Pranav B Prem

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has partially allowed appeals filed by two individuals penalized for their involvement in the smuggling of foreign-origin cigarettes, reducing the penalty amounts and holding that they were not "passengers" liable under Section 112(a) of the Customs Act.

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The bench, comprising Technical Member M.M. Parthiban, observed that although the appellants had contravened customs laws and were liable under Section 112(b) for dealing with smuggled goods, they could not be treated as "passengers" who carried or omitted to declare the smuggled goods themselves to attract penalty under Section 112(a). As a result, the tribunal set aside the penalties imposed under Section 112(a) and restricted the penalties under Section 112(b).

The appeal arose from an incident involving the illegal import of foreign-origin cigarettes through consignments arriving at the Mumbai airport from Kolkata. The Air Intelligence Unit (AIU) of CSI Airport Customs Commissionerate had intercepted a suspicious consignment covered under Air Waybill No. 098-30900284. On physical examination in the presence of panch witnesses and airline officials, it was found that the consignment contained 1,500 cartons comprising 15,000 cigarette packs, or 3,00,000 sticks, bearing the mark “New Light Cigarettes WIN” and “Made under the authority of Hongyunhonghe Tobacco Group Co. Ltd.”

As the recipients of the consignment, Sarup Singh and Manish Naobatram Gupta, failed to produce any valid documents proving legal import, the consignment was seized on the reasonable belief that it had been smuggled into India, violating the provisions of the Customs Act, 1962 and the Cigarettes and Other Tobacco Products Act, 2003 (COTPA).

Subsequent investigations revealed a network wherein Sarup Singh, acting on behalf of Manish Naobatram Gupta, would collect the smuggled consignments and hand them over to Suneesh A.K., who would then dispatch them through interstate buses under the directions of Sunil Subramanian, a shop owner dealing in imported goods. It was found that six to seven such consignments had previously been moved using this modus operandi.

A show cause notice dated 5 April 2017 proposed confiscation of the seized goods under Sections 111(d), 111(i), and 118 of the Customs Act and sought penalties against several individuals, including Sunil Subramanian and his employee, Suneesh A.K., under Sections 112(a) and 112(b). The Adjudicating Authority imposed a penalty of ₹3.5 lakhs on Sunil Subramanian and ₹1.5 lakhs on Suneesh A.K.

On appeal, CESTAT observed that the adjudicating authority had erroneously treated both appellants as “passengers” for the purpose of imposing penalty under Section 112(a). The Tribunal clarified that mere receipt or handling of smuggled goods did not make the appellants “passengers,” especially in the absence of evidence showing that they themselves imported or carried the goods. However, their involvement in knowingly dealing with smuggled goods was sufficient to sustain penalty under Section 112(b).

Accordingly, the Tribunal modified the Order-in-Original and reduced the penalties:

• Sunil Subramanian: Penalty reduced from ₹3,50,000 to ₹1,75,000 under Section 112(b)

• Suneesh A.K.: Penalty reduced from ₹1,50,000 to ₹75,000 under Section 112(b)

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The penalties under Section 112(a) were quashed for both appellants. In conclusion, while the Tribunal affirmed the appellants' role in the illegal distribution of foreign cigarettes, it emphasized the need for proper classification under relevant legal provisions and granted partial relief by reducing the quantum of penalty.

Appearance

Shri Bharat Raichandani, Advocate for the Appellants

Shri Rajiv Ranjan, Authorized Representative for the Respondent 

Cause Title: Suneesh A.K. V. Commissioner of Customs Mumbai Customs-CSI Airport Commissionerate

Case No: Customs Appeal No. 87171 Of 2019

Coram: Hon’ble Mr. M.M. Parthiban [Member (Technical)]

[Read/Download order]