2005 (10) TMI 392 - AT - Customs

Tribunal rules company not liable for agent's customs misconduct, emphasizing agent responsibility.

The Tribunal allowed the appeal filed by a company challenging the Commissioner's order regarding duty demands and penalties arising from the misconduct ... Agency liability under Section 147 of the Customs Act, 1962 - Liability of principal for agent's mala fide acts - Proviso to Section 147(3) - recovery sequence where agent's act not wilful - Forgery by Custom House Agent - Penalty under Section 114A of the Customs Act, 1962 - Interest under Section 28AB of the Customs Act, 1962Agency liability under Section 147 of the Customs Act, 1962 - Liability of principal for agent's mala fide acts - Forgery by Custom House Agent - Penalty under Section 114A of the Customs Act, 1962 - Interest under Section 28AB of the Customs Act, 1962 - Whether the appellant (importer) is liable to pay customs duty, interest and penalty in respect of goods cleared on a forged Bill of Entry prepared by its Custom House Agent (CHA), or whether liability lies solely on the CHA under Section 147. - HELD THAT: - The Tribunal examined the record and found that duty was not paid because the Bill of Entry contained forged entries and a receipt that related to another importer; the adjudicating authority itself recorded that the forgery was committed by the CHA. Applying the interpretation of Section 147 in the cited Hetero Drugs decision, the Tribunal held that Section 147(2) and (3) make an agent liable where he acts wilfully or negligently and that, where the agent has exceeded authority and committed mala fide acts (forgery), the principal is not to be held liable for those mala fide acts. The proviso to Section 147(3) contemplates recovery first from the owner where short-levy arises from an act which is not wilful on the part of the agent; conversely, where the agent is guilty of a wilful act or forgery, the agent alone is liable as he attains the status of importer under Section 147(3). The Tribunal found nothing on record to impugn the bona fides of the appellant: the appellant had paid amounts to the CHA for numerous bills and, except for the single forged Bill of Entry, demands in other bills were dropped, supporting the conclusion that the CHA exceeded his authority. The adjudicating authority failed to examine these aspects and proceeded to confirm demand, interest and equal penalty against the appellant without proper consideration. On this basis the Tribunal set aside the de novo order-in-original and held the appellant not liable for the duty, interest and penalty confirmed against it in respect of the forged Bill of Entry; liability was directed to rest with the CHA. [Paras 6, 7]The demand, interest and penalty confirmed against the appellant in respect of the forged Bill of Entry are set aside; the CHA alone is liable under Section 147(3) for the non-payment arising from the forgery, and the appeal is allowed with consequential relief.Final Conclusion: The Tribunal allowed the appeal, setting aside the order confirming duty, interest and equal penalty against the appellant in respect of the forged Bill of Entry, holding that the Custom House Agent who committed the forgery alone is liable under Section 147 of the Customs Act, 1962. Issues:- Misuse of warehousing facilities, forgery of bills of entry, and misappropriation of customs duty by Customs House Agents.- Liability of principal for acts committed by the agent under Section 147 of the Customs Act, 1962.- Application of proviso to Section 147(3) in case of malicious activity by the agent.- Determination of duty demands and penalty imposition by the Commissioner.- Appeal challenging the impugned order before CESTAT, Bangalore.- Interpretation of Sections 147(1), 147(2), and 147(3) of the Customs Act, 1962.- Assessment of liability for non-payment of duty arising from the agent's actions.- Justification for setting aside the de novo order-in-original.Analysis:The case involved investigations revealing misuse of warehousing facilities, forgery of bills of entry, and misappropriation of customs duty by Customs House Agents (CHAs) leading to demands for duty payment and penalties. The appellant, a company, challenged the order passed by the Commissioner of Customs, Air Cargo Complex, Chennai. The appellant contended that liability should only be on the CHA based on the case law precedent of Hetero Drugs Limited v. CC, Chennai. The appellant argued that the principal should not be held accountable for the agent's wrongful actions, citing legal precedents. The appellant emphasized that they had paid duty amounts in good faith and should not be liable for unauthorized actions of the CHA. The appellant also questioned the imposition of equal penalty and interest without evidence of collusion or intention to evade duty.The Revenue, represented by the learned SDR, argued that the appellant was liable to pay duty based on legal precedents and distinctions made by the Commissioner in the present case. The Tribunal carefully reviewed the case records and found that the demand for duty arose from forged entries in a specific Bill of Entry, indicating the CHA's involvement in the forgery. The Tribunal referenced the interpretation of Section 147 of the Customs Act, emphasizing that the CHA, not the principal, is liable for non-payment of duty resulting from the agent's actions. The Tribunal concluded that there was no evidence to doubt the appellant's bona fides, as the CHA had exceeded authority, making the de novo order-in-original meritless. Consequently, the appeal was allowed, and relief was granted to the appellant.In summary, the judgment addressed issues related to the liability of principals for acts of agents, application of legal provisions regarding duty payment, and the interpretation of relevant sections of the Customs Act. The Tribunal's decision highlighted the importance of establishing the culpability of the agent in cases of non-payment of duty and emphasized the need for evidence to support penalty imposition. The judgment provided clarity on the responsibilities of principals and agents in customs matters, ultimately setting aside the impugned order-in-original in favor of the appellant.