2017 (1) TMI 1562 - AT - Customs

Appellate tribunal rules in favor of clearing house agent, clarifying duty liability under Customs Act

HH Hingorani Versus C.C. Ahmedabad

The appellate tribunal ruled in favor of the clearing house agent (CHA), setting aside the demand for customs duty and penalties imposed on the appellant. ... CHA - demand of customs duty - penalty - evasion of customs duty on goods imported by various importers - Held that: - the demands of custom duty from appellant herein is only on the ground that appellant had not ensured that of the documents submitted by them on behalf of importers was in accordance with the existing provisons or otherwise, handled documents without verifying the antecedents of the importers - there are no provisions in Customs Act, 1962, that demand of customs duty needs to be discharged by any other person than importers. It is on record that the appellant herein is not a importer but is a clearing house agent. The issue, as to, can a duty liability be fastned on the CHA is well settle by the division bench of the Tribunal in the case of Devanshi Bhanji Khona [2008 (12) TMI 467 - CESTAT, BANGALORE], where it was held that the duties of the Custom House Agent i.e. current appellant before us, ended the moment the goods were cleared from the customs area. Subsequent detention of the undervaluation, etc. and could have proceeded against by the revenue only against the importer, which they did so, but not on the current appellant. As the demand of duty as also confiscation does not survive test of law against CHA, the question of imposition of penalty under Section 112 of the Custom Act, 1962 does not arise and is accordingly set aside. Appeal allowed - decided in favor of appellant. Issues: Liability of clearing house agent for customs duty and penaltiesAnalysis:The appeal was against an Order-in-Appeal regarding the demand of customs duties and penalties on the appellant, who was a clearing house agent (CHA) for certain importers. The adjudicating authority and the 1st appellate authority held the appellant liable for customs duty evasion and imposed penalties based on the appellant's failure to ensure compliance with customs regulations by the importers. The 1st Appellate Authority emphasized the appellant's lack of vigilance in handling documents and verifying the authenticity of importers, leading to duty evasion. However, the Customs Act, 1962 does not explicitly assign duty liability to CHAs, as established in the case law of Devanshi Bhanji Khona (2009). The Tribunal in that case clarified that once goods are cleared from customs, the responsibilities of a CHA cease, and any subsequent issues should be addressed with the importer directly. The Tribunal emphasized that the role of a CHA is limited to facilitating goods release and does not extend to being held liable for duty evasion by importers. Therefore, the appellate tribunal set aside the impugned order and allowed the appeal, ruling that the demand for duty and penalties against the CHA was not legally sustainable.In conclusion, the appellate tribunal's decision clarified that the duty liability and penalties cannot be imposed on a clearing house agent under the Customs Act, 1962. The judgment highlighted the limited role of a CHA in facilitating customs clearance and emphasized that duty evasion issues should be addressed with the importers directly. The ruling in this case aligned with established legal principles and previous case law, ultimately setting aside the demand for duty and penalties against the appellant CHA.