Whether penalty on CHA for mis-declaration of goods is valid when such goods required chemical test to know the actual nature of goods?

PJ/CASE LAW/2016-17/3047

Case: COMMR. OF CUS., TUTICORIN Vs MORIKS SHIPPING & TRADING (P) LTD.

Citation: 2015 (317) E.L.T. 3 (Mad.)

Brief Facts: - Aggrieved by the order of the Appellate Tribunal [2008 (227)E.L.T. 577 (Tribunal)] in dismissing the appeal filed by it, the Revenue is before this Court challenging the said order by filing the present appeal.
The goods, on the threshold of export, was subjected to a chemical analysis by the Department in its laboratory, and it was ascertained that the goods presented for export was common salt. Therefore, a case was framed against the exporter and the CHA. The original authority confiscated the goods under Section 113(h)(2) on the ground of mis-declaration of description and value of goods, but gave option of redemption to the exporter on payment of a fine of Rs. 20,000/- under Section 125 of the Customs Act. Penalty was also imposed on the exporter and the CHA at Rs. 5 Lakhs and Rs. 1.5 Lakhs respectively.
The CHA successfully challenged the penalty before the first appellate authority which set aside the penalty imposed on the CHA. The Revenue, aggrieved by the said order, filed appeal before the Tribunal contending that penalty should be imposed on the CHA on the basis of the finding of the original authority. However, the Tribunal declined to accept the plea for imposition of penalty on the CHA holding that CHA had no knowledge of the mis-declaration by the exporter on the nature of goods attempted to be exported by the exporter for wrongful availment of drawback claim and, therefore, dismissed the appeal filed by the Department. Aggrieved by the said order of the Tribunal, the present appeal is filed by the Revenue before this Court.

Reasoning of Judgement: It is evident from the order of the Tribunal that the goods were examined by the Customs Department in its laboratory, and analysis revealed that the goods were common salt instead of Organic Dye Intermediate G-Salt, as declared. Such being the case, this Court is baffled to note how penalty can be levied on the CHA. When the Department itself, only on the basis of the chemical analysis, was able to ascertain that the goods attempted to be exported was not common salt, how can a CHA be expected to know of the exact nature of the product at sight. In the above stated scenario, this Court has no hesitation to hold that the Commissioner (Appeals) and the Tribunal’s reasoning for setting aside the penalty imposed on the CHA is fully justified.
Finding no merits warranting interference with the order of the Tribunal, the appeal is dismissed.

Comment: The gist of the case is that when the Department itself, only on the basis of chemical analysis, was able to ascertain that the goods attempted to be exported was not common salt, how can a CHA be expected to know of the exact nature of the product at sight. Therefore penalty on CHA for mis declaration of goods is not justifiable.

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PJ/CASE LAW/2016-17/3047

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