2019 (1) TMI 838 - HC - Customs

Court affirms decision to delete penalty on Customs House Agent for lack of complicity in fraud

The court affirmed the Customs, Excise and Service Tax Appellate Tribunal's decision to delete the penalty imposed on the respondent Customs House Agent ... Waiver of Penalty imposed on CHA - whether the respondent was not required to verify and ascertain the address and details of the importers? - smuggling - over-valuation of goods - Regulation 13 of the Customs House Agent Regulation, 2004 - Held that:- The reference to the verification of “antecedents and correctness of Importer Exporter Code (IEC) Number” and the identity of the concerned exporter/importer, in the opinion of this Court is to be read in the context of the CHA’s duty as a mere agent rather than as a Revenue official who is empowered to investigate and enquire into the veracity of the statement made orally or in a document. If one interprets Regulation 13(o) reasonably in the light of what the CHA is expected to do, in the normal course, the duty cast is merely to satisfy itself as to whether the importer or exporter in fact is reflected in the list of the authorized exporters or importers and possesses the Importer Exporter Code (IEC) Number. There is nothing in the Regulations nor in the Customs Act which can cast such a higher responsibility as are sought to be urged by the Revenue. In the absence of any indication that the CHA concerned was complicit in the facts of a particular case, it cannot ordinarily be held liable. The judgment of the Andhra Pradesh High Court in Commissioner of Customs & Central Excise v. H.B. Cargo Services [2011 (3) TMI 816 - ANDHRA PRADESH HIGH COURT], does not apply to the facts of present case, as in that case, the facts reflected in paras 5 and 9 facially show that the CHA played an active role - this Court is of the opinion that the decision in H.B. Cargo Services does not apply in the present case. Appeal dismissed - decided against appellant. Issues:1. Whether the Customs, Excise and Service Tax Appellate Tribunal was correct in deleting the penalty imposed on the respondent as a customs house clearing agent.2. Whether the order passed by the Customs, Excise and Service Tax Appellate Tribunal was contrary to the facts on record.Analysis:1. The case involved a Customs House Agent (CHA) who was penalized under the Customs Act for facilitating dubious exports where the concerned parties were found to be non-existent. The penalty imposed was challenged before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The CESTAT allowed the CHA's appeal, relying on a previous judgment. The Revenue argued that the CHA failed to exercise due diligence as required by the Customs House Agent Regulation, 2004. They cited a judgment from the Andhra Pradesh High Court to support their stance, claiming that the previous judgment relied upon by CESTAT was not applicable.2. The CHA defended themselves by stating that the fraudulent activities were carried out by a former employee, and they were unaware of any wrongdoing. However, investigations revealed that the export firms were non-existent at the declared addresses. The CHA's failure to verify the antecedents and details of their clients enabled the fraudulent exports. The court examined Regulation 13 of the Customs House Agent Regulation, emphasizing the CHA's obligation to verify the authenticity of documents and client details. The court interpreted the regulation to impose a duty on the CHA as an agent, not a revenue official with investigative powers. The court concluded that unless there were clear indicators of complicity, the CHA could not be held liable.3. The court distinguished a previous judgment where the CHA played an active role in misconduct, leading to severe penalties. In that case, the court emphasized the gravity of corruption and the need for strict punishment. However, in the present case, the court found that the CHA's actions did not warrant such severe consequences. Therefore, the court dismissed the appeal, affirming the CESTAT's decision to delete the penalty imposed on the respondent CHA.