2015 (1) TMI 209 - HC - Customs

Imposition of penalty - Whether the Tribunal s decision was justified in setting aside the penalty imposed on the first respondent by the adjudicating authority under Section 114 (iii) of Customs Act, 1962, without considering the adverse observations made in the Order in Original dated 30.03.2006 on the CHA be correct in law, when the High Court of Delhi in the case of M/s.Satish Gupta Vs Union of India reported in 2007 (1) TMI 29 - HIGH COURT ,DELHI has justified the imposition of penalty on the CHA and held that the CHA is duty bound to exercise due diligence to ascertain the correct of information given by clients would be sustainable in law for imposing penalty on CHA - Held that - Even at the very outset, it is evident from the order of the Tribunal that the goods were examined by the Customs Department in its laboratory, and analysis revealed that the goods were common salt instead of Organic Dye Intermediate G-Salt, as declared. Such being the case, this Court is baffled to note how penalty can be levied on the CHA. When the Department itself, only on the basis of the chemical analysis, was able to ascertain that the goods attempted to be exported was not common salt, how can a CHA be expected to know of the exact nature of the product at sight. In the above stated scenario, this Court has no hesitation to hold that the Commissioner (Appeals) and the Tribunal s reasoning for setting aside the penalty imposed on the CHA is fully justified. - Further, the case of Satish Gupta (2007 (1) TMI 29 - HIGH COURT ,DELHI) relied on by the learned counsel for the appellant, does not apply to the facts of the present case. That is a case in which there is a clear finding that the CHA had knowledge and was aware of the nature of goods. In the present case, we find that the CHA does not bear knowledge about the nature of goods and there is no material to infer so. - Decided against Revenue.

Summary

Issues:
Challenge to the order of the Appellate Tribunal by the Revenue regarding penalty imposed on the Custom House Agent (CHA) under Section 114 (iii) of Customs Act, 1962 for mis-declaration of goods for export.

Analysis:
1. The case involved the Revenue challenging the order of the Appellate Tribunal dismissing their appeal against the penalty imposed on the CHA for mis-declaration of goods. The substantial question of law framed for consideration was whether the Tribunal was justified in setting aside the penalty imposed on the CHA under Section 114 (iii) of the Customs Act, 1962.

2. The facts revealed that the CHA was penalized with Rs. 1,50,000 for aiding an exporter in mis-declaring ordinary salt as 'Organic Dye Intermediate G-Salt' to claim drawback benefits falsely. The goods were confirmed to be common salt upon laboratory analysis by the Customs Department.

3. The original authority confiscated the goods for mis-declaration and offered redemption to the exporter on payment of a fine. Penalties of Rs. 5 Lakhs and Rs. 1.5 Lakhs were imposed on the exporter and the CHA, respectively. The penalty on the CHA was challenged and set aside by the first appellate authority.

4. The Tribunal rejected the Revenue's plea to impose a penalty on the CHA, stating that the CHA was unaware of the mis-declaration by the exporter. The Court noted that the Customs Department's analysis revealed the true nature of the goods, making it unreasonable to penalize the CHA for not knowing the exact product at sight.

5. The Court heard arguments from both parties and observed that the case cited by the appellant did not apply to the present scenario as there was no evidence that the CHA had knowledge of the mis-declaration in this case.

6. Ultimately, the Court upheld the Tribunal's decision to set aside the penalty on the CHA, emphasizing that the CHA was not expected to know the exact nature of the goods based on sight alone. The judgment favored the 1st respondent, dismissing the appeal by the Revenue.

7. The Court found no grounds to interfere with the Tribunal's order, leading to the dismissal of the appeal without costs. The decision was based on the lack of evidence implicating the CHA in the mis-declaration of goods for export.