2016 (4) TMI 1153 - AT - Customs

Customs House Agent penalty overturned for misclassification of goods, Tribunal rejects co-noticee settlement, emphasizes due diligence.

The Tribunal set aside the penalty imposed on the Customs House Agent (CHA) for misclassification of goods, emphasizing the applicability of a previous ... Imposition of penalty - Section 112 (b) of the Customs Act, 1962 - Section 117 of the Customs Act, 1962 – CHA – classification – food supplements – medicaments – Held that: - the imported goods were declared as classifiable under heading food supplements, as informed to the CHA. Further it was CHA only who applied for first check. The issue of classification is a complex issue and it cannot be said that the CHA should have opinion that the goods were not food supplements but were medicaments. Having made the declaration, it was for the Customs Department to find out the correct classification of the same – penalty not imposed – appeal allowed – decided in favor of appellant. Issues: Imposition of penalty on a Customs House Agent (CHA) under Section 112(b) of the Customs Act, 1962 read with Section 117 of the Customs Act, 1962.Analysis:1. The appellant, a CHA, was penalized Rs. 25,000 for declaring goods as food supplements on behalf of an importer, which were later found to be medicaments by the Revenue. The main importer settled the dispute before the Settlement Commission, but proceedings against the appellant continued, resulting in the penalty imposition.2. The appellant contended that the settlement by the main importer should conclude proceedings against all co-noticees, citing tribunal decisions like S.K. Colombowala vs. CC (Import), Mumbai and Windoors (India) vs. CCE, Mumbai II. The Commissioner did not follow the S.K. Colombowala decision, stating it was not unanimous, and referred to K.I. International Ltd. vs. CC, Chennai, where settlement before the Settlement Commission did not conclude proceedings against co-noticees.3. The Tribunal found no merit in the Adjudicating Authority's reasoning, emphasizing that the majority decision of the tribunal becomes the law, and minority views hold no reliance. Referring to Larsen & Toubro Ltd. vs. CST, Delhi, it held that the S.K. Colombowala decision was fully applicable to the present case.4. The Tribunal rejected the reliance on K.I. International Ltd. vs. CC, Chennai, stating it was not on point. It concluded that the S.K. Colombowala decision was applicable in this case, setting aside the penalty imposed on the appellant.5. Additionally, the Tribunal noted that the appellant was penalized for not exercising due diligence in verifying the goods' classification. It reasoned that the complexity of the classification issue and the CHA's reliance on the information provided did not justify the penalty. The Tribunal found no justifiable reasons to penalize the appellant on merit.6. Consequently, the impugned order imposing the penalty on the appellant was set aside, and the appeal was allowed with consequential relief granted to the appellant.