2021 (6) TMI 962 - AT - Customs

Customs penalties for Mahavir Logistics deemed disproportionate by Tribunal. License revocation overturned.

The Tribunal found that the penalties imposed on M/s Mahavir Logistics for breaching customs regulations were disproportionate. While confirming the ... Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - alleged undervaluation - allegation is that the holder of import export code (IEC) had neither been contacted by the appellant nor prescribed authorization obtained from him was held to have been established - breach of regulation no. 11(a), 11(d), 11(e), 11(m) and 11(n) of Customs Broker Licensing Regulations, 2013 - HELD THAT:- Though the inquiry, prescribed under Customs Broker Licensing Regulations, 2013, held that, while the breach of several of the obligations in regulation no. 11 had been substantiated, that failure to discharge duties with speed, as stipulated in regulation no. 11(m), was not, the licensing authority did, nonetheless, consider it fit to disregard that finding to conclude that the acceptance of documents from an unrelated person was indication of inefficiency but for which loss of revenue could have been avoided. It is also noted that it is the admitted lack of contact with the importer on record, Shri Balam Singh Rawat, and the obtaining of the authorization and documentation from Shri Anil Kumar Vachhar, the beneficiary importer, which is the foundation for every finding of breach sustained against the appellant - The obligation to advice the client to comply with the provisions of Customs Act, 1962, the obligation to exercise due diligence by ascertaining the veracity of all information pertaining to client, the obligation to discharge duties as customs broker with utmost speed and efficiency and without any delay and the obligation to verify antecedents, correctness of importer exporter code, to identify his client and functioning of his client at the declared address were, according to the licencing authority, breached. Breach of Regulation no. 11(m) - HELD THAT:- The regulation does not mandate physical verification but adjures ascertainment from reliable, independent, authentic documents, data or information. It is found that the records do not allege that the ‘importer-export code (IEC)’ had been obtained fraudulently or that the importer on record did not exist. These were claimed to have been verified from the data made available in the public domain by the Director General of Foreign Trade. The inquiry authority had held that the allegation of failure to discharge duties with utmost speed and efficiency would not sustain and, in departing therefrom to render a separate finding of the breach, the licensing authority failed to evince any acceptable reasons for such. Thus, this breach does not sustain. Breach of Regulation no. 11(e) - HELD THAT:- There is no doubt that the appellant did not have any contact with the importer on record and, consequently, there can be no scope for imparting any information to the importer which may conceivably be held as having led to breach of regulation no. 11(e) of Customs Broker Licensing Regulations, 2013. Breach of regulation 11(d) - HELD THAT:- Rendering advice to the client is just as inconceivable indicating the lack of scope for any breach of the obligation prescribed in regulation 11(d). It is seen from the visual evaluation of the signatures that forgery is also not in evidence. Nevertheless, the licensing authority did proceed to record a contradictory finding which, in the absence of expert opinion, is not tenable. Breach of regulation no. 11(a) - Failure to obtain authorization from the company/firm or individual by whom they, for the time, had been employed as customs broker - HELD THAT:- The appellant has not denied the lack of any communication with M/s Forus Enterprises except through Shri Anil Kumar Vachhar. We find that proceedings, under section 28 of Customs Act, 1962, for recovery of differential duty has been initiated against the beneficiary importer, Shri Anil Kumar Vachhar. It would, thus, appear that the appellant had dealt with the beneficiary importer of the imported goods but against authorization furnished by the importer on record. It is also equally clear that the appellant, while dealing with Shri Anil Kumar Vachhar, did not appear to have evinced any interest in ascertaining the identity, or connection with the goods, of the importer on record. The allegation against the imports is limited to undervaluation and it is difficult to appreciate that the breach of regulation no. 11(a) had, in any way, contributed to suppression of the value of the goods imported against the bill of entry. It is not within the remit of the customs broker to be conversant with the negotiations on price or the manner of transference of agreed recompense and, therefore, compliance with the said obligations would not have altered the allegations leveled against the importer, whether on the beneficial owner or of that on record. The licencing authority, after considering the nature and extent of contributory negligence on the part of M/s Mahavir Logistics, did find it appropriate to revoke the suspension ordered on 19th February 2018 by order dated 26th April 2018 - For not having insisted upon contact with the importer on record, revocation of licence and, that too, for first breach is, indeed, drastic - the ends of justice would be served by confirming the forfeiture of security deposit and the imposition of penalty of ₹50,000/- while setting aside the revocation of the customs broker licence. Appeal allowed in part. Issues:Revocation of customs broker license, forfeiture of security deposit, imposition of penalty under Customs Broker Licensing Regulations, 2013.Analysis:1. The appellant, M/s Mahavir Logistics, challenged the revocation of their customs broker license, forfeiture of security deposit, and imposition of a penalty of Rs. 50,000 under regulation 18 of Customs Broker Licensing Regulations, 2013. The appellant argued that the penalties were disproportionate as the proceedings were premature pending adjudication of a show cause notice issued under section 124 of the Customs Act, 1962.2. The appellant was found to have filed an undervalued bill of entry on behalf of a beneficiary importer, Shri Anil Kumar Vachhar, without proper authorization from the importer on record, M/s Forus Enterprises. The licensing authority imposed penalties and revoked the license based on breaches of various regulations. The appellant contended that they had taken precautionary measures to verify the authenticity of documents and that the duty differential had been rectified by the importer.3. The appellant's counsel argued that the Customs Broker Licensing Regulations, 2013 did not mandate physical verification of premises or the importer, and there was no allegation of fictitious import-export codes. The appellant highlighted that the duty differential was relatively small and did not justify the severe penalties imposed.4. The authorized representative emphasized the appellant's role in undervaluing imported goods and evading duty, citing statements from involved parties. The representative justified the penalties imposed and referred to a relevant High Court decision regarding penalties under the Customs Act, 1962.5. The inquiry found breaches of various regulations by the appellant, including failure to obtain proper authorization and lack of due diligence. The licensing authority disregarded the appellant's argument of not breaching regulation 11(m) regarding speed of duties. The authority concluded that the appellant's actions led to inefficiency and potential revenue loss.6. The appellant was found to have breached regulations by not contacting the importer on record, obtaining documentation from an unauthorized person, and lacking due diligence. However, some alleged breaches were not substantiated, and the licensing authority's findings were questioned for lack of proper reasoning.7. The appellant's involvement in undervaluation was limited to one bill of entry, and the breaches of regulations were not directly linked to the alleged suppression of imported goods' value. The customs broker's obligations did not significantly impact the allegations against the importer.8. The Tribunal agreed with the appellant that the penalties imposed were disproportionate. While confirming the forfeiture of the security deposit and the penalty of Rs. 50,000, the revocation of the customs broker license was set aside as too drastic for a first breach.9. The appeal was disposed of, with the decision announced in open court on 11th January 2021.