2025 (6) TMI 1282 - AT - Customs

Liability of customs duty - appellant as a courier firm and clearing agent can be held liable as the owner or importer of the parcels for the purpose of customs duty or not - failure to properly examine several crucial aspects - principles of natural justice - HELD THAT - Both the authorities below have failed to properly examine several crucial aspects. It would appear from the order of the original authority as confirmed by the first appellate authority that the appellant was penalized under Customs Act 1962 for non-compliance with the Courier Imports and Exports (Clearance) Regulations 1998 and for not exercising due diligence. However no reason has been assigned by both the authorities below as to the applicability of Rule 11 of Foreign Trade (Regulation) Rules 1993 which is intended for the owner of the imported goods though the appellant throughout has maintained that they are not the owner of the parcels. Importantly during the adjudication proceedings they produced the copies of the receipts of the parcels in question to the respective consignees/owners as documentary evidence but the same was neither looked into nor considered by either of the authorities below. The said document has to be looked into by the adjudicating authority before arriving at any conclusion. There is also a conspicuous absence of finding as to which parcel allegedly contained prohibited goods or how the goods have been held as prohibited as mandated by Section 111(d) of Customs Act 1962. In the absence of such a finding merely referring the provisions of regulations is not an adequate substitute. A breach of the regulations can be visited with consequences contained therein. Mere handling in the course of professional engagement does not necessarily imply prior knowledge about confiscation or reason to believe that any document produced by them is false in any manner. That requires an independent and specific finding which is absent in the orders of the authorities below. If the parcels have been sent by a company and not by any individual as a consignor of goods the prohibition if any in the Regulations of 1998 has also not been elaborated. Furthermore the valuation method adopted by the lower authorities has also not been explained. Conclusion - The adjudication and appellate orders were flawed due to inadequate examination of the appellant s role failure to consider crucial evidence absence of reasoned findings on prohibited goods and valuation and non-compliance with natural justice. The adjudication has not been done properly and has been upheld by the first appellate authority in a mechanical manner without proper examination. Therefore without commenting on the merits the matter deserves to be remanded to the adjudicating authority for a de novo adjudication after examining all the relevant evidences/documents - the appeal is allowed by way of remand.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the appellant, as a courier firm and clearing agent, can be held liable as the owner or importer of the parcels for the purpose of customs duty, penalty, and interest under the Customs Act, 1962 and related regulations.

2. Whether the adjudicating authorities properly applied the relevant legal provisions, including the Courier Imports and Exports (Clearance) Regulations, 1998 and Rule 11 of the Foreign Trade (Regulation) Rules, 1993, in imposing penalties and confirming duty demands.

3. Whether the authorities adequately examined and considered the evidence produced by the appellant, including receipts of parcels delivered to consignees and the valuation of goods for customs purposes.

4. Whether the adjudication process complied with the principles of natural justice by providing the appellant a fair opportunity to present evidence and contest the allegations.

5. Whether the valuation methodology and the basis for penalty imposition, including the determination of prohibited goods or false declarations, were properly explained and supported by findings.

Issue-wise Detailed Analysis:

Issue 1: Liability of the Courier Firm as Owner or Importer

The legal framework governing import of goods includes the Customs Act, 1962, and the Foreign Trade (Regulation) Rules, 1993. Rule 11 of the Foreign Trade Rules specifically applies to the "owner of the imported goods." The Courier Imports and Exports (Clearance) Regulations, 1998, regulate clearance procedures for courier shipments.

The Court noted that the appellant consistently maintained that they were neither the owners nor importers of the parcels but merely acted as clearing agents responsible for delivery post customs clearance. The appellant's role was limited to handling parcels on behalf of consignees and submitting the bill of entry information to customs officers.

The authorities below failed to assign reasons for applying Rule 11 to the appellant, despite the appellant's clear contention that they were not owners. The Tribunal emphasized that mere handling or professional engagement does not automatically confer ownership or liability under the Act. This distinction is critical because penalties and duty demands under customs law typically target owners or importers responsible for compliance.

The Court found that the adjudicating authorities did not adequately consider this legal distinction and the appellant's role, leading to an erroneous imposition of penalties and duty demands.

Issue 2: Application and Interpretation of Relevant Regulations and Rules

The adjudicating authority imposed penalties and duty demands citing non-compliance with the Courier Imports and Exports (Clearance) Regulations, 1998, and the Customs Act, 1962. However, the Tribunal observed that the authorities did not provide sufficient reasoning on how these regulations applied to the appellant in their capacity as a courier firm rather than an importer or owner.

The Tribunal also pointed out the absence of any specific findings regarding prohibited goods under Section 111(d) of the Customs Act, which mandates confiscation of prohibited goods. The authorities did not identify which parcels were prohibited nor how the prohibition was established. Without such findings, mere reference to regulatory provisions is inadequate to justify penalties or confiscation.

Furthermore, the Tribunal noted that the lower authorities failed to explain the valuation method used to enhance the value of the parcels for duty assessment, which is a fundamental aspect of customs adjudication.

Issue 3: Examination and Consideration of Evidence

The appellant submitted documentary evidence including receipts of parcels delivered to consignees/owners, which was not considered by the adjudicating authorities. The Tribunal held that such evidence is crucial to determine ownership and the appellant's role and must be examined before concluding liability.

Additionally, the Tribunal observed that no inventory or examination report of the parcels was prepared or supplied to the appellant during the investigation, which undermines the procedural fairness and the factual basis for findings.

The appellant also contended that duty and interest amounting to over Rs. 23 lakhs had been paid during the investigation, and a bank guarantee was furnished, but these facts were not reflected or acknowledged in the show cause notice or adjudication orders, indicating incomplete consideration of relevant facts.

Issue 4: Compliance with Principles of Natural Justice

The Tribunal found that the adjudication was conducted in a mechanical manner without proper examination of evidence or reasoned findings. The absence of a detailed hearing process and failure to consider the appellant's submissions and documentary evidence violated the principles of natural justice.

The Court directed that the appellant must be given a proper opportunity of hearing during the de novo adjudication, ensuring all relevant evidence and arguments are duly considered.

Issue 5: Valuation and Penalty Imposition

The Tribunal highlighted that the valuation adopted by the lower authorities to assess duty was not explained or justified. The basis for enhanced valuation and the methodology used were not disclosed, raising questions about the correctness of the duty demand.

Regarding penalty, the Tribunal emphasized that imposition requires a finding of culpability such as prior knowledge of false declarations or prohibited goods. The authorities failed to make such specific findings, rendering the penalty orders unsustainable.

Significant Holdings:

The Tribunal held that the adjudication and appellate orders were flawed due to inadequate examination of the appellant's role, failure to consider crucial evidence, absence of reasoned findings on prohibited goods and valuation, and non-compliance with natural justice.

The Court stated: "Mere handling in the course of professional engagement does not necessarily imply prior knowledge about confiscation or reason to believe that any document produced by them is false in any manner. That requires an independent and specific finding which is absent in the orders of the authorities below."

It was further observed that "the appellant produced the copies of the receipts of the parcels in question to the respective consignees/owners as documentary evidence but the same was neither looked into nor considered by either of the authorities below. The said document, in my view, has to be looked into by the adjudicating authority before arriving at any conclusion."

The Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for de novo adjudication after proper examination of all relevant evidence and documents, directing that the appellant be afforded a fair opportunity of hearing and that the matter be decided preferably within six months.