2025 (7) TMI 1275 - HC - Customs

Levy of penalty u/s 114 of CA - Penalty on CHA (CB) - treating the appellant as another appellant on same footing when their cases were different - HELD THAT - On facts there is no dispute that the appellant completely failed in ascertaining the whereabouts by way of KYC of the persons associated from whom they had sourced the business nor were they in possession of any letter of authorization or profile assessment and verification report of their ultimate client. The company at Nepal for whom they undertook the said transit clearance of Nepal based cargo meant for export to Korea. The appellant contended that the show-cause notice does not make out any adjudication of abetment against the appellant and therefore no penalty can be imposed under section 114(i) of the Act. This argument was rejected by the learned Tribunal after noting the facts and observing that it is not only abetment which result in fixation of penal liabilities on the person concerned but the law also provides for imposing penalty for doing or failure to do any act which act or omission renders such goods liable for confiscation under section 113. Therefore the learned Tribunal was right in making such an observation as section 114(i) primarily holds a person liable for penalty action for such act of omission or commission and abetment is only secondary to the act of omission or commission. It was rightly observed by the learned Tribunal that it was the primary responsibility of the Customs House agent to obtain and fulfill the KYC norms as required in law and was not expected to act on oral information and therefore the appellant absolve himself of his role as an intermediary in the attempted export of Red Sander wood logs. Despite such a finding the learned Tribunal has taken a lenient view and has reduced the penalty from Rs.50 Lacs to Rs.4 Lacs. Thus no questions of law much less substantial questions of law arises for consideration in this appeal - appeal dismissed.

Summary

ISSUES:

Whether treating the appellant on the same footing as another appellant in penalty proceedings under the Customs Act is legally correct when their cases differ materially'Whether the Tribunal erred in holding that the appellant failed to make out a convincing case for non-imposition of penalty'Whether an enquiry officer was properly nominated under section 22 of the CHALR 2004 (now regulation 20 of the Customs Broker Licensing Regulations, 2013) to investigate alleged violations against the appellant'Whether penalty imposed under section 114(i) of the Customs Act, 1962 for violation of Customs Broker Licensing Regulations, 2013 is sustainable in law?

RULINGS / HOLDINGS:

The Tribunal rightly did not differentiate between the appellant and the other party as the appellant's failure to comply with KYC norms and due diligence justified similar treatment; the cases could not be separated for penalty purposes.The Tribunal correctly held that the appellant "could not make out a convincing case for non-imposing penalty" because the appellant failed to fulfill primary responsibilities under the law, including obtaining KYC documents and verifying client profiles.The nomination of an enquiry officer under section 22 of CHALR 2004 (now regulation 20 of the Customs Broker Licensing Regulations, 2013) was acknowledged, but the penalty was imposed based on substantive violations rather than procedural defects in enquiry.Penalty under section 114(i) of the Customs Act, 1962 for violation of CBLR 2013 is sustainable; the Tribunal held that "penalty was imposed ... for such act of omission or commission" and that abetment is secondary to the act itself, thus penalty for failure to comply with CBLR norms is valid under section 114(i).

RATIONALE:

The Court applied the statutory framework of the Customs Act, 1962, particularly sections 114(i), 124, and 130, along with the Customs Broker Licensing Regulations, 2013, emphasizing the duty of Customs House agents to comply with KYC norms and due diligence obligations.The Court relied on the principle that penalty liability under section 114(i) arises not only from abetment but also from acts or omissions rendering goods liable for confiscation under section 113, thereby broadening the scope of penal liability.The Tribunal's leniency in reducing the penalty from Rs. 50 Lacs to Rs. 4 Lacs was noted, reflecting discretionary mitigation despite upholding the penalty's validity.No unique doctrinal shift or dissent was recorded; the decision reaffirmed existing legal principles governing Customs House agents' responsibilities and penalty provisions under the Customs Act.