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Procedural Role in Customs Clearance Does Not Prove Smuggling :
The has set aside a ₹4.56 crore differential customs duty demand and penalties imposed on a shipping forwarder, holding that the failed to produce evidence that the forwarder knew about smuggled goods concealed in a consignment. Justice Hemant Chandangoudar, presiding as a single judge, allowed the writ petition filed by C. Solomon Selvaraj, proprietor of , quashing the Order-in-Original dated .
The Case: A Container of Needles and Tapes
The dispute stemmed from a import by , declared as containing gas stoves and spare parts. Acting on intelligence, the examined the consignment and discovered 2,01,13,000 sewing machine needles of the “Organ” and “Flying Tiger” brands, along with 70,200 steel measuring tapes, concealed behind the declared goods. The Bill of Entry, packing list, and related documents did not mention these items.
Investigation revealed that the importer’s address was fictitious and the persons behind the transaction—including one Vishal—could not be traced. The Department alleged that Selvaraj received import documents from Vishal, instructed the customs broker——to file the Bill of Entry in the name of R.M. Enterprises, paid customs duty from his firm’s account, and arranged clearance. Based on these actions, the Department held Selvaraj for under , along with an equivalent penalty under and an additional ₹10 lakh penalty for alleged use of under .
Petitioner’s Stand: No Ownership, No
Selvaraj argued that he was neither the owner nor of the goods and that the Department’s inability to trace the actual importer could not make him liable. He pointed to a previous round of litigation () where the High Court had set aside an earlier adjudication order and directed the Department to determine whether Selvaraj had of the attempted smuggling and what role he actually played. The impugned order, he contended, failed to record any specific finding on these points and merely reiterated his involvement in the clearance process.
Department’s Defence: Control Over Consignment
The Department, represented by Senior Standing Counsel , maintained that the material collected during investigation—including Selvaraj’s statement under —established his over the consignment. The Department relied on the same sequence of actions—receiving documents, instructing the broker, paying duty, obtaining delivery—to argue that Selvaraj was not a mere agent but a beneficiary of the transaction.
Legal Analysis: Is the Key
Justice Chandangoudar examined whether the record could sustain the finding of culpability. The court noted that in the earlier round, it had expressly held that the Department’s failure to trace the actual importer could not, by itself, justify treating Selvaraj as the . The respondent was directed to examine afresh whether Selvaraj had of the concealed goods and to fix liability proportional to his actual role.
“The respondent has not recorded a specific and reasoned finding that the petitioner had that the container contained the undeclared sewing machine needles and measuring tapes or that he knowingly facilitated their ,” the court observed. The circumstances that Selvaraj handled customs clearance, paid duty, and interacted with the broker were, in the court’s view, insufficient to establish .
The court distinguished between a person who actually commits an act rendering goods liable to confiscation and one who abets such act. Citing the ’s decision in Rajeev Khatri v. Commissioner of Customs (Export) , (2023) 9 Centax 412 (Del.), the court noted that requires of the offending act. “, without the requisite , cannot by itself amount to ,” it said.
Applying , which deals with , the court held that the Department had not established the foundational facts showing that Selvaraj was expressly or impliedly authorised by the actual owner or importer to act as his agent. The ’s ruling in Collector of Customs, Cochin v. Trivandrum Rubber Works Ltd. , (1999) 106 E.L.T. 9 (S.C.), was cited for the proposition that the liability for duty under Section 28 is ordinarily that of the person chargeable with the duty.
Previous Proceedings Set Aside
The Department had also relied on an earlier alleged smuggling case against Selvaraj to bolster its case. However, the court noted that the , had subsequently set aside the penalties imposed in that case. The CESTAT ruling, dated , held that cannot be proved unless the actual offender is identified, and that applies to fraudulent exports, not imports. The High Court therefore held that reliance on those proceedings could not be sustained.
Key Observations
The judgment included several pointed observations:
“These circumstances may, undoubtedly, establish that the petitioner was involved in the clearance of the consignment. However, involvement in the clearance process, by itself, is not sufficient to establish that the petitioner was the owner or of the goods, or that he knowingly participated in the or attempted smuggling.”
“The mere fact that the petitioner undertook customs clearance and transportation on a lump-sum basis, received documents from Vishal, dealt with the Customs Broker, paid the assessed duty and arranged for examination and clearance cannot, without more, establish of the concealed goods.”
“The impugned order therefore also fails to establish the necessary ingredients for sustaining the penalty imposed upon the petitioner in respect of the alleged .”
Final Decision
The High Court allowed the writ petition and set aside the impugned Order-in-Original insofar as it fastened , interest, and penalties on Selvaraj. The court clarified that its order was confined to the petitioner’s liability and did not affect proceedings against other noticees. The decision underscores that mere involvement in the procedural aspects of customs clearance—without independent evidence of —cannot support the imposition of substantial duty and penalty demands on forwarding agents.
Case Title:
Coram: Justice Hemant Chandangoudar (Single Judge)
Date:
