2025 (11) TMI 209 - AT - Customs

CHA cleared of penalty under s.112(i) Customs Act for relying on importer documents and lacking mens rea

CESTAT (Allahabad) - AT allowed the appeal and set aside penalties under s.112(i) of the Customs Act, 1962 imposed on the appellant customs house agent. ... Levy of penalty on CHA u/s 112(i) of CA, 1962 - illicit importation of Korean Cigarette Edge Super Slim and Korean Cigarette Edge Gold - HELD THAT:- The Appellant is a CHA who acts on basis of the documents provided and under verification of the importer vide the Bill of Entry for clearance of the said imported cigarettes. The CHA cannot be held responsible for commission of any offence in this regard for imposition of penalty under Section 112(i) as held in D. S. Cargo Service V/s Commissioner of Customs, New Delhi [2009 (6) TMI 807 - CESTAT, NEW DELHI]. In the present case it has no evidence has been put forth to show that appellant who is Custom Broker, filing the Bill of Entry and facilitating custom clearance of the goods imported by the importer was in any way in knowledge of the marking on package while filing the bill of entry or effecting the clearance of the goods. His statement has also not been recorded in the proceedings initiated for the confiscation of the imported cigarettes. The case of Jasjeet Singh Marwah, referred above specifically refers to his statement admitting mis-declaration and undervaluation by the CHA. Court on founding the statement voluntary, upheld the penalty imposed in that case. There are no merits in the penalties imposed on the Appellant by the in the impugned order to this extent is set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a Customs House Agent (CHA) who files the bill of entry is liable to penalty under Section 112(i) of the Customs Act, 1962 where the imported goods are held liable to confiscation under Section 111(d). 2. Whether imposition of penalty on a CHA requires proof of mens rea, knowledge, collusion or abetment, or whether absolute/vicarious liability arises by virtue of Section 147 (liability of principal and agent). 3. The proper application of Section 147 in proceedings under the Customs Act: scope of deemed knowledge/consent and whether agent can be treated as owner/importer for purposes of liability. 4. The precedential value and applicability of judicial decisions relied upon by the adjudicating authority (notably the Delhi High Court judgment referred to by the adjudicator) and whether such authorities mandate imposition of penalty on CHA absent proof of knowledge. 5. Whether facts of non-cooperation by the CHA (summons not complied with) justify drawing adverse inference sufficient to sustain penalty under Section 112(i). ISSUE-WISE DETAILED ANALYSIS Issue 1 - CHA liability under Section 112(i) where goods are confiscated under Section 111(d) Legal framework: Section 111(d) renders goods liable to confiscation; Section 112(i) prescribes penalty where goods are liable to confiscation. Section 147 addresses liability of principal and agent in proceedings under the Act. Precedent treatment: The impugned order relied on a Delhi High Court decision holding both importer and CHA liable in appropriate circumstances. The Tribunal and other authorities cited (e.g., D.S. Cargo Service; Prime Forwarders; Ghevarchand Chunilal Jain) have held that penalty on CHA is not sustainable in absence of material showing knowledge or connivance. Interpretation and reasoning: The Court recognizes that Section 112 penalizes persons whose acts render goods liable to confiscation and also those who 'abet' such acts. The Tribunal emphasizes distinction between primary offender and facilitator: mere filing of bill of entry, without knowledge or role in the illicit importation, does not ipso facto attract penalty. The adjudicator's view that Section 147 casts equal onus on CHA is analysed alongside authorities that qualify such onus by requiring proof of knowledge or that the agent acted with consent/knowledge of principal. Ratio vs. Obiter: Ratio - CHA is not automatically liable under Section 112(i) merely for filing a bill of entry; penalty requires either direct involvement or evidence of abetment/collusion/knowledge. Obiter - discussion on policy consequences of imposing absolute liability on CHAs (commercial harm) and civil vs. criminal nature of proceedings. Conclusion: Penalty under Section 112(i) cannot be sustained against a CHA absent evidence of prior knowledge, collusion, or abetment; mere facilitation by filing documents is insufficient. Issue 2 - Requirement of mens rea/knowledge/collusion for penalizing CHA (interpretation of 'abet') Legal framework: Section 112 (and related penal provisions) penalize acts rendering goods liable to confiscation and persons who 'abet' such acts. Definition/meaning of abetment is drawn from the General Clauses Act and IPC (Section 107 IPC as referenced), since Customs Act does not define 'abet'. Precedent treatment: Tribunal and various High Court/Tribunal decisions (Amritlaksmi Machine Works; Yogesh Kumar; Prakash Poonia; Shiva Khurana; Poonia & Brothers; Rajan Arora) emphasize need for mens rea/knowledge for penalizing CHA/CB; where absence of guilty mind established, penalty set aside. Interpretation and reasoning: The Tribunal reasons that the 'abet' limb imports intentional aiding or collusion; therefore mens rea is a sine qua non for penalizing CHA as abettor. The adjudicator's broader reading (imposing penalty by operation of Section 147 or by contumacious conduct) is examined and found insufficient without evidentiary support of knowledge or collusion. The Court further notes that