importation of prohibited goods rather than directly committing those acts.

• The Court made a distinction between the imposition of a penalty for failing to fulfil a civil obligation and the imposition of a penalty as a punishment for committing a crime. Based on this distinction, the Court recognized that although a penalty under s. 112(a) of the Act does not necessitate the presence of *mens rea *or a guilty mind. For non-compliance with a civil obligation pertaining to abetting an offence (as in the case of the second category of persons under s. 112(a) of the Act), the Court noted that abetment inherently requires knowledge of the wrongful act being abetted.

• Therefore, the Court held that persons who have directly committed acts of omission or commission that render goods liable for confiscation are obligated to pay the penalty as prescribed under s. 112(a) of the Act, without the need to establish their malicious intent. However, the same principle does not apply to persons who are accused of abetting such acts of omission or commission and did so innocently.

• The Court while referring to the definition of ‘abet’ in the General Clauses Act, 1897 and the Indian Penal Code, 1860, held that the said definitions emphasize intentional aid or active complicity in facilitating the commission of a crime. The Court also cited various decisions of the Supreme Court and various High Courts that supported the above-stated interpretation and concurred with their findings. The cases referred to support this interpretation include Shree Ram v. State of U.P.[ii], Amritlakshmi Machine Works v. The Commissioner of Customs (Import), Mumbai*[iii]*, and Commissioner of Customs (Import) v. Trinetra Impex Pvt. Ltd.[iv].

Analysis

The Court’s decision focused on the interpretation of the term ‘abet’ in s. 112(a) of the Act. It clarified that abetting an offence requires knowledge of the wrongful act and active involvement or intentional aid in facilitating that act. Mere facilitation without knowledge does not amount to abetment. The Court distinguished between penalties imposed for acts of omission or commission as punishment for crime from those imposed for abetting such acts of omission or commission as civil obligations. This judgment sets a precedent that penalties imposed on abettors should take into account the essential element of mens rea, thereby protecting against penalization for innocent facilitation.

End Notes

[i] 2023 SCC OnLine Del 3840

[ii] (1975) 3 SCC 495

[iii] (2016) 335 ELT 225 (Bom)

[iv] (2020) 372 ELT 332 (Del)

Authored by Prashant Singh, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.