The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai has set aside penalties imposed on two Customs House Agents (CHAs) – M/s. Meticulous Forwarders and M/s. Masterstroke Freight Forwarders Pvt. Ltd. – accused of aiding the diversion of duty-free imported raw silk yarn into the domestic market.
The bench of Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) overturned the order, finding no sufficient evidence of “active collusion” or shared intent between the CHAs and the importer or High Seas Seller to defraud the revenue.
The appellants are CHAs who were involved in the clearance of raw silk yarn valued at Rs.3,36,10,6140/- imported by M/s. Kalp Impex allegedly by misusing the Advance Authorisation Scheme, in February 2009.
The appellants were alleged to have aided and abetted in the clearance of the imported goods which were cleared duty-free, into the local market. Further they had without obtaining the requisite authorisations from the importer and without verifying the signatures of the authorized persons of both the High Sea Seller and buyer firm, presented the HSS agreement before the authorities for clearance of the goods and after clearance from the customs, the consignments have been booked to Bangalore instead of Surat at the instance of the High Seas Seller.
Therefore it appeared that the appellants’ act of omission / commission have rendered the goods liable for confiscation under sec. 111(o) of the Customs Act, 1962 and the appellants were liable to penalty under section 112(a) of the Act for abetment. After due process of law, the Ld. Commissioner held that the appellants are liable for penalty and imposed a penalty of Rs.7,00,000/- each under sec. 112(a).
The appellants submitted that without prejudice and without admitting but assuming the allegations in the show cause notice to be correct for argument sake, not meeting an importer or not having a written authorization, not transporting the goods to Surat and sending it to Bangalore etc does not amount to rendering the goods liable to confiscation or to abetment thereof. The confiscation is stated to arise in terms of section 111(d), (m) and (o) ibid. The allegations do not fall within the mischief of these provisions to be read with section 112(a) which is invoked against the appellants. The allegations of “active collusion with the so-called ‘High Sea Sellers’” are unsupported by any evidence.
The department contended that mens rea was not an essential condition for the imposition of penalty under Section 112(a) of the Customs Act, 1962 and hence the omissions and commissions of the appellants which are in violation of the Custom House Agents Licencing Regulation 2004 and the Customs Act, had correctly been penalized under the Act.
“The presumption of innocence is a background assumption of our legal system. From the allegations against the appellants, it is seen that there is nothing to prove that there was a common intention between them and the others involved,” the tribunal observed.
The tribunal clarified the distinction between negligence or regulatory violations under the Customs Brokers Licensing Regulations and culpability under the Customs Act. It held that while the agents may have acted in violation of procedural obligations, that alone did not warrant invoking penal provisions meant for deliberate acts of evasion or abetment.
Citing Supreme Court precedents, the order emphasized that unless there is a clear finding of shared intent or conspiracy, actions like improper documentation or failure to verify signatures cannot automatically be termed as abetment under Section 112(a).
The tribunal also noted the lack of corroborating evidence to support the claim of active participation by the agents in any illegal diversion, stating that the “charge of ‘active collusion’ with the High Sea Sellers is not proved.”
The penalties were accordingly quashed, with the tribunal granting consequential relief to the appellants as per law.
Case Details
Case Title: M/s. Meticulous Forwarders Versus Commissioner of customs
Case No.: Customs Appeal No. 42080 of 2014
Date: 14.07.2025
Counsel For Appellant: S. Murugappan, Advocate
Counsel For Respondent: Mohamed Uvasullah Muhsin
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