civil character of customs penal provisions makes them compensatory but does not negate requirement of culpability for facilitators. Ratio vs. Obiter: Ratio - mens rea/knowledge is required to impose penalty on CHA under the abetment limb; absent such proof, penal provisions should not be applied to mere facilitators. Obiter - expansive commentary on commercial consequences if CHAs were treated as strictly liable. Conclusion: For CHA to be penalized as abettor under Section 112, there must be evidence of knowledge, collusion or intentional facilitation; inadvertent or routine filing of documents without such knowledge does not attract penalty. Issue 3 - Application and scope of Section 147 (liability of principal and agent) Legal framework: Section 147(1)-(3) permits acts required of owner/importer to be done by agent; subsection (2) deems acts done by agent to be done with knowledge/consent of owner unless contrary proved; subsection (3) deems agent to be owner for certain purposes. Precedent treatment: The Delhi High Court decision relied upon by the adjudicator interpreted Section 147 as making owner/importer and agent jointly liable in certain circumstances. However, Tribunal decisions distinguish that holding where there is no evidence of express/implicit authorization or admission by the CHA of mis-declaration. Interpretation and reasoning: The Tribunal observes that Section 147 creates presumptions that can be rebutted by proof to the contrary; it does not create absolute unqualified liability in every case. Where the CHA acted on documents provided by importer and there is no evidence of knowledge/connection, Section 147's deeming provisions alone do not justify penalty. Reliance on Section 147 must be contextualized with evidentiary findings (e.g., admissions, statements, or other proof of connivance). Ratio vs. Obiter: Ratio - Section 147 exposes agent to liability but permits rebuttal; it does not eliminate requirement to establish knowledge/consent where penalty is sought under penal provisions. Obiter - comparison of cases where Section 147 was applied versus cases where it was distinguished on facts. Conclusion: Section 147 can render an agent liable, but its presumptions are rebuttable; absence of evidence of knowledge or authorization precludes penal consequence solely based on Section 147. Issue 4 - Precedential value of relied authorities and distinguishing of Delhi High Court decision Legal framework: Adjudicative reliance on precedent must fit the facts; admissions/statements of CHA play decisive role where precedent upheld penalty based on such admissions. Precedent treatment: The impugned order relied on Jasjeet Singh Marwaha (Delhi High Court) where CHA's admission/collusion supported penalty. The Tribunal cites Buhariwala Logistics and other authorities distinguishing Jasjeet Singh where no admission or evidence of authorisation/knowledge exists. Interpretation and reasoning: The Tribunal distinguishes the cited Delhi High Court authority on factual matrix: in Jasjeet Singh the CHA had admitted mis-declaration; in the present proceedings there was no evidence of such admission or proof of knowledge. The Tribunal underscores that precedents upholding penalty on CHA are fact-sensitive and do not mandate penalty where the record lacks culpatory evidence. Ratio vs. Obiter: Ratio - precedents imposing penalty on CHA are applicable only when factual findings (admission, knowledge, collusion) exist; otherwise those precedents are distinguishable. Obiter - commentary on investigative practice and recording of CHA statements. Conclusion: Reliance on the Delhi High Court decision is distinguishable on facts; absent corroborative evidence of knowledge or admission, that authority does not support penalty in the present matter. Issue 5 - Effect of CHA's non-cooperation (failure to appear/respond to summons) on sustaining penalty Legal framework: Adjudicating authorities may draw adverse inferences from non-cooperation, but penalty requires substantive evidence of culpability under Section 112. Precedent treatment: The impugned order treated failure to appear and alleged lack of cooperation as indicative of connivance. The Tribunal considered alternate findings in an appellate order where similar facts resulted in setting aside penalty for absence of mens rea and evidentiary proof. Interpretation and reasoning: The Tribunal notes that while non-appearance may be considered, it is not a substitute for positive evidence of knowledge or abetment. The adjudicator's rejection of CHA's explanation because of non-appearance was weighed against other authorities and an appellate finding in a related matter that accepted absence of evidence of malafide and set aside penalty. Ratio vs. Obiter: Ratio - non-cooperation alone, without material evidence of knowledge or collusion, is insufficient to sustain penalty under Section 112(i). Obiter - observations on administrative practice of summoning CHAs and consequences of procedural non-compliance. Conclusion: Adverse inference from non-cooperation does not automatically validate penalty; in the absence of evidence of mens rea/abetment, penalty cannot be sustained solely on the CHA's failure to appear. OVERALL CONCLUSION The penalties imposed under Section 112(i) on the CHA are not sustainable on the record before the Tribunal because there is no evidence of knowledge, collusion, abetment or admission by the CHA; Section 147 and relied authority are distinguishable on facts; mere filing of bill of entry or procedural non-cooperation does not suffice to fix penal liability. The appeal is allowed and the penalty set aside.