2017 (11) TMI 168 - AT - Customs

Penalty u/s 112(a) of the CA, 1962 on CHA - it was alleged that appellant had in fact abetted for the lower discharge of customs duty by indulging in such undervaluation by not including the freight in the assessable value - Held that - though the liability and confiscation of the goods has been upheld, the fact remains that the importer has misstated and accepted that it was their mistake in directing the CHA not to include freight element and in order to achieve it, they had instructed for manipulating the shipping bills. Be that as it may, charge of abetment on the CHA could not be established, which is also more or less the findings of the first appellate authority - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalties under Section 112(a) of the Customs Act, 1962 on Clearing House Agents (CHA) for manipulating Shipping House Bill of Lading to undervalue imported goods.

Analysis:
The judgment addressed the issue of penalties imposed on appellants, who were CHAs, under Section 112(a) of the Customs Act, 1962 for manipulating shipping documents to undervalue imported goods. The Departmental Representative highlighted that the appellants had altered the terms of freight on the Bill of Lading, resulting in undervaluation and lower customs duty payment. The authorities found that the appellants abetted undervaluation by excluding freight from the assessable value. However, the counsel for the appellants argued that penalties were not applicable as the importers had acknowledged their mistake, paid the differential duty, interest, and 25% penalty under Section 28(6) of the Customs Act, 1962. The counsel relied on precedents to support non-imposition of personal penalties on CHAs.

The Tribunal considered the submissions and observed that the penalties imposed under Section 112(a) seemed unwarranted. The first appellate authority had accepted the importer's admission of error, payment of dues, and penalty, which concluded proceedings against the importer. The authority clarified that liability of co-noticees (CHA) would not be conclusive in cases involving confiscation of goods under Section 111 of the Customs Act. While the liability and confiscation were upheld, the charge of abetment against the CHA was not established. Consequently, the Tribunal held that the impugned orders against the appellants were unsustainable, set them aside, and allowed the appeals.

In conclusion, the judgment analyzed the imposition of penalties on CHAs for manipulating shipping documents to undervalue imported goods. It emphasized the importance of distinguishing liability between importers and CHAs, especially in cases where importers admit mistakes and fulfill penalty requirements. The decision clarified the applicability of penalties under specific sections of the Customs Act and highlighted the need for evidence to establish abetment charges against CHAs.