The Madras High Court has held that a steamer agent who lodges the Import General Manifest (IGM) and acts before Customs authorities as an agent of the vessel’s master can be treated as a “person-in-charge” for the purposes of Section 116 of the Customs Act, 1962 and can be held liable for customs penalty over grossly misdeclared cargo.
The Bench of Dr. Justice G. Jayachandran and Justice N. Mala has observed that the agent is liable for a penalty for failure to account for a substantial deficiency between the goods declared in the IGM and the goods actually found in the containers.
The dispute arose from the import of consignments declared as “shredded steel scrap” and “heavy melting steel scrap.” The respondent company was a private limited company functioning as a steamer agent of Mediterranean Shipping Company, S.A., whose principal office was in Geneva.
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The case originated after information received from Container Freight Stations regarding suspected short landing in consignments of steel scrap. The Docks Intelligence Unit examined the consignments and detected serious discrepancies in the declared quantity and nature of the goods.
A report dated August 6, 2010, recorded substantial discrepancies in the weighment of containers declared to contain shredded steel scrap. In respect of 12 Bills of Lading, examination revealed that the containers largely contained broken roof tiles, while the quantity of declared steel scrap was substantially deficient. The actual weight was found to be only around 87.5% of the declared weight in the initial examination, while the broader examination of the 150 containers later revealed an even more significant discrepancy.
The Customs authorities subsequently found that the problem was not confined to a few isolated containers. In all, 150 twenty-foot containers had been shipped through the same shipping line.
The IGM declared 3,429.809 metric tonnes of shredded steel scrap and 168.24 metric tonnes of heavy melting steel scrap. However, inspection by the Docks Intelligence Unit showed that the declared goods were present only in negligible quantities and that the containers largely contained broken roof tiles.
The Commissioner’s findings were particularly significant. Out of the 150 containers, 143 containers contained 368.005 metric tonnes of broken roof tiles and 48.680 metric tonnes of heavy melting steel scrap, instead of the declared 3,429.809 metric tonnes of shredded steel scrap. In the remaining seven containers, against the declared 168.24 metric tonnes of heavy melting steel scrap, only 5.33 metric tonnes were found.
The High Court noted that, across the 150 containers, the actual weight of goods unloaded was only 12.5% on average of the weight declared in the IGM and Bills of Lading. The Court considered this an exceptionally large discrepancy that could not simply be brushed aside by the shipping agent.
A show cause notice dated December 5, 2011 was issued proposing confiscation of the goods and imposition of penalties under Sections 116 and 112 of the Customs Act.
Following adjudication, the Commissioner ordered confiscation of 365.545 metric tonnes of broken roof tiles and 54.21 metric tonnes of heavy melting steel scrap, besides confiscation of 150 twenty-foot shipping containers with an option to redeem them on payment of a ₹10 lakh redemption fine.
The Commissioner also imposed a penalty of ₹90,15,924 on the steamer agent for failure to make the required declaration in the Import General Manifest and for failure to satisfactorily account for the shortage involving the declared steel scrap.
Interestingly, the Commissioner accepted the explanation of the importers that they had themselves been cheated by the foreign supplier and had taken steps to recover their advance payments. Proceedings against the importers were therefore dropped, while the penalty proceedings against the steamer agent continued.
The steamer agent challenged the Commissioner’s order before CESTAT.
The Tribunal accepted the contention that the Revenue had not established that the shipping agent was aware of the misdeclaration. It also took note of the fact that the containers had arrived with their seals intact.
According to the Tribunal, the misdeclaration had occurred before the goods were placed on board and before the shipping agent took custody of them. It therefore treated the matter as one of short shipment rather than short landingand relied upon the Bombay High Court’s decision in Shaw Wallace & Co. Ltd. v. Assistant Collector of Customs to set aside the Commissioner’s order.
The Revenue challenged the CESTAT ruling before the Madras High Court under Section 130 of the Customs Act.
Before the High Court, the Revenue argued that the steamer agent was equally liable as the person-in-charge of the vessel in view of the Supreme Court’s judgment in British Airways PLC v. Union of India, reported in 2002 (139) ELT 6 and 2002 (2) SCC 95.
The Revenue contended that Section 116 liability was not restricted only to the person physically in charge of the conveyance. According to the Department, liability could also extend to an agent appointed under the Customs Act or a person representing the person-in-charge and accepted by Customs authorities for dealing with the cargo.
The Department further emphasised that the respondent had itself lodged the IGM and therefore acted as the agent of the vessel before Customs authorities.
