The Kerala High Court has held that the employer is not vicariously liable for forged use of the customs department seal by the employee.

The bench of Justice A.K. Jayasankaran Nambiar and Justice Easwaran S. have observed that there is no evidence to show that the appellant/employer had forged the seal of the customs authority. Thus, it was found that the appellant is not vicariously liable.

The appellant/assessee was visited with a proceeding for imposition of penalty and cancellation of the license on the pretext that the employees of the appellant had misused the seal of the customs authority. The notice to show cause was answered by the appellant. However, the reply was not accepted, and the customs authority proceeded to cancel the license of the appellant and imposed a penalty of Rs.50,000. Aggrieved by the order, the appellant approached the appellate tribunal.

In the appeal, on an extensive consideration of the material facts, the tribunal concluded that there is no evidence to show that the appellant had forged the seal of the customs authority. Thus, it was found that the appellant is not vicariously liable. However, despite the finding, the tribunal proceeded to sustain the penalty under Section 117 of the Customs Act, which is challenged by the appellant.

The court held that while the tribunal has found that there are no reasons to sustain the allegations in the show cause notice and thereby interfered with the order of cancellation of the license, it has not assigned any reason for nevertheless sustaining the penalty under Section 117 of the Customs Act. Moreover, when the employees against whom the allegations of forgery were made have been exonerated and the penalty imposed against them has been set aside, there is no reason to sustain the findings of the tribunal that penalise the appellant.

The court held that the order of the tribunal sustaining the penalty under Section 117 of the Customs Act cannot be sustained. 

Case Details

Case Title: M/S MBK Logistics Private Limited Versus  The Commissioner Of Customs

Case No.: CUS.APPEAL NO. 6 OF 2020

Date: 18/02/2025

Counsel For Appellant: Aswin Gopakumar

Counsel For Respondent: Rajesh B.

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