TaxTMI 
TaxTMI 
2017 (10) TMI 1446
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.... exporting cargo at Chennai both at Airport and at Seaport. 3. While so, the Director of Revenue Intelligence, Chennai Zonal Unit (CZU-DRI in short) received specific intelligence that, attempts were made to illegally export red sanders, an item which is prohibited for export, through Chennai Port in a consignment covered under Shipping Bill No. 1326995, dated 28-2-2014 filed in the name of M/s. Rubicon Mineral Process, Chennai. 4. On receipt of such revenue intelligence report, the shipping bill concerned was scrutinised by the customs authorities, which revealed that, the said customs bill were filed by the Customs House Agent, M/s. Sowparnika Shipping Services (the appellant herein) in the name of M/s. Rubicon Mineral Process, Chennai for export of 1,440 bags of Potash Feldspar 200 Mesh to M/s. Transport Korea Co., Ltd., Room 409 Dong-A Jel Building, Juncang Dong, 4-GA Jun-GU, Busan, Korea under the strength of invoice No. RMP/001, dated 25-2-2014. 5. The said Potash Feldspar 200 Mesh were to be exported in three containers with Container Nos. CAIU2281887, BMOU2319149 and HDMU2587835 with 480 bags per container, which were sealed with Customs One Time Sea....
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....149, it was found that the declared goods, i.e., Potash Feldspar 200 Mesh were stacked in the front portion of the container and on removal of the same, a heap of some material covered with plastic sheets were found. On removing the said plastic sheets, 226 nos. of red colour wooden logs, totally weighing 8 Metric Tonnes were found. The said V. Kamaraj, ACF, Forest Protection Squad, inspected the said red colour wooden logs and certified the same to be red sanders with the scientific name Pterocarpus santalinus and further stated that they were prohibited items for export under Foreign Trade Policy & CITES. 11. Thereafter on reasonable belief that the red sanders were attempted to be exported out of India in the guise of declared item namely Potash Feldspar 200 Mesh, CZU-DRI officials seized 226 nos. of red sanders logs, weighing 8 Metric Tonnes and valued at Rs. 3,60,00,000/- under mahazar, dated 24-3-2014. 12. Thereafter based on the report given by M. Vadamalai, Container Surveyor, that the customs seal at the containers were tampered with, the container in question was also seized and since the Potash Feldspar 200 Mesh goods were used for the purpose of smugglin....
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..... Sowparnika Shipping Services has preferred this civil miscellaneous appeal, where he raised the following substantial questions of Law : "1. Whether the Tribunal was justified in sustaining the Order-in-Original, imposing penalty when admittedly the said Order-in-Original only, found violation of the provisions of Customs Broker Licensing Regulations, 2013? 2. Whether the Tribunal is correct in holding that the appellant was privy to then alleged misfeasance on the part of the exporter, especially, when it is the specific case of the appellant that as a Customs Broker, he had only gone by the documents made available to him for process of the shipping bill in question? 3. Whether the Tribunal, is justified and correct in sustaining the penalty against the appellant when even according to the Order-in-Original, there were some alleged negligence attributable to the appellant? Whether such negligence per se could be a ground for imposing penalty under Section 114 of the Customs Act, 1962, is a question, which would loom large in the present appeal, especially when there is no co....
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.... substantial questions of law submitted that, the appellant is the customs handling agent and he is governed by the CBLR, 2013 and if at all any violation is found under the said Regulations, on the part of the appellant, the revenue cannot invoke Section 114 of the Customs Act for imposing penalty and therefore, the very imposition of penalty by invoking the provisions of Customs Act is unlawful and therefore the order-in-original as confirmed by the CESTAT though the impugned order is liable to be set aside. 19. In order to substantiate his contention, the Learned Counsel appearing for the appellant would rely upon the following decisions : (i) 2015 (320) E.L.T. 264 (Mad.), [Commissioner of Customs (Exports) v. I. Sahaya Edin Prabhu] (ii) 2015 (317) E.L.T. 3 (Mad.), [Commissioner of Customs, Tuticorin v. Moriks Shipping & Trading (P) Ltd.] (iii) 2016 (338) E.L.T. 380 (Mad.), [Transport Logistics v. CESTAT, Chennai]. 20. By relying upon the said decisions, the Learned Counsel appearing for the appellant would contend that, first of all under the provisions of Customs Act, penalty cannot be imposed....
