Steamer Agent Liable Under Section 116 of Customs Act for False IGM Declaration and Cargo Shortage: Madras High Court
Background and Overview
The Madras High Court, in the case of Commissioner of Customs Vs Msc Agency India Pvt. Ltd, delivered a significant ruling on the liability of steamer agents under Section 116 of the Customs Act, 1962. The Court allowed the Revenue's Civil Miscellaneous Appeal, reversing the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, dated 23.10.2013, and restored the original order passed by the Commissioner of Customs dated 27.11.2012.
The judgment carries far-reaching implications for steamer agents and shipping lines operating in India, firmly establishing that filing the Import General Manifest (IGM) with customs authorities is not a mere administrative act — it creates binding legal accountability under the Customs Act, 1962.
Factual Matrix of the Case
The Parties and Their Roles
The respondent, Msc Agency India Pvt. Ltd, is a Private Limited Company incorporated under the Companies Act, 1956, functioning as the steamer agent for M/s. Mediterranean Shipping Company, S.A. — a global container owner and shipping carrier headquartered in Geneva.
Discovery of the Discrepancy
Acting on intelligence received from multiple Container Freight Stations (CFS) regarding short landing of imported steel scrap, the Docks Intelligence Unit (DIU) undertook a detailed inspection of import consignments belonging to various importers. The inspection report dated 06.08.2010 from M/s. ICBC CFS exposed a massive divergence between declared cargo and actual cargo unloaded from the containers.
Key findings included:
- 150 containers (20-foot units) were declared in the Import General Manifest (IGM) and Bills of Lading as containing "shredded steel scrap" and "Heavy Melting Steel Scrap"
- On physical examination across 12 Bills of Lading, the containers were found to be predominantly filled with broken roof tiles
- The actual average weight of goods unloaded was a mere 12.5% of the declared weight — a staggering 87.5% shortfall
- Specifically, out of 150 containers:
- 143 containers declared to hold 3,429.809 Metric Tons of shredded steel scrap actually contained only 368.005 Metric Tons of broken roof tiles and 48.680 Metric Tons of Heavy Melting Steel Scrap
- The remaining 7 containers declared to contain 168.24 Metric Tons of Heavy Melting Steel Scrap were found to hold only 5.33 Metric Tons of the same
Show Cause Notice and Commissioner's Order
A Show Cause Notice dated 05.12.2011 was issued, proposing confiscation of goods and imposition of penalties on both the steamer agent (respondent) and the importers under Section 116 and Section 112 of the Customs Act, 1962.
Upon adjudication, the Commissioner of Customs vide Order dated 27.11.2012 passed the following directions:
- Confiscation of 365.545 Metric Tons of broken roof tiles and 54.21 Metric Tons of Heavy Melting Steel Scrap
- Confiscation of 150 nos. of 20-feet shipping containers, with an option to redeem on payment of a redemption fine of Rs. 10 lakhs
- Imposition of penalty of Rs. 90,15,924/- on the respondent (steamer agent) for:
- Failure to make a true declaration in the Import General Manifest
- Failure to satisfactorily account for the shortage of 3,381.129 Metric Tons of shredded steel scrap and 162.71 Metric Tons of Heavy Melting Steel Scrap
- The total duty involved amounted to Rs. 90,15,924/-
Note: The Commissioner dropped all proceedings against the importers after accepting their explanation that they had been defrauded by their overseas suppliers and had initiated steps to recover advance payments.
CESTAT's Decision and Revenue's Challenge
CESTAT Order Dated 23.10.2013
The respondent steamer agent appealed before CESTAT, Chennai. The Tribunal overturned the Commissioner's order on the following grounds:
- The Revenue had not produced any evidence proving that the steamer agent had prior knowledge of the misdeclaration
- The containers had arrived with their seals intact, which suggested the misdeclaration occurred before the goods were loaded
- The Tribunal characterized the incident as a case of short shipment rather than short landing
- The Tribunal placed reliance on Shaw Wallace & Co Ltd Vs. Assistant Collector of Customs and Others, 1986 251 ELT 948 (Bomb) to hold that the steamer agent was not liable