Customs House Agent Cannot Be Penalized Without Direct Evidence or Involvement in Alleged Undervaluation: CESTAT [Read Order]

S A Dalal and Co., the appellant, is a licensed CHA based in Mumbai. A penalty of Rs. 10 lakhs was imposed on them under Section 112A of the Customs Act, 1962, in connection with a case involving alleged undervaluation and misdeclaration of imported mobile accessories by other parties. The customs department issued a show cause notice to the appellant and proceeded to penalize them, even though no investigation had been conducted against the CHA, no documents were recovered from their premises, and their statement was never recorded.

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The appellant’s counsel argued that they were never called for investigation and that the entire penalty was based solely on statements given by third parties, specifically, the importer Shri Prabhat Tarsaria and a director of another customs agency, Shri Rupin Parekh. The appellant contended that none of the co-accused alleged any wrongdoing by them or stated that the CHA was aware of the undervaluation.

They also submitted that penalizing them without direct evidence or even a basic inquiry violated the principles of natural justice. In support of their case, the appellant relied on previous rulings such as Enterprise International Ltd. v. Commissioner of Customs, Kolkata, and Warren Trading Pvt. Ltd. v. Commissioner of Customs, Kandla, where penalties were struck down in similar circumstances.

The revenue counsel countered that there was no requirement to record the appellant’s statement before issuing a penalty. They argued that an investigation regarding the broader case was carried out, and the penalty under Section 112A was valid based on findings from that investigation.

The single-member bench comprising Dr. Suvendu Kumar Pati (Judicial Member) observed that no investigation was conducted against the appellant, and they were not given an opportunity to defend themselves during the inquiry. It further held that under Section 114 of the Indian Evidence Act, the statements of co-accused are not sufficient unless corroborated by independent evidence. Since there was no material on record linking the CHA to the alleged undervaluation, the tribunal held that the penalty could not be sustained.

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The tribunal allowed the appeal and set aside the penalty of Rs. 10 lakhs imposed on S A Dalal and Co., ruling that a CHA cannot be penalized without direct involvement or evidence.

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