2016 (1) TMI 512 - AT - Customs

Levy of penalty on courier agency on the ground that they have failed to exercise due diligence in performing their work as an authorized courier and thus, their inaction/negligence has led to this attempt of smuggling of costly goods in the guise of low value spare parts. - Held that - the appellants are a Courier Company and in ordinary course of business they do not come to know about the factual desertion of the goods or actual value of the same. They are only aware of the details as disclosed by the clients. As argued by the learned AR, it is seen that no allegation in respect of failure to follow regulation 13(a) have been made in the notice and therefore, he cannot place any reliance on any fact relating to failure to observe the said regulations. Furthermore, it is seen that no specific case of non-compliance, which was known to the appellant, was pointed out either in the notice or in the impugned order and therefore no allegation made for failure to observe the obligation under regulation 13(b) can be made. - However, regulation 13(c) provides for a very wide scope. The appellants were required to exercise due diligence. The fact that the weight of consignment was 22 kg and the freight was ₹ 25,000/- but the declared value was less than ₹ 3000/- should have raised suspicion. Therefore, it is felt that it was possible for the appellant to exercise due diligence in respect of the consignment. Considering that the appellants are in the courier business such consignments are indeed the outliners and needed closer scrutiny. However, considering the facts of the case, it is felt that the penalty imposed of ₹ 1 lakh is excessive and penalty under Section is revised to ₹ 10,000/- only - Decided partly in favor of appellant.

Summary

Issues:
1. Undervaluation and mis-declaration of goods by a courier company leading to seizure and penalty imposition.
2. Interpretation of penalty provisions under Section 117 of the Customs Act, 1962.
3. Examination of the courier company's obligations under Courier Import and Export Regulations.

Analysis:

Issue 1: Undervaluation and mis-declaration of goods
The case involved a courier company that declared goods as spare parts valued at Rs. 2934, but upon examination, it was found to contain high-value items like ARRI Alexa Cameras and memory cards worth approximately Rs. 65 lakhs. The Commissioner imposed a penalty of Rs. 1,00,000 on the appellant for failing to exercise due diligence, leading to the attempt of smuggling costly goods under the guise of low-value spare parts.

Issue 2: Interpretation of penalty provisions under Section 117
The appellant argued that the penalty under Section 117 of the Customs Act can only be imposed when a person contravenes any provisions of the Act or fails to comply with them. The appellant contended that no specific default on their part was highlighted in the impugned order. The Tribunal observed that while no concrete evidence of knowledge of mis-declaration was found, the appellant's failure to exercise due diligence warranted a penalty under Section 117. The penalty was revised from Rs. 1,00,000 to Rs. 10,000 considering the circumstances.

Issue 3: Examination of courier company's obligations
The authorized courier was required to exercise due diligence as per Regulation 13(c) of the Courier Import and Export Regulations. The appellant, a courier company, contended that they were not aware of the actual contents or value of the goods beyond what was disclosed by the clients. The Tribunal noted that while no specific failure to follow regulations 13(a) and 13(b) was alleged, the appellant could have exercised due diligence based on the suspicious factors like the weight of the parcel versus declared value. The penalty was reduced to Rs. 10,000, acknowledging the need for closer scrutiny of such outlier consignments by courier companies.

In conclusion, the Tribunal partially allowed the appeal, revising the penalty imposed on the appellant from Rs. 1,00,000 to Rs. 10,000, emphasizing the importance of exercising due diligence in the courier business to prevent mis-declarations and undervaluation of goods.