2018 (7) TMI 552 - AT - Customs

Customs Act penalty overturned for Custom House Agent not involved in mis-declaration

The tribunal overturned the penalty imposed on a Custom House Agent (CHA) for alleged mis-declaration of goods by the importer, as the CHA was not ... Penalty u/s 112(a) of the Customs Act, 1962 on CHA - mis-declaration of goods - Held that:- The appellant have declared the goods as per the document, therefore, the mis-declaration cannot be alleged against the appellant. As regard the penalty imposed under section 112 (a), entire discussion is on the violation of Regulation of CHALR 2004. For any violation of CHALR 2004, penalty cannot be imposed under the Customs Act, for the reasons that the CHALR 2004 in itself is the complete Regulation for proceeding against the CHA for any violation of Regulation. Penalty set aside - appeal allowed - decided in favor of appellant. Issues:1. Imposition of penalty on a Custom House Agent (CHA) for mis-declaration of goods leading to evasion of Custom Duty.2. Violation of regulations under CHALR 2004 by the appellant.3. Failure to follow KYC norms and obtain authorization from the importer by the appellant.Analysis:Issue 1: Imposition of penalty on CHA for mis-declaration of goodsThe appellant, a Custom House Agent (CHA), was penalized under section 112(a) of the Customs Act, 1962 for alleged mis-declaration of goods by the importer, resulting in evasion of Custom Duty. However, it was established that the appellant was not involved in the mis-declaration of goods by the importer. The adjudicating authority acknowledged this fact and held that the appellant cannot be penalized for mis-declaration. The judgment cited by the appellant's counsel supported this stance, emphasizing that when the CHA is not party to mis-declaration, the penalty under the Customs Act should be set aside. As the revenue did not appeal against this finding, it attained finality. Consequently, the penalty imposed on the appellant was overturned, and the appeal was allowed.Issue 2: Violation of regulations under CHALR 2004The appellant argued that the penalty imposed on them for violation of regulations under CHALR 2004 was unwarranted. It was contended that since the proceedings under CHALR were conducted separately, imposing a penalty under the Customs Act was unjustified. The tribunal agreed with this argument, highlighting that any violation of CHALR 2004 should be dealt with under the said regulation itself. As the appellant's CHA license was already revoked and security deposit forfeited under CHALR proceedings, imposing an additional penalty under the Customs Act was deemed inappropriate. The tribunal found no basis for penalizing the appellant under the Customs Act when they were not involved in mis-declaration and had already faced consequences under CHALR. Therefore, the penalty under the Customs Act was set aside.Issue 3: Failure to follow KYC norms and obtain authorizationThe Revenue contended that the appellant failed to adhere to KYC norms and obtain proper authorization from the importer, justifying the penalty under section 112(a) of the Customs Act. However, the tribunal's analysis focused on the lack of involvement of the appellant in the mis-declaration of goods. Since the appellant had correctly declared the goods as per the documents and was not complicit in the mis-declaration, the penalty under section 112(a) was deemed unjustified. The tribunal's decision to set aside the penalty was based on the absence of evidence implicating the appellant in the mis-declaration, despite procedural lapses related to KYC norms and authorization.Overall, the tribunal's judgment emphasized the importance of establishing the direct involvement of a party in wrongful acts before imposing penalties, ensuring that regulatory violations are addressed within the appropriate legal framework, and upholding the principles of natural justice in adjudicating penalties under the Customs Act.