Case Law Details
Three Aces Global Logistics Pvt. Ltd. Vs Principal Commissioner of Customs (CESTAT Delhi)
In Three Aces Global Logistics Pvt. Ltd. Vs Principal Commissioner of Customs, the CESTAT Delhi examined whether penalty under Section 112(a)(ii) of the Customs Act, 1962 could be imposed on a Customs House Agent in a case involving alleged misclassification of imported goods. The appellant had filed Bills of Entry on behalf of M/s Vanesa Cosmetics Pvt. Ltd. for imports of “Actuator, Valve, Pocket spray Bottle” used for scent spray and similar toilet sprays during 2017-2020 at ICD Tughlakabad and Air Cargo, New Delhi. Following an investigation by the Directorate of Revenue Intelligence regarding alleged misclassification, a show cause notice was issued to both the importer and the appellant. The Principal Commissioner confirmed the demand of differential customs duty against the importer and imposed penalty on the appellant under Section 112(a)(ii) on the ground of suppression of facts and wilful misstatement.
Before the Tribunal, the appellant argued that classification disputes involve matters of opinion and that earlier Bills of Entry had been physically examined and cleared by Customs authorities on the basis of the classification declared by the importer. It was also submitted that the appellant acted only on the declarations and documents provided by the importer and there was no evidence of connivance in any alleged improper import.
The Tribunal observed that penalty under Section 112(a)(ii) can be imposed only if goods are liable to confiscation under Section 111 of the Customs Act. Relying on its earlier decision in Challenger Cargo Carriers Pvt. Ltd., the Tribunal held that Section 111(m) applies to cases of misdeclaration of goods and not merely to wrong classification. It further held that even if goods are wrongly classified or duty is incorrectly self-assessed, the goods do not automatically become liable for confiscation. Since the goods in the present case were not liable to confiscation, the Tribunal held that penalty under Section 112(a)(ii) could not be sustained. Accordingly, the penalty imposed on the Customs House Agent was set aside and the appeal was allowed.
FULL TEXT OF THE CESTAT DELHI ORDER
Three Aces Global Logistics Pvt. Ltd1, a Customs House Agent, is aggrieved by that portion of the order dated 28.06.2023 passed by the Principal Commissioner of Customs ICD (Import), Tughlakabad2 that imposes a penalty upon it under section 112(a) (ii) of the Customs Act, 19623.
2. It transpires from the record that the appellant had filed a Bill of Entry on behalf of M/s Vanesa Cosmetics Pvt. Ltd for imports of “Actuator, Valve, Pocket spray Bottle” meant for scent spray and similar toilet sprays during the period from 2017-2020 for imports at ICD TKD, New Delhi and Air Cargo, New Delhi. The Directorate of Revenue Intelligence conducted an investigation on the misclassification of the imported goods and a show cause notice dated 07.07.2022 was issued to M/s Vanesa Cosmetics Pvt Ltd as also to the appellant. The appellant filed a detailed reply to the show cause notice and contested the allegations made. However, the Principal Commissioner, by the order dated 28.06.2023, not only confirmed the demand of differential customs duty from the importer as the goods were misclassified, but also imposed penalty upon the appellant under section 112(a)(ii) of the Customs Act.
3. Penalty has been imposed upon the appellant for the reason that the short payment demand has been determined on account of suppression of facts or willful statement.
4. Shri T. Chakrapani, learned consultant for the appellant submitted that the classification dispute is a matter of opinion and penalty cannot be imposed for this reason. Learned consultant pointed out that the past Bills of Entries were physically examined and given out of charge based on the classification declared by the importer. Learned consultant also pointed out that the appellant had acted on the declaration, information and documents provided by the importer and there is no evidence on record to suggest that the appellant had connived with the imported for alleged improper import.
5. Shri M.K. Shukla, learned authorized representative appearing for the department, however, supported the impugned order.
6. Penalty under section 112 (a) (ii) is imposed if goods are liable to confiscation under section 111 of the Customs Act.
7. The view taken by the Principal Commissioner that the goods were liable to confiscation under section 111(m) of the Customs Act cannot be sustained merely for the reason that there was some misclassification by the importer or the Customs Broker. This is what was held by a Division Bench of this Tribunal in Challenger Cargo Cargo Carriers Pvt Ltd Principal Commissioner of Customs (Import) Inland Container Depot, Tughlakabad, New Delhi4 and The relevant observations are as follows:
“20. Section 111(m) does not provide for confiscation of goods if the importer or on his behalf, the Customs Broker claims any wrong classification in the Bill of Entry. It only provides for confiscation if there is mis-declaration of goods. Even if the goods are mis-classified or duty is otherwise wrongly self-assessed by the importer, the goods do not become liable for confiscation.”
8. As the goods could not be confiscated, the imposition of penalty upon the appellant under section 112(a) (ii) of the Customs Act cannot be sustained.
9. The impugned order so far as it imposes penalty upon the appellant is, accordingly, set aside and the appeal is allowed.
(Order pronounced on 18.05.2026)
Notes:
1 the appellant
2 the Principal Commissioner
3 the Customs Act
4 Customs Appeal No. 50980 of 2021 decided on 01.12.2022
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