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 ... Effect of settlement before the Settlement Commission on co-noticees - binding nature of majority Tribunal decisions where difference of opinion is resolved by a third Member - liability of a Customs House Agent for incorrect classification of imported goods and penalty under the Customs Act - due diligence obligation of a Customs House Agent in ascertaining classification of imported goodsEffect of settlement before the Settlement Commission on co-noticees - binding nature of majority Tribunal decisions where difference of opinion is resolved by a third Member - Whether settlement of the dispute by the importer before the Settlement Commission concludes proceedings against other co-noticees including the CHA. - HELD THAT: - The Tribunal held that the ratio in S.K. Colombowala v. CC (Import), Mumbai, being a majority decision where an initial difference of opinion was resolved by a third Member, constitutes the declaration of law and is applicable. The Adjudicating Authority's refusal to follow that ratio on the ground of a dissenting view was incorrect: the majority view governs and is to be treated as binding. Reliance on K.I. International Ltd. v. CC, Chennai was rejected because that decision was subsequently examined and its reliance on an unrelated Supreme Court decision rendered it inapposite. Applying the majority ratio, the Settlement Commission's settlement by the importer is operative vis-a -vis the co-noticees in the facts of the case. [Paras 3, 4, 5]The Settlement Commission's settlement by the importer applies to the present appellant; the Commissioner erred in refusing to follow the majority Tribunal ratio.Liability of a Customs House Agent for incorrect classification of imported goods and penalty under the Customs Act - due diligence obligation of a Customs House Agent in ascertaining classification of imported goods - Whether imposition of penalty on the CHA for alleged failure to exercise due diligence in classification of the imported goods is sustainable on merits. - HELD THAT: - The Tribunal found that the goods were declared to the CHA as food supplements by the importer and that the CHA had applied for first check. Classification of the goods involved a complex question of law and fact; it could not be said that the CHA was obliged to form the view that the goods were medicaments rather than food supplements. The primary duty to determine correct classification lay with the Customs authorities once the declaration was made. On these considerations, even on merits, there was no justification for imposing the penalty on the CHA. [Paras 6, 7]The penalty imposed on the appellant CHA was unjustified on merits and is set aside.Final Conclusion: The impugned order insofar as it imposes penalty on the appellant is set aside; the appeal is allowed with consequential relief to the 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.