2026 (1) TMI 1172 - AT - Customs

Customs duty liability from CHA misappropriation: importers relieved where bona fide demand drafts were misused; demand set aside

Liability for short-levied customs duty arising from a clearing agent's substitution and misappropriation was examined; the article explains that where ... Liability for short-levied customs duty arising from CHA's substitution and misappropriation - Deemed payment by tender of demand draft - Liability of Customs House Agent as importer - Bona fide payment - Wilful suppression for penalty - Misappropriation by clearing agent - Consequence of forged or fake Bills of Entry - MODVAT/central excise credit claim - Supervision of bonded procedures - HELD THAT:- We find that Bangalore Bench of Tribunal dealt with an identical set of facts in the case of Hetero Drugs Ltd. Vs Commissioner of Customs (Airport) Chennai [2003 (12) TMI 190 - CESTAT, BANGALORE]. The claim of the 1st Appellant that it had given Demand Drafts for payment of Customs duty to their CHA in the name of “Collector of Customs A/c Vera Laboratories” remains uncontroverted and hence, when payment is apparently made by the Importer/1st Appellant by giving Demand Drafts to their CHA for a bonafide reason of them to not having any deposit account in their own name, the allegation as to the intention to evade duty perhaps may not be correct. We say so because in response to the SCN, the State Bank of Hyderabad, Industrial Branch, Hyderabad had issued a certificate to the effect that they had issued a Demand Draft for Rs.31,86,154/- favouring the “Collector of Customs, Madras A/c. Vera Laboratories Ltd., Hyderabad” at their service branch, which document is also placed at page 118 of the Appeal Memo before us along with a copy of bank payment voucher dated 20.05.1995 raised by the 1st Appellant in the name of “Collector of Customs, Madras”. The above facts also find indirectly accepted by the Adjudicating Authority himself when we peruse the impugned order wherein also there is a doubt expressed by the Commissioner as “It is now clear that the CHA has substituted the imported bonded drugs. The deposits in the Deposit Account of M/s.Far Port International were utilized for clearance of goods in respect of other importers/clients of M/s.Far Port International. The CHA has received the amounts towards customs duty from the importers in the form of drafts drawn in favour of The CHA has fraudulently withdrawn the amounts from these accounts and have utilized for his own use.” Thus, we find that the issue in the case on hand stands squarely covered by the ratio in the above decisions / orders and hence, the demand raised in the impugned order does not survive. The Tribunal allowed the appeals, setting aside the demand of duty and the penalties imposed on the appellants, on the view that the importers had bona fide tendered payment by demand drafts and the culpability for non-payment lay with the CHA whose misconduct cannot attract duty or penalty on the importers. Issues: Whether the demand of customs duty and penalties confirmed against the importer arising from substituted/fake goods and alleged short payment of duty by their Customs House Agent (CHA) are sustainable, and whether the importer is liable when it had furnished demand drafts in favour of the Collector of Customs through the CHA.Analysis: The facts decided on the record show substitution of imported goods by the CHA and alleged misuse/misappropriation of demand drafts deposited by the importer. The Tribunal applied prior decisions holding that a demand draft or cheque tendered for payment is to be treated as payment on the date of tender, and that where non-payment arises from the wrongful acts of the CHA the CHA may attract liability under Section 147 while the importer who tendered bona fide payment is protected. The Tribunal compared the evidence of bank instruments and prior Tribunal rulings which interpret the date of payment and the status of CHA as importer in cases of misuse, and found that the adjudicating authority had not addressed the CHA's misfeasance or the fact of tendered demand drafts. The Tribunal concluded that the impugned demand and penalties rest on the CHA's actions and ongeries rather than on any wilful evasion by the importer.Conclusion: The demand of duty and penalties confirmed against the importer are not sustainable and are set aside; the appeals are allowed in favour of the importer.