2022 (6) TMI 784 - AT - Customs

Tribunal partially allows appeal, sets aside license revocation, reduces penalty. Principal Commissioner's findings unsupported.

The Tribunal partly allowed the appeal, setting aside the revocation of the CB license and forfeiture of the security deposit, and reducing the penalty to ... Revocation of Customs Broker License - Forfeiture of security deposit - levy of penalty - act of substitution and smuggling of red sanders - allegation of lack of negligence on the part of appellant in not undertaking the proper verification of the exporter/ IEC Holder - HELD THAT:- The entire case made against the appellant is on account of their failure not to properly and completely verify the antecedents of the person/ client entrusting them with the paper and consignment for export. In view of the judgements relied upon by the Appellant and those referred in the inquiry report there was no need for physical visit to the premises and meeting with the client before taking the job. Principal Commissioner has relied upon the statement recorded during the course of investigation. These statements have not been corroborated. Even the statutory documents produced by the appellant for undertaking the KYC of the exporter (IEC Holder) have not been verified and found to fake etc. It is not even the case of revenue that these documents were not taken by the Appellant for undertaking KYC. The only allegation that has been made the ground for not complying/ discharging the obligations casted under CBLR, 2018 is that CB had not physically met and physically verified their premises. The CB was require to do the KYC on the basis of the documents prescribed. Undisputedly such KYC was done by the appellant, only what was not done was physical meeting and physical verification of the premises. There are no merits in any of the findings recorded by the Principal Commissioner, in respect of any of the charges framed against the appellant under regulation 10 (a), (d) & (n), 13 (12) whereas the findings recorded by the enquiry officer are more justifiable and logical. It is also not the case of revenue that appellant was in any way involved in abetting or colluding with the alleged fraudsters in the substitution of export consignments after their clearance from CFS. If the fact of not involvement with the act of smuggling the Red Sanders, is to be held in favour of the Appellants than in our view the punishments inflicted by the impugned order on the appellants are excessive and not proportionate to the violations committed if any. This is also to be viewed in light of the fact that the inquiry officer has in his report held that none of the alleged violations can be established against the appellant during the inquiry proceedings - just for failure to physically visit and verify the antecedents of the client, revocation of the licence of the CB broker has been held to be not justified. Thus, the enquiry officer has more reasonably concluded in the matter, and the appellant CB can at the most be held guilty for contravention of the Regulation 10 (n). Various High Courts have held that punishment for the offences should be proportionate to the gravity of offence. In the present we do not find that appellant was in any way responsible for any act of misconduct but is vicariously responsible for the acts of their employees, hence the punishment of revocation of licence is much harsh and disproportionate to the offences committed. The impugned order stands modified to extent of setting aside the order of revocation of the license of CB and forfeiture of the security deposit - the penalty imposed on the CB reduced from Rs 50,000/- to Rs 10,000/- - appeal allowed in part. Issues Involved:1. Imposition of penalty on the Customs Broker (CB).2. Forfeiture of the security deposit.3. Revocation of the CB license.4. Alleged violations of Regulations 10(a), 10(d), 10(n), and 13(12) of the Customs Broker Licensing Regulations (CBLR), 2018.5. Adequacy of the inquiry process and findings.6. Proportionality of the punishment imposed.Detailed Analysis:1. Imposition of Penalty on the Customs Broker (CB):The Principal Commissioner imposed a penalty of Rs 50,000 on the CB under Regulation 18 of CBLR, 2018. The CB argued that they had received proper authorization from the exporter and had complied with KYC requirements. The inquiry officer found no evidence supporting the charge of violating Regulation 10(a), 10(d), 10(n), and 13(12) of the CBLR, 2018. However, the Principal Commissioner disagreed and upheld the penalty, citing the CB's failure to verify the exporter's details adequately.2. Forfeiture of the Security Deposit:The Principal Commissioner ordered the forfeiture of the entire security deposit furnished by the CB under Regulation 14 of CBLR, 2018. The CB contended that they had followed due diligence and that the substitution of goods occurred after the container was sealed, which was beyond their control. The inquiry officer found no substantial evidence of the CB's involvement in the illegal export. The Tribunal concluded that the forfeiture of the security deposit was excessive and not justified.3. Revocation of the CB License:The Principal Commissioner revoked the CB license under Regulation 14 of CBLR, 2018, citing the CB's failure to verify the exporter's credentials adequately. The CB argued that the punishment was disproportionate, especially since they had complied with KYC norms based on available documents. The inquiry officer's report found no conclusive evidence of violations. The Tribunal held that the revocation was harsh and disproportionate, considering the CB's long-standing service and lack of direct involvement in the smuggling attempt.4. Alleged Violations of Regulations 10(a), 10(d), 10(n), and 13(12) of CBLR, 2018:- Regulation 10(a): The Principal Commissioner alleged that the CB failed to obtain proper authorization. The CB provided evidence of authorization and KYC documents, which were not disputed by the department. The inquiry officer found no violation.- Regulation 10(d): The Principal Commissioner claimed the CB did not advise the client to comply with the regulations. The CB argued that they had no interaction with the exporter, which was confirmed by the inquiry officer, who found no evidence of non-compliance.- Regulation 10(n): The Principal Commissioner alleged the CB did not verify the exporter's antecedents. The CB provided necessary documents for KYC, and the inquiry officer found no requirement for physical verification. The Tribunal agreed with the inquiry officer's findings.- Regulation 13(12): The Principal Commissioner claimed the CB failed to supervise their employees adequately. The CB's employee admitted to not knowing the regulations, but the inquiry officer found no evidence of the CB's direct involvement in the smuggling attempt.5. Adequacy of the Inquiry Process and Findings:The inquiry officer conducted a thorough investigation and concluded that the charges against the CB were not proved. The Principal Commissioner disagreed with the inquiry report but did not provide substantial evidence to support the charges. The Tribunal found the inquiry officer's findings to be more reasonable and logical.6. Proportionality of the Punishment Imposed:The Tribunal emphasized the importance of proportionality in punishment. It noted that the CB had a long-standing service record and was not directly involved in the smuggling attempt. The Tribunal found the revocation of the license and forfeiture of the security deposit to be excessive and disproportionate to the alleged violations. It reduced the penalty from Rs 50,000 to Rs 10,000 and set aside the revocation of the license and forfeiture of the security deposit.Conclusion:The Tribunal partly allowed the appeal, setting aside the revocation of the CB license and forfeiture of the security deposit, and reducing the penalty to Rs 10,000. The Tribunal found the Principal Commissioner's findings to be unsupported by substantial evidence and upheld the inquiry officer's report, which found no conclusive proof of the alleged violations.