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....takeholders including the proprietor of M/s. Flamingo, one C.K. Litheesh, partner of M/s. Rubicon Mineral Process, D. Gopinath, the General Manager of M/s. Vishrutha Logistics Ltd., one Veeramani and also the appellant, i.e., K.V. Prabhakaran, Proprietor, M/s. Sowparnika Shipping Services. Out of the three containers, in container No. 2319149, the customs team in front of all these individuals including the independent witnesses, i.e., M. Vadamalai, Container Supervisor and also one V. Kamaraj, Assistant Conservator of Forest, Forest Protection Squad, found 226 nos. of red colour wooden logs totally weighing 8 Metric Tonnes. Since the red wooden logs were certified to be red sanders by the Forest Protection Squad, Assistant Conservator of Forest, V. Kamaraj, by giving its scientific name also and since the said red sanders were prohibited for export under the Foreign Trade Policy, the red sanders, the Potash Feldspar 200 Mesh, the containers all were seized under the mahazar. 24. The Learned Standing Counsel would further contend that, thereafter show cause notices were issued to all stakeholders including the appellant seeking show cause from them as to why penalty should ....
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....r alia stated that he started M/s. Sowparnika Shipping Services in 1998 and obtained CHA licence (No. R498) in the same year; that his major clients include M/s. ZIP Industries, Chingelpet; M/s. Navadurga Enterprises, Chennai, etc; that he knew Shri Litheesh, who was into freight forwarding business; that Shri Litheesh asked him to lend his CHA license for arranging customs clearance of his (Litheesh) clients consignments; that Shri Litheesh promised to pay Rs. 1,000/- per consignment to him for lending his CHA license; that he also agreed for the same; that accordingly, Shri Litheesh came to his office and gave the invoice, packing list and IEC details of M/s. Rubicon Mineral Process and asked him to file a shipping bill for the said consignment; that accordingly, he filed the shipping bill No. 1326995, dated 28-2-2014 and informed the same to Shri Litheesh for arranging customs clearance; that Shri Litheesh attended to the customs clearance of the said consignment and subsequent stuffing of the goods in the container; that his (Prabhakaran) staff did not attend to the customs clearance of the said consignment; that he has not obtained any authorization from M/s. Rubicon Mineral P....
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....ion was booked in the name of M/s. Rubicon Mineral Process, the shipping bill produced in the name of M/s. Rubicon Mineral Process was not at all handled by the appellant, instead the said Litheesh of M/s. Flamingo Shipping Services handled it and the staff of the appellant also did not attend to the customs clearance of the said consignment, as the appellant did not get any authorisation from the exporter namely, M/s. Rubicon Mineral Process and no authorisation letter has been admittedly given by the exporter. It has been the categorical statement of the appellant that, he did not know anyone from M/s. Rubicon Mineral Process and he had further stated that he had neither communicated with them nor had any contacts with them. 33. The only defence taken by the appellant in the reply to the show cause notice is that, at the time of initial stuffing of the containers in front of the customs officials at Vishrutha CFS, only the declared goods were stuffed and thereafter, if at all any tampering, which might have been taken place, as claimed by the revenue officials, the appellant had no knowledge about the subsequent development. Therefore he cannot be held liable for the alle....
