2019 (8) TMI 1574 - AT - Customs

Department's Failure to Prove Charges Against Customs Broker Firm & Director

BHARATI FREIGHT FORWARDERS PVT. LTD. Versus COMMR. OF CGST & C. EX., MADHYA PRADESH

The Tribunal found that the Department failed to provide concrete evidence of the appellants' involvement in diverting duty-free goods or over-utilizing ... Levy of Penalty u/s 112b(ii) of Customs Act - misuse of the EPCG authorization letter - over-utilization of the EPCG value - also, abetted the diversion of machinery imported under EPCG licence at zero rate of duty without fulfilment of the export obligation - HELD THAT:- The Department has not adduced any concrete evidence to prove that the appellants have helped the importer namely M/s. Kasare Vanya Silk Mill Pvt. Ltd. in the diversion of duty free imported capital goods without fulfilment of the export obligation. The role of the customs clearing agent is limited to the clearance of the import consignment from the port of importation and once the consignment has been handed over to the importer its beyond our imagination that custom house agent can keep track of the import consignment as to whether it is being installed by the importer at his factory premises or being diverted/sold to some other person. There are no iota of an evidence to establish any connivance or abetment on the part of the appellant with the importer in diversion of duty free imported capital goods. Charge of over-utilization of the EPCG licence whereunder some consignment has been cleared without payment of customs duty - HELD THAT:- Once EPCG licence is registered with particular port of importation the value of the EPCG licence is maintained by the custom house and same is also endorsed on the licence itself. The CHA cannot be made responsible for ensuring that import value should be within the limit of the EPCG licence value - in this case the precaution should have been taken by the customs department that the capital goods worth as authorized in the EPCG licence are only cleared up to the value provided therein and only they have the machinery to stop misuse of value provided into EPCG licence. CHA cannot be made responsible for such misuse of the EPCG licence unless and until some concrete evidence is produced which establishes a mala fide on the part of the customs house agent and misuse of EPCG licence. We find that no such evidence has been adduced by the Department which clearly involves the appellants in misuse of EPCG licences. The charges levelled against the appellants and on the basis of which penalty under Section 112b(ii) under the Customs Act, 1962 has been imposed are not proved by the Department and, therefore, the penalty imposed is set aside - appeal allowed - decided in favor of appellant. Issues:Allegations against CHA/Customs Broker firm and its Director for facilitating duty-free clearance of capital goods under EPCG Scheme and diversion of goods in the domestic market.Analysis:The case involved allegations against a CHA/Customs Broker firm and its Director for facilitating duty-free clearance of capital goods under the EPCG Scheme and diversion of goods in the domestic market. The appellants were co-noticees for penalty under Section 112B of the Customs Act, 1962. The primary allegations were that the CHA firm facilitated the importer in clearing goods at zero customs duty despite the exhaustion of the duty-free import value under the EPCG license. Additionally, it was alleged that the capital goods were diverted in the domestic market, violating the Customs Act provisions. The Department contended that the appellants colluded with the importing firm to facilitate the diversion/selling of duty-free imported capital goods.The show cause notice was adjudicated, imposing a penalty on the noticees individually under Section 112(b)(ii) of the Customs Act, 1962. The appellants contested the penalty, arguing that they cleared import consignments based on documents provided by the importer and were not responsible for tracking the utilization of goods post-clearance. They emphasized that the Customs authorities and the importer were aware of the EPCG license value and import procedures, not the CHA.Upon review of the contentions, the Tribunal found that the Department failed to provide concrete evidence of the appellants' involvement in diverting duty-free goods or over-utilizing the EPCG license value. The Tribunal noted that the role of a customs clearing agent is limited to clearance, and they cannot monitor post-clearance activities. It was highlighted that the CHA cannot be held responsible for ensuring compliance with EPCG license limits or preventing misuse without concrete evidence of malafide intent.Consequently, the Tribunal held that the charges against the appellants were not proven by the Department. The penalty imposed under the order-in-original was set aside, and both appeals were allowed. The Tribunal emphasized the need for concrete evidence to establish CHA's involvement in EPCG license misuse and diversion of duty-free goods, highlighting the limited role and responsibilities of a customs clearing agent in import clearance processes.