ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 31.10.2025
CESTAT Ahmedabad Overturns Penalties and Redemption Fine in Tug βAllianceβ Smuggling
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad, recently delivered a significant judgment in the case of Customs Appeal No. β 11938 of 2015 and related appeals, concerning the alleged illegal supply of goods to a foreign vessel, MT CANTA, by the tug βAllianceβ. β The case, which involved multiple appellants, including individuals and companies, revolved around allegations of smuggling and violations of the Customs Act, 1962. β
Background of the Case
The case originated from intelligence reports suggesting that the tug βAllianceβ, owned by M/s. β K.B. Shipping & Company, had illegally supplied 20 KL of diesel oil, welding rods, grinders, and discs to the foreign vessel MT CANTA in high seas without filing export documents or obtaining proper customs clearance. β The Directorate of Revenue Intelligence (DRI) investigated the matter, leading to the issuance of a Show Cause Notice on March 11, 2014. β
The Adjudicating Authority found the goods liable for confiscation under Sections 113(f) and (g) of the Customs Act, 1962, and imposed penalties on several individuals and entities under Sections 114(iii) and 114AA of the Act. β Additionally, the tug βAllianceβ was confiscated, with an option for redemption upon payment of a fine of Rs. β 30,00,000.
The appellants challenged the Order-in-Original, arguing that the penalties and fines were imposed without proper consideration of their submissions and in violation of the principles of natural justice. β They contended that they were not given an opportunity to cross-examine key witnesses and that the penalties were unjustified due to a lack of evidence proving their involvement or knowledge of the alleged illegal activities. β
Tribunalβs Observations and Decision β
After a detailed examination of the case, The Tribunal made the following key observations:
- No Evidence of Prior Knowledge or Connivance: The Tribunal found no evidence to suggest that the appellants, including Appellants, had prior knowledge or were involved in the illegal activities carried out by the tugβs Master, and Supervisor. β The Tribunal noted that the appellants had trusted their employees to follow proper procedures, but the employees failed to comply with customs regulations.
- Violation of Principles of Natural Justice: The Tribunal highlighted that the appellants were denied the opportunity to cross-examine key witnesses, which violated the principles of natural justice. β This was a significant procedural lapse in the adjudication process. β
- Wrongful Imposition of Penalties: The Tribunal ruled that penalties under Sections 114(iii) and 114AA of the Customs Act were wrongly imposed on the appellants, as there was no evidence of their direct involvement or intent to violate customs laws.
- Redemption Fine on Tug βAllianceβ Not Sustainable: The Tribunal observed that the tug βAllianceβ was under the operational control of M/s. β K.B. Shipping & Co. at the time of the alleged incident, and the actual owners, M/s. β V.S. Marine Services, were not involved in or aware of the illegal activities. β Therefore, the redemption fine of Rs. 30,00,000 imposed on the tug was deemed unsustainable. β
Final Verdict
The Tribunal set aside the impugned order passed by the Commissioner of Customs (Appeals) and allowed the appeals filed by the appellants. β The penalties imposed on the appellants under Sections 114(iii) and 114AA of the Customs Act were revoked, and the redemption fine on the tug βAllianceβ was also annulled.
Source: CESTAT Ahmedabad
Handy Download:
Write to us at office@aadrikaalaw.com
Tel: +91-11-4999 2707 I +91-9999005379