2016 (11) TMI 758 - AT - Customs

Appellate Tribunal clarifies Customs Act sections on penalties for facilitating under-declaration of values

The Appellate Tribunal differentiated between Sections 112(a) and 114AA of the Customs Act, noting that Section 114AA applies to importers using false ... Imposition of penalty u/s 112(a) and 114AA of the Customs Act, 1962 - Held that: - I find that the Section 114AA is applicable to an importer who uses incorrect or false materials in the transaction of the business, whereas Section 112(a) deals with abatement - In the present case, it is already an admitted fact that the appellant is an agent on commission basis between the foreign supplier and the Indian importer, and he himself is not an importer per se. Therefore, I find that the penalty under Section 114AA is not imposable since the appellant cannot be brought under the category of person who are liable to penalty. Therefore, I set aside the penalty imposed under Section 114AA of the Customs Act, 1962. Penalty u/s 112(a) - Held that: - The Commissioner (Appeals) has already recorded the fact that the appellant had no direct role in the customs clearance and did not signed any customs paper and had arranged duplicate invoice for lower value for importer without knowing the actual intention of the importer. But the offence committed by the appellant is punishable under Section 112(a) of the Customs Act, 1962 and since ignorance of law and/or being unaware of the intention of the importer is not a ground of excuse, I impose a penalty of ₹ 50,000/- under Section 112(a) and direct the Adjudicating Authority to appropriate the amount, paid by the appellant, towards the same. Appeal allowed - decided partly in favor of appellant. Issues:Penalties imposed under Sections 112(a) and 114AA of the Customs Act, 1962 on the appellant for acting as a purchase agent in importing goods.Analysis:1. The appellant, acting as a purchase agent, facilitated the import of goods for M/s. Bharti Glass Company from China. The appellant's role was limited to correspondence with foreign exporters as per instructions of the importer, without direct involvement in customs clearance or signing customs papers. The appellant claimed ignorance of the intention behind arranging duplicate invoices showing lower values, done at the importer's request for business purposes. The Lower Appellate Authority acknowledged the appellant's limited role and reduced penalties imposed.2. During a search at the appellant's office, documents were seized, including email correspondences related to the import. The appellant admitted arranging duplicate invoices but claimed it was at the importer's request, without knowledge of the implications. The Lower Appellate Authority recognized the appellant's lack of direct involvement in customs procedures.3. The appellant's counsel argued that the appellant's actions did not render the goods liable for confiscation under Section 111 of the Customs Act, as the undervaluation was at the importer's behest. The counsel contended that the appellant's role did not fall under Section 114AA, which pertains to knowingly using false materials in business transactions.4. The Appellate Tribunal differentiated between Sections 112(a) and 114AA, noting that the latter applies to importers using false materials, not agents like the appellant. The Tribunal acknowledged the appellant's limited role and lack of direct involvement in customs processes. Despite the appellant's ignorance of the importer's intentions not absolving him of liability, the Tribunal imposed a penalty of &8377; 50,000 under Section 112(a) due to the appellant's involvement in facilitating under-declaration of values through duplicate invoices.5. The Tribunal's decision set aside the penalty under Section 114AA but upheld the penalty under Section 112(a) based on the appellant's role in facilitating actions that could render goods liable to confiscation under Section 111. The judgment highlighted the distinction between the roles of importers and agents in customs-related offenses, emphasizing the agent's accountability under Section 112(a) despite limited direct involvement in the importation process.