2016 (10) TMI 1290 - AT - Customs

Imposition of penalty u/s 114 of Customs Act on CHA - non-application of mind - vicarious liability - it is alleged that CHA have abetted in the fraudulent exports of the impugned goods effected/attempted by M/s. CMA Overseas - HELD THAT - It is seen that the appeal can be disposed of on the short ground of non-application of mind by the adjudicating authority. The lack of diligence as well as the participative role ascribed to the appellant cannot be alienated from the licensee. While a partner can be proceeded against in his individual capacity for acts of omission and commission in relation to goods that are held liable for confiscation, the primary role of the Customs house agent, in relation to use of the licence issued to the agent, cannot be shifted to an individual, howsoever influential he or she may be in the licensed entity. The fastening of vicarious responsibility on the appellant is beyond the pale of law. Imposition of penalty is a harsh measure to be invoked after due deliberation of the acts that have led to such offence as are clearly identified in the statute as penalizable. Section 114 has two facets which are to be invoked in mutually exclusive situations. That the adjudicating authority has failed to appreciate the distinction and has failed to invoke the particular provision taints his finding. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Section 114 of Customs Act, 1962 on a partner of a Customs House Agent (CHA) firm.
2. Role and liability of a partner in facilitating fraudulent exports through an unauthorized person.
3. Application of vicarious responsibility on an individual partner in a licensed entity.
4. Consideration of due deliberation before imposing penalties under Section 114.

Analysis:
1. The appeal was filed by a partner of a CHA firm who was penalized under Section 114 of the Customs Act, 1962 for allowing an unauthorized person to use the CHA license for clearing goods. The Commissioner of Customs found the partner to have facilitated fraudulent exports by lending support to the unauthorized person for a monetary consideration. The partner was accused of flouting Customs House Agents Licensing Regulations, 2004 by allowing the unauthorized person to clear goods without proper authorization, presence during examination, or verification of the exporter's credentials.

2. The Tribunal noted the lack of diligence by the adjudicating authority and highlighted that the participative role ascribed to the partner cannot be isolated from the CHA firm. While acknowledging that partners can be held individually liable for their actions, the Tribunal emphasized that the primary responsibility of a CHA in using the license cannot be shifted to an individual partner, regardless of their influence within the firm. The Tribunal deemed the imposition of vicarious responsibility on the partner as beyond the legal scope.

3. Furthermore, the Tribunal criticized the imposition of the penalty as a harsh measure that should be invoked after careful consideration of the specific offenses outlined in the statute. Section 114 of the Customs Act, 1962 provides for penalties in distinct situations, and the Tribunal found that the adjudicating authority failed to correctly apply the provisions, leading to a flawed decision. The Tribunal concluded that the penalty imposed on the partner was unjustified and set it aside, thereby allowing the appeal.

4. In summary, the Tribunal's judgment focused on the partner's liability in facilitating fraudulent exports through an unauthorized person, the incorrect application of vicarious responsibility, and the necessity for due deliberation before imposing penalties under Section 114 of the Customs Act, 1962. The decision highlighted the importance of upholding legal principles and ensuring that penalties are imposed in accordance with the law.