2014 (4) TMI 656 - AT - Customs

CHA - One of their employees, who was issued a photo ID Card in Form- H as per Regulation 19 (6) of Custom House Agents Licensing Regulations, 2004, was found to be not possessing the minimum educational qualification as prescribed under Regulation 19. - concerned employee was having a certificate of having completed 12th class from the Board of Secondary Sanskrit Education, Lucknow. - the Board was not recognized by University Grants Commission. - Imposition of penalty u/s 158 (2) of the Customs Act, 1962 - Held that - The The appellant as well as approving AC or DC of Customs have missed to ascertain whether the Board in question was recognized by UGC - Thus, once there is negligence on the part of department also, it is not fair to impose any penalty on the appellant - No other facts leading to revenue leakage or any loss to the State has been pointed out - Thus, it is felt that penalty imposed is not warranted - The impugned order set aside and appeal allowed Decided in favour of appellant.

Summary

Issues:
1. Non-compliance with minimum educational qualification requirements for employees of a Custom House Agent.
2. Imposition of penalty under Section 158 (2) of the Customs Act, 1962.
3. Duty of a Custom House Agent to ensure compliance with regulations.
4. Requirement of mens rea for imposing penalties.

Analysis:

Issue 1: Non-compliance with minimum educational qualification
The appellant, a Custom House Agent, employed an individual without the required educational qualifications, leading to a penalty imposition under Section 158 (2) of the Customs Act, 1962. The employee did not meet the minimum educational standard of 10+2 or equivalent as per the regulations. The Board from which the employee obtained a certificate was not recognized by the University Grants Commission, raising concerns about the due diligence exercised by the appellant in the hiring process.

Issue 2: Imposition of penalty
The penalty of Rs.50,000/- was imposed on the appellant for the violation. The appellant contended that they were unaware of the unrecognized status of the educational board and promptly terminated the employee upon discovery. The appellant argued that since there was no revenue leakage or detrimental activity involved, the penalty was unwarranted.

Issue 3: Duty of a Custom House Agent
The Assistant Commissioner or Deputy Commissioner of Customs, responsible for approving employee appointments, also failed to verify the recognition status of the educational board. The appellant emphasized that the lack of awareness on the part of both the appellant and the approving authority indicated a lack of mens rea in the violation.

Issue 4: Requirement of mens rea for penalties
The Revenue argued that the duty to ensure compliance with regulations lies with the Custom House Agent, regardless of awareness of the recognition status of educational institutions. However, the judge noted that the negligence on the part of the approving authorities also contributed to the oversight, leading to the decision that the penalty was unjustified.

In conclusion, the Tribunal found that the penalty imposed on the appellant was not warranted due to the shared responsibility of ensuring compliance with regulations between the appellant and the approving authorities. The absence of any revenue loss or misconduct by the employee further supported the decision to set aside the penalty and allow the appeal.