2025 (10) TMI 497 - AT - Customs

Penalty under s.112 Customs Act set aside for clearing agent where only documents handled and no evidence of diversion

CESTAT held that the penalty under s.112, Customs Act, imposed on the customs clearing agent for alleged diversion of imported goods under an advance ... Levy of penalty u/s 112 of Customs Act, 1962 on custom clearing agent/employee - diversion of imported goods - diversion despite condition of import under ‘advance licence’ requiring consumption for manufacture and export of specified goods - HELD THAT:- The impugned order has assumed that the appellant herein was aware of the diversion of imported goods but we take note that he had only handled the documents and, at no stage, had admitted to handling of the goods for delivery at a place other than as instructed by the importer. There is also no statement implicating the appellant. There are no reason for the penalty to survive and, accordingly, set aside the impugned order to allow the appeal. ISSUES PRESENTED AND CONSIDERED 1. Whether a penalty under Section 112 of the Customs Act can be imposed on a customs clearing agent/employee for diversion of imported goods where the charge is based on alleged knowledge or abetment of diversion. 2. Whether handling of import documents and facilitating clearance, without evidence of active participation in diversion or a clear admission of knowledge, suffices to establish mens rea/abetment for imposition of penalty under Section 112. 3. The evidentiary standard required to fasten penal liability under the Customs Act in circumstances where confiscation under Section 111 is alleged to have resulted from omissions/commissions of third parties. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework for penalty under Section 112 vis-à-vis confiscation under Section 111 Legal framework: Section 111 provides for confiscation of goods in certain events; Section 112 enables imposition of penalties on persons whose acts/omissions have contributed to confiscation. The adjudicatory function is to determine whether the person's conduct amounts to an offence/abettal or culpable omission under the Customs Act. Precedent treatment: The Tribunal considered prior adjudications in near-identical factual matrices where penalties against the same individual were examined and dropped. That prior Tribunal decision treated the absence of positive evidence of involvement as determinative against imposition of penalty. Interpretation and reasoning: The impugned order equated possession of documents and facilitation of clearance with knowledge of diversion. The Tribunal rejected that equation, emphasizing that mere procedural acts in customs clearance do not automatically convert into culpable acts under Section 112 unless independent evidence shows knowledge, intention or active participation in diversion. The Court treated the statutory scheme as requiring proof of culpability beyond the mere fact of subsequent diversion of goods. Ratio vs. Obiter: Ratio - A penalty under Section 112 cannot be sustained solely on the basis that goods cleared by an agent were subsequently diverted; there must be evidence of knowledge, active participation, or deliberate omission amounting to abetment. Obiter - Observations on policy or the mischief of diversion generally, insofar as not strictly necessary to the decision. Conclusions: The Tribunal set aside the penalty under Section 112 because the record did not establish the requisite culpability linking the appellant's acts to the diversion that triggered confiscation under Section 111. Issue 2 - Sufficiency of evidence: documents-handling, absence of admission, and contours of abetment Legal framework: Penal liability for abetment historically references principles of abetment as articulated in criminal law (e.g., Section 107 IPC contours), but for Customs Act penalties the focus is on whether acts or omissions materially contributed to contravention warranting penalty under Section 112. Precedent treatment: The Tribunal relied on an earlier adjudicatory finding (in closely similar facts) that absence of statements or other positive evidence implicating the clearing agent meant no penalty could be imposed. That earlier finding was treated as persuasive and followed in the present adjudication. Interpretation and reasoning: The Court analyzed the facts that the appellant had handled bills of entry, invoices and DEEC Part-I and had handed over documents (and, according to the impugned order, 'handed over the goods' at instruction). The Tribunal noted there was no independent statement by implicated persons alleging the appellant's knowledge or active role in diversion, and no admission by the appellant of diverting physical goods or directing delivery contrary to importer instructions. On this basis the Tribunal held the inference of knowledge/abetment could not be drawn: the role of a clearing agent in supplying documents and executing clearance formalities is ordinarily non-culpable unless coupled with evidence of ulterior knowledge or active facilitation of diversion. Ratio vs. Obiter: Ratio - Mere handling of documentation and performing clearance functions does not meet the evidentiary threshold for abetment or penalty under Section 112 absent positive evidence of knowledge or participation. Obiter - References to the investigatory record and specifics of statements not necessary to the legal holding. Conclusions: The Tribunal concluded that the evidence failed to establish abetment or culpable knowledge; therefore penal liability could not survive. Issue 3 - Reliance on earlier, similar findings and consistency of adjudication Legal framework: Administrative and adjudicatory consistency requires that like cases be treated alike unless material factual distinctions exist. Prior Tribunal findings on identical or substantially similar facts are binding persuasive authority in assessing penalties. Precedent treatment: The Tribunal explicitly relied on a prior order in which penalty proceedings against the same individual in relation to similar imports were dropped. That prior decision was examined for its treatment of evidentiary insufficiency and contours of abetment. Interpretation and reasoning: The present adjudication replicated the factual matrix (handling of documents, no direct evidence of diversion involvement) relied upon in the prior decision. The Tribunal treated the prior findings as correct, noting that the impugned order in the present matter incorrectly assumed knowledge without supporting evidence. Consistency required setting aside the penalty where the factual record did not distinguish the present case materially from the prior one. Ratio vs. Obiter: Ratio - Where prior adjudication of substantially similar facts establishes absence of evidence of culpability, a subsequent imposition of penalty on the same legal basis is not sustainable. Obiter - Any ancillary commentary about policy or broader enforcement is not essential to the decision. Conclusions: The Tribunal followed the earlier treatment and found no reason to sustain the penalty, setting aside the impugned order. Final disposition and operative conclusion The Tribunal found that the impugned penal order under Section 112 was not supported by positive evidence of knowledge, active participation or abetment by the appellant; mere handling of documents and clearance formalities, without corroborative statements or admissions, did not satisfy the requisite standard to impose penalty. Accordingly, the penalty was set aside and the appeal allowed.