Sylvester and Co. vs Union of India

This Appeal under Section 130 of the Customs Act, 1962 (the Act), challenges the order dated 1st November, 2013 passed by the Customs, Excise & Service Tax Appellate Tribunal (the Tribunal). By the impugned order dated 1st November, 2013, the Appellant was directed to predeposit 25% of Rs.7 lakhs penalty imposed by the Commissioner of Customs (Export) (Adjudicating Authority) for the purpose of entertaining the Appellants appeal on merits.

The following questions of law have been raised for our consideration by the Appellant:

(i) Whether in the facts and circumstances of the case and the law and especially being that, when the freight forwarder without consulting the CHA proceeds to direct the Shipping Line for loading of Containers on the Vessel and the Vessel sails prior to issue of Let Export Order, whether it was appropriate and correct in law for the Tribunal to direct the Appellant to predeposit the 25% of the penalty imposed by the Respondent No. 2 i.e. Rs.1.75 lakhs instead of granting complete waiver from predeposit of the entire penalty imposed on the Appellants, as they did not have any knowledge as regards the loading of the Containers on the vessel.

(ii) Was it correct to have imposed a penalty on the CHA under Section 114(iii) of the Customs Act, 1962 when the facts of the case do not attract any penalty on the CHA under Section 114(iii) of the Customs Act, 1962.

(iii) Was it proper and correct for the CESTAT, Mumbai being the final fact finding authority under the Act to have suo moto cast/lay down an obligation on the CHA to perform an impossible duty and when it was the specific contention of the CHA, that the Steamer Agent loaded the Container, despite the presence of a Preventive Officer, can a CHA be held responsible for a violation committed by other persons which has reflected in clear terms in the record of proceedings.

The admitted facts are that the Appellant is a Custom House Agent (CHA), who had filed shipping bills on 30th September, 2008 and 1st October, 2008 in respect of the goods to be loaded on a foreign going vessel scheduled to sale on 9th October, 2008. The goods governed by the shipping bills, filed by the Appellant were loaded on to the foreign going vessel as scheduled on 9th October, 2008. However, this loading on the vessel took place without Let Export Order (LEO) being passed in respect of examination of goods covered by the shipping bills.

On the above facts, the Adjudicating Authority held that in view of the goods being loaded without LEO, the goods loaded are liable for confiscation under Section 113(g) of the Act. In view of the failure of the CHA to ensure that the goods are loaded only after LEO a penalty of Rs.7 lakhs was imposed upon the Appellant under Section 114(iii) of the Act by the Adjudicating Authority to reach the above conclusion. In support, reliance was placed upon Customs Manual, indicating the responsibility of the CHA as an agent of the exporter vis-�-vis the LEO.

The grievance of the Appellant both before the Tribunal as also before us is that once the goods covered by the Shipping Bills go into the Docks, the CHA has no access to it. Therefore, it could not have obtained the LEO. Besides, in the present case, absence of mens rea is pleaded as the Appellant had not instructed the shipping line to load the goods without obtaining the LEO. It is further submitted that identical issues were finally disposed of by the Tribunal imposing penalty upon the CHA but the same have on challenge been admitted by this Court. Therefore, it is submitted that the impugned order should have dispensed with the predeposit of penalty for the purposes of hearing the appeal on merits.

An appeal from an order of an Adjudicating Authority to the Tribunal under the Act is not an absolute right of appeal. This right of appeal is subject to the Appellant predepositing the duty levied and/or penalty before the appeal can be entertained as provided under Section 129E of the Act. However, the proviso to Section 129E of the Act gives jurisdiction to the Appellate Authority to dispense with the predeposit in case where such predeposit would cause undue hardship to the Appellant. The test applied to determine undue hardship is inter alia prima facie merits of the Appellant''s case or breach of natural justice etc. Therefore, it is for the Appellant to establish before the Tribunal that issue in appeal is completely covered by a decision of the Tribunal or by the higher forum in its favour on identical facts or that the order is ex facie contrary to provisions of the Act.

We find that the impugned order of the Tribunal has considered all relevant facts and in particular, relied upon its own decisions in identical matters where CHA such as the Appellant have been imposed penalty for the goods being loaded on foreign going vessel without having obtained the necessary LEO from the Customs. The Tribunal also relied upon the Customs Manual which specifically casts an obligation on the exporter or his agent to have the goods examined by the Customs. In this case, the CHA was obliged to present the goods to the shed appraiser (export) in docks for examination and it is only after examination of the goods that an LEO is passed. In this case, the impugned order records the fact that the Appellant was at all times aware that the vessel was to sale out of India on 9th October, 2009 and, therefore, ought to have ensured that the goods are examined before they are loaded on to the foreign going vessel. The alternate submission in respect of absence mens rea was also considered by the Tribunal and on interpretation of Section 114 of the Act recorded a prima facie finding that there is no requirement of mens rea under Section 114 of the Act. The reliance upon the admission of an appeal by this Court from an order of the Tribunal at the final hearing for purposes of dispensing with predeposit is inappropriate. In fact, the Tribunal had held against the Appellant on a similar fact and, therefore, this itself would warrant a deposit.

In these circumstances, the deposit of 25% of the penalty of Rs.7 lakhs imposed upon the Appellant is reasonable in the present facts. Thus, no substantial question of law arises for consideration. Accordingly, appeal dismissed.

However, it is made clear that the observations made herein are only for the purpose of disposing of this appeal filed by the Appellant against the order directing a predeposit. These observations should not in any manner encumber the Tribunal in deciding the issue on in-depth examination of merits at the final hearing of the Appeal.

At this stage, Mr. Kantawala, learned Counsel appearing for the Appellant seeks extension of four weeks to make the deposit from today. Extension granted. On deposit, the appeal of the Appellant would in its time be disposed of on merits.

In view of the disposal of the Appeal, nothing survives in Notice of Motion No. 1474 of 2014 and the same is also disposed of as infructuous.