CESTAT Sets Aside Penalty Imposed on CHA; cites Lack of Knowledge and Prior Acquittal of Main Importer [Read Order]

In a ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad, set aside a penalty of Rs. 1 Lakh imposed against a Customs House Agent (CHA) under Section 112(a) of the Customs Act, 1962. The Tribunal held that the penalty was not sustainable as the Department failed to prove that the Appellant had knowledge of the concealment of smuggled goods.

The Tribunal ruled in favour of the Appellant, noting that the penalty on the main accused had already been set aside in a prior proceeding and that no separate proceedings had been initiated against the CHA under the Customs Broker Licensing Regulations.

Anand D Mehta, the Appellant and a Customs House Agent, was penalized for his alleged role in an import attempt by M/s. Rodex International. The Directorate of Revenue Intelligence (DRI) had intercepted a container imported by Rodex, ostensibly containing refrigerators and TVs, and discovered 28,580 undeclared SD Memory Cards concealed within. The Department alleged that the Appellant, who assisted in documentation, was complicit in the smuggling attempt.

The Department contended that the Appellant was aware of the concealment and upheld the penalty imposed by the Commissioner of Customs, Kandla. They argued that the Appellant’s association with the main importer, Lilaram Arjandas Asudani, implicated him in the wrongdoing.

The Appellant argued that the Bill of Entry was filed on a "SELF" basis by the importer, and he had merely assisted in document preparation. He emphasized that there was no material evidence to prove he had knowledge of the concealed memory cards. Furthermore, the Appellant pointed out that the penalty imposed on the main perpetrator, Lilaram Arjandas Asudani, had already been set aside by the Tribunal in 2024. Relying on the judgment in G. Narayan & Co. vs. Commissioner of Customs, he argued that a penalty under Section 112(a) cannot be imposed on a CHA without initiating proceedings under the Customs Broker Licensing Regulations, 2013.

The Coram of S. S. Garg (Member Judicial) observed that the Commissioner’s own order recorded that the Appellant had only helped in filing the Bill of Entry. The Tribunal found that the Revenue failed to bring any corroborative evidence on record to show that the Appellant had prior knowledge of the concealment.

The Tribunal observed:

“I find that the Customs has failed to bring on record any corroborative evidence which clearly shows that the appellant had knowledge that 28580 pieces of Memory Cards are concealed by the Rodex International.”

Noting that the penalty on the mastermind had been set aside and that no proceedings under the Licensing Regulations were initiated against the CHA, the Tribunal relied on G. Narayan & Co. to hold that the penalty was unjustified. Following the ratio of various precedents, the Tribunal held that without establishing proof of knowledge, a penalty on a CHA under Section 112(a) is not imposable.

In view of this, the CESTAT allowed the appeal, setting aside the impugned penalty.

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