2025 (7) TMI 650 - AT - Customs

Clearing agents cannot be penalized for fraudulent export benefits when they only filed documents and officers cleared goods after examination.

M/s Fairdeal Enterprise Private Limited, S.K. Kanjilal, M/s Suman International Versus Commissioner of Customs (Port), Kolkata

M/s Fairdeal Enterprise Private Limited, S.K. Kanjilal, M/s Suman International Versus Commissioner of Customs (Port), Kolkata - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal in this matter are:Whether the appellants, who acted as clearing agents filing manual shipping bills and facilitating export, can be held liable for penalties under the Customs Act, 1962 for fraudulent availing of duty drawback and DEPB benefits by the exporters.Whether the appellants had any knowledge or role in the alleged fraud involving non-export or overvaluation of goods, and thus whether penalty provisions under Section 114(i) and 114(iii) of the Customs Act can be invoked against them.Whether the extended period of limitation for issuing the show-cause notice is invokable in the facts of the case, given that the goods were physically examined and allowed for export by the proper officer prior to export.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Liability of Clearing Agents for Fraudulent Availment of Duty Drawback and DEPB BenefitsRelevant legal framework and precedents: The Customs Act, 1962, particularly Section 114(i) and 114(iii), empowers imposition of penalties for fraudulent activities related to customs procedures. The Foreign Trade (Regulation) Rules, 1993, and Export (Control) Order 1988, along with the Foreign Trade (Development & Regulation) Act, 1992, regulate export procedures and benefits such as duty drawback and DEPB schemes. The Ministry of Finance Circular No.15/97 dated 05.06.1997 prescribes valuation norms for exports and limits on DEPB benefits relative to the price declared.Court's interpretation and reasoning: The Tribunal observed that the appellants acted solely as clearing agents who filed shipping bills manually and submitted export documents to the proper officers. The goods were physically examined and allowed for export by the proper officers, indicating official acceptance of the consignment's quality and value at the time of export. The Tribunal emphasized that the appellants' role ended once the goods were cleared for export and that there was no evidence on record that the appellants had knowledge of or participated in any fraudulent overvaluation or non-export of goods.Key evidence and findings: The enquiry revealed that the exporters fraudulently declared exports to a Russian consignee who did not receive the goods, and overvalued goods to avail higher DEPB benefits. However, the clearing agents, including the appellants, were not shown to have any complicity or knowledge. The goods were examined and cleared by customs officers, and the appellants only handled documentation.Application of law to facts: Since the appellants' involvement was limited to filing documents and facilitating export clearance, and there was no proof of their knowledge or complicity in the fraudulent acts, the Tribunal held that penalty provisions under Section 114(i) and 114(iii) of the Customs Act could not be imposed on them. The principle that penalty requires a culpable role or knowledge was applied to absolve the clearing agents.Treatment of competing arguments: The appellants argued that their role ended after filing shipping bills and that they had no role in availing benefits under the schemes. The Revenue contended that the clearing agents assisted in the fraudulent availment of benefits. The Tribunal sided with the appellants, finding no evidence to support the Revenue's claim of complicity.Conclusions: The Tribunal concluded that the clearing agents cannot be penalized for the exporter's fraudulent acts in absence of evidence of their involvement or knowledge.Issue 2: Invokability of Extended Period of Limitation for Issuing Show-Cause NoticeRelevant legal framework and precedents: The Customs Act provides for limitation periods for initiating proceedings. The extended period of limitation can be invoked in cases involving suppression of facts or fraud, but not when goods have been physically examined and allowed for export by the proper officer.Court's interpretation and reasoning: The Tribunal noted that the goods were physically examined and allowed to be exported during the relevant period. Since the goods were cleared by the proper officer, the extended period of limitation could not be invoked to issue the show-cause notice after a delay.Key evidence and findings: The shipping bills were manually filed and the goods were examined and cleared by customs officers. The show-cause notice was issued more than a year after export, invoking the extended limitation period.Application of law to facts: The Tribunal applied the principle that extended limitation is not applicable where goods have been examined and allowed for export, as there is no suppression or concealment in such cases. Therefore, the issuance of the show-cause notice invoking extended limitation was held to be improper.Treatment of competing arguments: The appellants argued against the invocation of extended limitation on this basis, while the Revenue supported the impugned order. The Tribunal accepted the appellants' submissions.Conclusions: The extended period of limitation was held not invokable, rendering the show-cause notice issued beyond the normal limitation period invalid.3. SIGNIFICANT HOLDINGSThe Tribunal held:'During the period of export, the self-assessment proceeding was not in force. Moreover, the shipping bills were filed by the appellant manually being a clearing agent and the goods after examination were allowed to be exported by the proper officer and it is the role of the exporter to avail the benefit by way of DEPB and Drawback under the Scheme, where the appellants have no role to play. The appellants are only filing the export documents before the proper officer and the proper officer has cleared the goods for export. In that circumstances, when the goods were allowed to export, the role of the appellants comes to end and nowhere from the records, it has been brought by the Revenue on record that the appellants were having any knowledge for overvaluation or inferior quality of the impugned goods. In that circumstances, we hold that no penalty can be imposed on the appellants.'Further, the Tribunal stated:'As the goods have been examined by the proper officer and allowed to be exported, in that circumstances, the extended period of limitation is not invokable.'The core principles established are:Clearing agents who merely file export documents and facilitate customs clearance without knowledge or involvement in fraudulent activities cannot be penalized under Section 114(i) and 114(iii) of the Customs Act.Extended period of limitation for initiating penalty proceedings is not applicable where goods have been physically examined and allowed to be exported by the proper officer.Accordingly, the penalties imposed on the appellants were set aside and the appeals allowed with consequential relief.