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....ement had stated that Shri Litheesh who was known to him had asked him whether his CHA license could be used for arranging customs clearance of some export consignments and he had agreed for the same. Shri Litheesh had attended to the customs clearance of the said consignment and subsequent stuffing of the goods into the containers. He had not obtained any authorization from M/s. Rubicon Mineral Process. He did not know anyone from M/s. Rubicon Mineral Process and also that he did not know anything about the presence of red sanders in the said consignment. He denied most of the allegations in the show cause notice and that statement of co-noticees cannot be used in the proceedings which are penal in character, without corrobotation of material particulars and cross-examination of the said persons to ascertain the truthfulness of their respective statements. If it proved that there was no tampering of the containers at the time of stuffing, and also that if the goods stuffed were the declared goods, the question of his role in respect of the prohibited goods does not arise. He neither knew Shri Ravi Kumar not had Shri Ravi Kumar interacted with him and that he was una....
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....e smuggled goods were concealed under HDPE Bags containing Potash Feldspar 200 Mesh and covered by a grey coloured plastic sheet inside the container. Shri Litheesh who had no CHA license by his firm M/s. Flamingo Shipping Services, revealed story of his assistance to Shri Krishna Prasad and aided him beginning from the state of booking the container to clear the alleged export of red sanders. Such act of abetment of Shri Litheesh was corroborated from the statement of Shri Krishna Prasad, who on examination revealed entire story of the attempted smuggling naming Shri Litheesh and bringing him to the fold of scrutiny by investigation bringing out their contact with each other from February, 2014. Shri Litheesh without having CHA license and authorization from the exporter, borrowed the license of Shri Prabhakaran (owner of M/s. Sowparnika Shipping Services) facilitated the attempted smuggling as abettor. He became a party to the fraud committed against Customs making misuse of IEC of Shri Gopinath to file shipping bill in the name of M/s. Rubicon Mineral Process. Shri Krishna Prasad was found to be master mind in the perpetrated smuggling. Shri Litheesh could not rule out his role ....
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....or the appellant by raising the substantial question of law that, for the alleged violation of the Customs Broker Licensing Regulations, penalty under the provisions of the Customs Act cannot be imposed. In this regard, the Learned Counsel appearing for the assessee had relied upon three judgments cited supra. 40. In the first judgment, in 2015 (320) E.L.T. 264 (Mad.), the Division Bench of this Court has found that the Tribunal by taking note of the fact that there was no finding of a positive role of the first respondent, i.e., assessee therein or licensee therein, in attempting to smuggle out Red Sanders wooden logs, held that, imposition of penalty under Section 114(i) of the Customs Act was not sustainable. The relevant paragraphs of the said judgments are extracted herein for easy reference. "2.5 The Tribunal, taking note of the fact that there is no finding of a positive role of the first respondent in the attempt to smuggle out red sander wooden logs, held that imposition of penalty under Section 114(i) of the Customs Act is not sustainable. The Tribunal allowed the appeal filed by the first respondent and set aside the penalty imposed, by observing that for....
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....t, it is evidence from the order of the Tribunal that the goods were examined by the Customs Department in its laboratory and analysis revealed that the goods were common salt instead of Organic Dye Intermediate G-Salt, as declared. Such being the case, this Court is baffled to note how penalty can be levied on the CHA. When the Department itself, only on the basis of the chemical analysis, was able to ascertain that the goods attempted to be exported was not common salt, how can a CHA be expected to know of the exact nature of the product at sight. In the above stated scenario, this Court has no hesitation to hold that the Commissioner (Appeals) and the Tribunal's reasoning for setting aside the penalty imposed on the CHA is fully justified." 43. Here in the case on hand, the facts are entirely different, as there is a vast difference between the goods declared to be exported and the goods actually attempted to be exported. Here the goods declared for export is 1,440 bags of Potash Feldspar 200 Mesh, whereas in one out of three containers instead of Potash Feldspar 200 Mesh, 226 nos. of Red Sanders wooden logs were stuffed inside the container and therefore the said aspect....