LIABILITY TO PAY CUSTOMS DUTY CANNOT BE FIXED ON CUSTOMS BROKER

Dutiable goods

Section 12(1) of the Customs Act, 1962 provides that except as other provided in the Act, or any other laws for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 or any other law for the time being in force on goods imported into or exported from India.  Section 12(2) provides that the provisions of sub-section (1) shall apply in respect of all goods belonging to the Government as they apply in respect of goods not belonging to the Government.

Penalty for short levy or non levy of duty in certain cases

Section 114A of the Customs Act provides that where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (8) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined :

Penalty for use of false and incorrect material

Section 114AA of the Customs Act provides penalty for use of false and incorrect material.  The said section provides that if a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods.

Duty payable only importer or exporter

In the matter of import or export the importer or exporter may do the same by themselves or through an authorized person or an agent.  In such a case if there is any short payment or mis declaration the importer or exporter is solely liable for payment of tax and also penalty.    

In ‘RADO IMPEX LOGISTICS PVT LTD. VERSUS THE COMMISSIONER OF CUSTOMS’ – 2020 (1) TMI 204 - CESTAT HYDERABAD, the appellant is a customs broker.  He filed two bills of entry for the import of rice cookers on behalf of the importer Rajguru Tradelink.  The importer orally gave the responsibility of paying customs duty applicable on the goods.  Such customs duty may be reimbursed by the importer.  The appellant gave this work to his employee Shri Parthiban.  The employee deliberately misdeclared the quantity of goods in both  the bills of entry to reduce the customs duty.  The Department, during the assessment found that the value declared by the appellant was much lower than the value of contemporaneous imports.  Therefore the assessment was revised.  The duty was assessed based on the contemporaneous imports.  Subsequently the department found that the quantity of the goods declared was much lower than actual imports. 

The Department investigated the matter and it found that the importer had outsourced the entire operations to the appellant who has misdeclared the quantity of goods to evade the payment of customs duty.  The Deputy Commissioner, in his order, confiscated the entire goods under section 111(1) of the Customs Act, 1962 and allowed redemption on payment of redemption fine of ₹ 2,00,000/- under section 125 of the Customs Act.  The Commissioner confirmed the duty of ₹ 4,82,054/- and appropriated the duty already paid towards this amount.  The Commissioner also imposed penalty of ₹ 49,000/- on importer under section 112(b)(i) of the Customs Act and ₹ 1,00,000/- on the appellant under section 114AA of the Act for presenting false and incorrect material in the declaration made in the bills of entry.

The appellant paid the penalty imposed on him.  The importer did not file appeal against the order of the Commissioner.   However the Revenue filed appeal before the Commissioner (Appeals).  The Revenue contended that the penalties should have been imposed by the Deputy Commissioner upon appellant under section 114A of the Customs Act, 1962 which has not been done.  The Commissioner agreed with the contention of the Revenue and imposed a penalty of ₹ 4,82,054/0 on the appellant under section 114A of the Customs Act, 1962.  Against the order of Commissioner (Appeals), the appellant filed appeal before the Tribunal.

The appellant put forth the following arguments before the Tribunal-

• The appellants were the customs broker for the consignment in question.
• The appellants employed Shri Parthiban to file the bills of entry on their account who has misdeclared the quantity of goods in the bills of entry for which mistake they are liable.
• The appellant has already paid the penalty under section 114AA imposed by the Deputy Commissioner.
• Section 114A provides for short levy or non levy in certain cases that can only be on the person who is liable to pay the duty or interest as the case may be.
• In this case the importer is liable to pay duty or interest and not the appellant.
• Therefore the penalty imposed under section 114A is to be set aside.

The Revenue contended the following before the Tribunal-

• The entire activity was outsourced by the importer to the appellant who himself as per the understanding, had undertaken to pay the entire customs duty.
• The person who is liable to pay customs duty in this case was the appellant themselves and not necessarily the importers. 
• It does not matter whether the importer subsequently reimburses the customs duty to the appellant or not.
• Section 114A has been correctly invoked with respect to these goods.

The Revenue drew the attention of the Tribunal of the provision of Regulation 11(g) of Customs Brokers Licensing Regulations, 2013 which provides that a customs broker shall promptly pay over to the Government, when due, sums received for payment of any duty, tax or other debt or obligations owing to the Government and promptly account to his client for funds received for him in excess of government or other charges payable in respect of the clearance of cargo or baggage on behalf of the client.  The Revenue submitted that in view of the above said regulation section 114A has been correctly invoked.

The Tribunal heard the submissions of both sides.  The Tribunal analyzed the provisions of section 12 of the Customs Act, 1962. 

The Tribunal held that as per section 12 of the Act, it can be seen that the charge of customs duty is on the goods imported or exported.  It does not matter if the importer or exporter entrusts this responsibility to somebody else, may be his own employee or an agent.  The liability is on the importer or exporter only. The definition ‘importer’ also includes any person who holds himself out to be an importer. The Tribunal observed that in this case the appellant has not claimed himself to be importer. The bills of entry mention the name of the main importer as the importer for the consignments. Therefore the importer is only liable to pay the customs duty and not the appellant.  Section 114A will not apply to the appellant since the offence committed by him is mis declaration of facts in the bills of entry.  Section 114AA is meant for such offence and a penalty of ₹ 1,00,000/- was imposed on the appellant for such offences by the Deputy Commissioner which has been paid by the appellant.

The Tribunal allowed the appeal filed by the appellant.