2019 (11) TMI 72 - HC - Customs

Imposition of penalties u/s 112 (b) and 114AA of the Customs Act, 1962 on the Director of the Respondent - CHA s direct involvement with the importer or not - HELD THAT - Pertinently, it was noted that the Central Bureau of India (CBI) had investigated the issuance of bogus exemptions certificates and had not charge-sheeted the CHA. The charge-sheet was filed only against the proprietor of the importer and its authorized signatory and the proprietorship concern. The CBI in its charge-sheet recorded that the CHA had retained photocopies of the bills of exchange for its office records and had forwarded the original copies of the same along with his bill to the importer for getting payments. Thus, CHA s direct involvement with the importer was not established. This fact prevailed upon this Court in dismissing the appeal filed by the Customs Department, not finding it to be fit to impose harsher penalty. The Customs Department is aggrieved by the deletion of the penalties imposed on the CHA. In respect of the show case notice dated 06.03.2013, penalty has been imposed under Section 112 (b) as well as 114AA of the Act. A perusal of the said provisions clearly reveals that the penalty under the said provisions can be imposed wherever there is an element of mens rea or conscious knowledge, which is a sine qua non for imposition of the penalty - The facts of the case in hand do not reveal any such element of mens rea or conscious knowledge qua the importer. There is no active role attributed to the Respondent, which justifies the imposition of the penalty under Section 112 (b) and Section 114AA of the Act. Nothing has emerged even in the criminal investigation. Imposition of penalties u/s 112 (a) of Customs Act - HELD THAT - For imposition of penalty in respect of the cases falling under Section 112 (a) of the Act, mens rea may not be required to be proved as condition precedent, however, when it comes to imposition of the penalty on an abettor, it is necessary to show that the said essential element/ ingredient is present - In the present case, there is no element of mens rea or conscious knowledge which can be attributed to the CHA. The investigation carried out by the CBI and other facts reveal that the CHA acted bona fide and merely facilitated the imports on the strength of the documents which were handed over to him by the importer -There is no sufficient material on record to show that the CHA was actively involved in the fraudulent availment of the exemption by the importer, warranting levy of personal penalty. Appeal dismissed.

Summary

Issues Involved:
1. Legitimacy of penalties imposed under Sections 112(b) and 114AA of the Customs Act, 1962.
2. Role and responsibilities of the Customs House Agent (CHA) in verifying exemption certificates.
3. Evaluation of mens rea or conscious knowledge for imposing penalties.
4. Parallel proceedings under Customs Broker Licensing Regulations and the Customs Act, 1962.
5. Findings from the Central Bureau of Investigation (CBI) and departmental actions against customs officers.

Issue-wise Detailed Analysis:

1. Legitimacy of penalties imposed under Sections 112(b) and 114AA of the Customs Act, 1962:
The appeal challenges the order of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) which set aside penalties imposed on the CHA under Sections 112(b) and 114AA of the Customs Act, 1962. The CESTAT found no evidence that the CHA played any role in forging the exemption certificates or misleading customs authorities. The High Court upheld this decision, emphasizing that penalties under these sections require an element of mens rea or conscious knowledge, which was not established in this case.

2. Role and responsibilities of the Customs House Agent (CHA) in verifying exemption certificates:
The Customs Department argued that the CHA failed in its duty to ensure the validity and genuineness of the exemption certificates submitted by the importer. The CHA's Managing Director admitted to knowing that the certificates should have been issued by a higher authority but failed to verify this. The High Court, however, noted that the CHA acted in good faith and merely processed the documents provided by the importer.

3. Evaluation of mens rea or conscious knowledge for imposing penalties:
The High Court reiterated that for penalties under Sections 112(b) and 114AA, there must be evidence of mens rea or conscious knowledge. The provisions use terms like "knowingly or intentionally," indicating the necessity of proving intent. The court found no such evidence against the CHA, who acted based on the documents provided without any indication of fraud or forgery.

4. Parallel proceedings under Customs Broker Licensing Regulations and the Customs Act, 1962:
The CHA faced parallel proceedings under the Customs Broker Licensing Regulations, resulting in a forfeiture of security deposit. The High Court noted that these proceedings and the facts therein were relevant to the present case. The court had previously dismissed an appeal for harsher penalties against the CHA, emphasizing the CHA's lack of direct involvement in the forgery.

5. Findings from the Central Bureau of Investigation (CBI) and departmental actions against customs officers:
The CBI investigated the issue and did not charge-sheet the CHA, focusing instead on the importer and its representatives. The High Court highlighted that no departmental action was taken against customs officers who accepted the forged documents, drawing an adverse inference against the Customs Department. The court noted that the CHA's role was limited to processing and forwarding documents, with no involvement in the forgery.

Conclusion:
The High Court dismissed the appeal, finding no substantial question of law requiring adjudication. The court upheld the CESTAT's decision to set aside the penalties, emphasizing the lack of evidence for mens rea or conscious knowledge on the part of the CHA. The court also noted the CHA's good faith actions and the absence of direct involvement in the forgery, as established by the CBI investigation and the lack of departmental action against customs officers.