The respondent, on the other hand, argued that it was merely a carrier agent and was not a party to the declaration of the contents of the containers. It contended that the IGM had been filed on the basis of information contained in the Bills of Lading and that the Bills specifically stated that the particulars were furnished by the shipper and remained unchecked by the carrier.
It was also argued that the containers had arrived with their seals intact and that the respondent could not be treated as the “person-in-charge” of the vessel.
The Division Bench observed that the principal question was whether the penalty under Section 116 of the Customs Act could be imposed upon the steamer agent for failure to account for goods as declared in the Import General Manifest.
The Court found that the factual position was essentially undisputed. The respondent was the agent or representative of the shipping line and had filed the IGM in respect of the containers.
The High Court further noted that the respondent had not disputed the significant discrepancy in the quantity and nature of the goods. Instead, it sought protection from the terms of the Bills of Lading stating that the particulars had been furnished by the shipper and were unchecked by the carrier.
The High Court rejected this defence.
The Bench agreed with the Commissioner that contractual stipulations contained in Bills of Lading could not override statutory obligations under the Customs Act. The Bills of Lading were essentially contractual documents between the shipper and carrier and could not be relied upon to defeat the statutory consequences flowing from the Customs Act.
The Commissioner had also found that the seals used on the containers were supplied by the steamer agent/carrier and that, after taking charge of the sealed containers, the carrier was required to account for the declared cargo. The High Court found this factual reasoning to be sound.
The Court specifically criticised CESTAT for reversing the Commissioner’s detailed factual findings without adequately examining the extent of the discrepancy. It observed that the Tribunal had dealt with the matter in a “very cavalier” manner and had reversed the adjudication order in a cryptic fashion by relying upon Shaw Wallace.
A central part of the judgment concerns the Supreme Court’s ruling in British Airways PLC v. Union of India.
The Madras High Court noted that the Supreme Court had examined the interplay between Sections 2(31), 42, 116 and 148 of the Customs Act and held that where cargo is not unloaded at the intended destination or deficiencies are not satisfactorily accounted for, liability under Section 116 can extend beyond the person-in-charge of the conveyance.
The liability can also be fastened upon an agent appointed under the Act or a person representing the person-in-charge who has been accepted by Customs authorities for dealing with cargo on behalf of the person-in-charge.
The High Court held that it was bound by the Supreme Court’s decision in British Airways, which had also been followed by a coordinate Bench of the Madras High Court in Caravel Logistics Private Limited. Consequently, the respondent could not escape liability merely by contending that it did not fall within the ordinary meaning of “person-in-charge” under Section 2(31).
The Court attached particular importance to the respondent’s role in filing the Import General Manifest.
Referring to the earlier Division Bench ruling in Caravel Logistics, the Court explained that an IGM is not merely a document informing Customs about the arrival of a vessel and its cargo. Under Section 30, the person delivering the import manifest is required to subscribe to a declaration regarding the truth of its contents.
The High Court observed that the statutory significance of the IGM is further demonstrated by Section 31, under which the vessel cannot ordinarily be permitted to unload imported goods until the requisite entry-inwards order is granted, and such order is linked to delivery of the import manifest.
The Court therefore concluded that whoever lodges the import manifest with the proper Customs officer acts as an agent of the master of the vessel for the statutory purpose of dealing with the cargo.
In the present case, the respondent had admittedly lodged the IGM, subscribed to the declaration regarding the truth of its contents and was accepted by Customs officers as an agent of the vessel’s master for dealing with the cargo. These circumstances brought the respondent within the statutory concept of a “person-in-charge.”
The Court also placed considerable emphasis on the scale of the discrepancy.
The Bench noted that the same shipping line had transported all 150 containers and that the actual weight of goods unloaded was, on average, only 12.5% of the weight declared in the IGM and Bills of Lading.
According to the Court, such a massive difference could not reasonably have gone unnoticed had the shipping line exercised the requisite diligence. Since the respondent had filed the IGM and represented itself before Customs as the agent of the shipper, its failure to satisfactorily explain the deficiency attracted the statutory penalty.
The High Court ultimately answered all the substantial questions of law framed in the appeal in favour of the Revenue.
The Court held that the respondent, having acted as the agent of the person-in-charge, was liable under Section 116 for failure to file an accurate and complete IGM and for failing to satisfactorily account for the deficiency in the manifested goods.
The Court consequently allowed the Revenue’s Civil Miscellaneous Appeal, set aside CESTAT’s order dated October 23, 2013 and restored the Commissioner of Customs’ original order dated November 27, 2012.
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