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Dated: 15.04.2025

CESTAT Ahmedabad Held that penalty cannot be imposed in absence of mens rea and credible evidence

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench, vide Final Order No. 10240/2025 dated 11 April 2025, allowed the appeal of M/s Aeromar Logistics (India) Pvt. Ltd., setting aside the penalty imposed under Sections 114(iii) and 114AA of the Customs Act, 1962.

Case Background

• The case arose from an investigation into fraudulent overvaluation of export goods declared as “Super Ceramic Coating (Pro Polish)” by M/s Fusion Overseas, intercepted at ICD Khodiyar.
• The FOB value was allegedly inflated by over 22 times, and the department concluded the goods were not manufactured as claimed.
• M/s Aeromar Logistics was issued a show cause notice as a co-noticee, accused of failing to verify the authenticity of export documents received from M/s Mass Shipping Agency before forwarding them to the CHA.

Allegations and Penalty

• The adjudicating authority imposed a penalty of ₹50 lakhs on Aeromar Logistics under Sections 114(iii) and 114AA of the Customs Act.
• It was alleged they acted negligently and abetted the fraudulent export by facilitating the transmission of false documents.

Appellant’s Defense

• Aeromar Logistics clarified they were not the Customs Broker in the case.
• Acted only as an intermediary, forwarding documents received via email from Mass Shipping Agency to the CHA.
• Had no knowledge or role in verification or handling of the export goods.
• No evidence of intentional abetment, forgery, or submission of false documents was provided by the department.

CESTAT’s Observations & Ruling

• Noted that no statement from Aeromar was recorded under investigation.
• The only communication was a letter confirming receipt of documents from Mass Shipping.
• CESTAT emphasized that:
  • Abetment requires knowledge and intentional assistance in the wrongful act.
  • Mere transmission of documents, without active participation or malafide intent, does not attract penalty under Section 114 or 114AA.
• Cited precedent cases including:
  • Bansal Fine Foods Pvt. Ltd.
  • PD Prasad & Sons Pvt. Ltd.
  • Rajeev Khatri vs Commissioner of Customs (Export)
  • Amritlakshmi Machine Works (Bombay High Court)
• Held that penalty cannot be imposed in absence of mens rea and credible evidence.

Final Verdict

• The Tribunal set aside the penalty of ₹50 lakhs imposed under Sections 114(iii) and 114AA.
• Allowed the appeal of M/s Aeromar Logistics (India) Pvt. Ltd. with consequential relief.

Significance

• Clarifies liability in the supply chain, distinguishing logistics intermediaries from direct actors.
• Reaffirms that innocent facilitation, without knowledge or intent, is not punishable under abetment provisions.
• Reinforces the judicial approach that penalties must be based on evidence, not presumptions.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

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Source: CESTAT Ahmedabad

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