2025 (12) TMI 833 - AT - Customs

Penalties u/ss 112(a) and 114AA set aside as consignment agent cleared of under-valuation allegations

CESTAT Kolkata allowed the appeal of the consignment agent and set aside penalties imposed under ss. 112(a) and 114AA of the Customs Act, 1962. The ... Levy of penalty u/s 112(a) and u/s 114AA of the Customs Act, 1962 on Consignment Agent - facilitating the under-valuation of the goods as a consignment agent - HELD THAT:- It is observed that the appeal filed by the importer, namely, Shri Ranaji Ganguly, Proprietor of M/s. D.D. Impex, has already been decided by this Tribunal in SHRI RANAJI GANGULY, PROPRIETOR OF M/S. D.D. IMPEX VERSUS COMMISSIONER OF CUSTOMS (PORT), KOLKATA [2025 (2) TMI 1286 - CESTAT KOLKATA] wherein it has been categorically held that the allegation of undervaluation has not sustained and accordingly, the appeal filed by Shri Ranaji Ganguly, Proprietor of M/s D.D. Impex, has been allowed. It is found that the charge against the present appellant is based on his own testimony as well as that of his co-accused - the statement of the appellant does not lend any credence to the fact that he has entered in a nexus enabling undervalued imports into the country. While it is also on record that the appellant was associated with M/s E.B. McSun Pte Ltd., Singapore for marketing and sales promotion work in India, for which he was paid a commission amount by the overseas exporters, in the absence of any corroborative evidence, there is nothing on record to substantiate the charge of the appellant’s complicity in under-valuation of the goods imported. Thus, it can be seen that the charge of under-valuation against the main importer Shri Ranaji Ganguly, Proprietor of M/s D.D. Impex has not sustained. Thus, the allegation of facilitating the under-valuation by the consignment agent, i.e., the appellant herein also does not sustain. In view of this, the penalties imposed on the appellant under Sections 112(a) and 114AA of the Customs Act, 1962, are not sustainable and hence the same is set aside. The penalties imposed on the appellant under Sections 112(a) and 114AA of the Customs Act, 1962 of the Customs Act, 1962 set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the allegation of under-valuation of imported spares of Heavy Earth Moving Machinery stood established on the evidentiary material relied upon by the Department. 2. Whether penalties under Sections 112(a) and 114AA of the Customs Act, 1962 on a consignment agent can be sustained when the allegation of under-valuation against the main importer has not been proved. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Establishment of under-valuation of imported spares (a) Legal framework (as discussed) 3. The Court considered the legality of relying on: (i) unsigned, unauthenticated copies of commercial invoices allegedly recovered from the laptop of the foreign supplier, in the context of Section 139 of the Customs Act; and (ii) electronic records in the form of computer printouts, in the context of Section 138C(1) and (2) of the Customs Act (pari materia with Section 65B of the Evidence Act). 4. The Court referred to precedent holding that unsigned xerox copies cannot form the basis for enhancement of transaction value, and that electronic documents cannot be treated as admissible evidence unless the mandatory certification requirements of Section 138C(2) are satisfied. (b) Interpretation and reasoning 5. The Court noted that the imports were made in 2005-2006, prior to the self-assessment regime, and that the goods were assessed and cleared by the customs authorities after examination, with no objection on valuation, and no appeal was filed against the finally assessed bills of entry. 6. The subsequent show cause notice alleging under-valuation was issued more than four years later, based primarily on documents retrieved from the laptop of the foreign supplier and statements of the supplier and the consignment agent. 7. The alleged parallel invoices recovered from the laptop were unsigned and unauthenticated photocopies. The Court held that, in terms of settled law, no presumption under Section 139 could be drawn from such documents and they could not validly be used to enhance the declared transaction value. 8. The computer printouts/invoices extracted from the storage devices were not accompanied by the certificate required under Section 138C(2) of the Customs Act from a responsible person relating to the operation of the computer/device. Applying the law on electronic evidence, the Court held that, in the absence of such certificate, these documents were inadmissible and could not be relied upon to establish under-valuation. 9. The alleged incriminating invoices were not subsequently shown to the foreign supplier for confirmation or authentication, and no clarification statement regarding their authenticity was obtained from him. Instead, the investigation sought the opinion of the consignment agent, who neither prepared the invoices nor owned the devices. 10. The Court further noted total absence of corroborative evidence of any extra or additional payment made by the importer to the foreign supplier. No banking records, details of non-banking remittances, quantum of alleged differential consideration, or contemporaneous import prices were produced. No document evidencing payment of any undeclared amount formed part of the relied-upon documents. 11. In this backdrop, the Court held that the statements relied upon to allege under-valuation were uncorroborated, and the foundational documentary evidence (unsigned invoices and uncertified electronic records) was inadmissible. The allegation of suppression of value with intent to evade duty, necessary to disturb final assessments, was not substantiated. (c) Conclusions 12. The Court concluded, following and relying upon its earlier final order in respect of the main importer, that: * the alleged under-valuation of the imported spares was not proved on the basis of admissible and reliable evidence; and * the differential duty demand raised on the footing of under-valuation was unsustainable in law. Issue 2: Sustainability of penalties on the consignment agent under Sections 112(a) and 114AA (a) Legal framework (as discussed) 13. Penalties on the appellant had been imposed under Section 112(a) (abetment of improper importation liable to confiscation) and Section 114AA (use of false or incorrect material in documents, etc.). The Department's case was that the appellant, acting as consignment agent, facilitated under-valued imports. (b) Interpretation and reasoning 14. The Court observed that the charge against the appellant was derivative in nature and rested on the allegation that the main imports were under-valued and that he had facilitated such under-valuation as a consignment agent/marketing agent of the foreign supplier. 15. Referring to its prior detailed findings in the main importer's appeal, the Court held that the core allegation of under-valuation itself had not been sustained. The supposed primary offence (under-valuation of imports) having failed, the basis for alleging facilitation of such offence against the consignment agent also fell. 16. Independently, the Court examined the material against the appellant and found that: * the appellant's own statements and those of co-accused did not credibly establish that he had entered into any nexus or agreement to enable under-valued imports; and * although he was associated with the foreign supplier for marketing and sales promotion and received commission for such work, there was no corroborative evidence showing his complicity in any scheme of under-valuation. 17. In the absence of admissible evidence of under-valuation and of any corroborated act of abetment or knowing involvement by the appellant, the essential ingredients for imposing penalties under Sections 112(a) and 114AA were held not to be satisfied. (c) Conclusions 18. The Court held that: * when the allegation of under-valuation against the main importer has not been established, the consequential allegation that the consignment agent facilitated such under-valuation cannot be sustained; * no independent, cogent evidence existed to prove that the appellant knowingly abetted any act rendering the goods liable to confiscation or used false material in customs documents. 19. Consequently, the penalties imposed on the appellant under Sections 112(a) and 114AA of the Customs Act, 1962 were set aside in toto, and the appeals were allowed with consequential relief as per law.