2026 (2) TMI 1034 - AT - Customs

Accountant certification liability: issuing certificates without collusion or knowledge of fraud does not attract penalty under Section 112(a).

Issuance of accountant certificates without proof of collusion, knowledge of fraud, or active participation does not constitute abetment attracting ... Penalty u/s 112(a) - Goods liable to confiscation u/s 111(d) and 111(o) - Liability of a Chartered Accountant for issuance of certificates - Mere issuance of certificates without collusion does not attract Section 112(a) - Due diligence in issuing professional certificates - HELD THAT:- It is observed that the Appellant has issued the certificates in question at the behest of his friend Hiral K. Patwa, Advocate in whose case the proposal to import penalty under Section 112(a) of Customs Act, 1962 has been dropped by the AA in the impugned orders. The Appellant has neither dealt with the goods nor dealt with anyone other than Shri Hiral K. Patwa for issuing the certificates. Hence neither the allegation of abetment nor that of knowingly dealing with offending goods is borne out by any evidence. Therefore, the requirements of Section 112(a) of Customs Act, 1962 are not met in Appellant’s case. We are of the view that the appellant has acted negligently in discharge of his professional duties. It is hoped that adequate caution is exercised in issuing any certificate in future. Taking a lenient view and in pursuance of the judgement of the Hon’ble Bombay High Court in the case of Mahesh P. Patel Versus The Commissioner of Customs (EP) [2018 (12) TMI 883 - BOMBAY HIGH COURT], both the appeals filed by the Appellant Dipal J Shah are allowed. Consequently, the penalties imposed on the Appellant Dipal J Shah in the impugned orders are set aside. Issues: Whether a chartered accountant who issued certificates certifying installed machinery and production capacity without physical verification is liable to penalty under Section 112(a) of the Customs Act, 1962 for abetting or facilitating imports that were later found liable to confiscation under Section 111(d) and 111(o) of the Customs Act, 1962.Analysis: The legal question turned on whether the act of issuing accountant's certificates, without evidence of collusion or active participation in the import/diversion, constitutes an act or abetment that renders imported goods liable to confiscation under Section 111 and thereby attracts penalty under Section 112(a). Reliance was placed on the decision in Mahesh P. Patel v. Commissioner of Customs (Bombay High Court) which held that where the role of the accountant ends with issuing certificates and there is no proof of awareness of or participation in the fraud, Section 112(a) is not attracted; mere lack of full verification may establish negligence but not the culpable act or abetment required for penalty under Section 112(a). Applying that framework to the facts: the certificates were made at the instance of a third party, the adjudicating authority dropped similar penalty proceedings against that third party, the appellant dealt only with the friend who prepared the certificates, there is no evidence of collusion or of direct or indirect benefit derived by the appellant, and the asserted licences predated (and were held in abeyance pending verification such that the CA's certificate formed part of subsequent verification) the certificates. The Tribunal found that these facts establish at most negligent professional conduct, not the active facilitation or abetment envisaged by Section 112(a).Conclusion: The appellant is not liable under Section 112(a) of the Customs Act, 1962; the appeals are allowed and the penalties imposed in the impugned orders are set aside in favour of the assessee.Ratio Decidendi: Mere issuance of certification by a chartered accountant without proof of collusion, knowledge of fraud, or active facilitation does not satisfy the requirements of Section 112(a) of the Customs Act, 1962; absence of such nexus renders only negligence, not the penal liability under Section 112(a).