TaxTMI 
TaxTMI 
2021 (2) TMI 1029
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.... that the exporters had obtained DFIA by exporting corn starch, maize starch powder, protein concentrate corn gluten, liquid glucose, maize corn starch, in which locally procured agricultural products had been used as the main ingredient. Acting on the said intelligence, there was an alert which was put on October 26, 2017 through Risk Management Division, Mumbai for the Bills of Entry where the goods were classified under CTH 10059000. 3. During the scrutiny of the data base, it was found that one importer by the name of M/s Encanterra Traders Pvt. Ltd. [Encanterra Traders] had imported the said goods by filing two bills of entry at Chennai Seaport in which the goods were declared as popcorn variety of maize corn and thus DFIA benefit was availed to the tune of Rs. 42,56,540/-. It was further noticed that Encanterra Traders had also imported the goods at ICD, Tughlakabad and at Nhava Sheva Port and thus claimed benefits of Rs. 65,67,614/- and Rs. 26,11,520/- respectively. The goods at these two ports were also declared as "popcorn variety of maize corn" under Customs Notification dated April 01, 2015. 4. During the scrutiny it was also found that Encanterra Traders had exporte....
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....ioned parties being M/s Encanterra Traders Private Limited, M/s Chef's Choice, M/s Hira Traders and their Directors/Partners/Prop Wherein the Appellant CHA has not been made a co-noticee. Further, there is no allegation of connivance on the part of the Appellant CHA firm with the aforementioned parties. Further, the offence report has been issued almost after one year when the offence was detected in October, 2017 and investigations began. We also find that the Appellant have not violated any of the CHA regulations and have obtained proper documents required to meet the requirement of KYC. Further, no means rea has been alleged against the Appellant nor there is any finding regarding illegal gain made against the CHA. Further, Shri Lal Chand Sharma of the CHA company have retracted his statement particularly answer given to Question No. 1 and 2 in the statement recorded on September 04, 2018 at the first opportunity by letter dated September 10, 2018, addressed to the Deputy Director, DRI, Delhi, stating there that the answer to the said questions were dictated by the officer threatening him of harassment, if he does not toe their line. It was further clarified that the Appellant u....
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....lty was also imposed upon the appellant. 13. It is this order dated July 5, 2019 that has been assailed in this appeal. 14. Shri Akhil Krishan Maggu, learned Counsel for the appellant made the following submissions:- (i) The appellant had followed all the provisions of the 2018 Regulations and infact had duly carried out the KYC procedure norms provided for in the said Regulations and the Board Circular dated April 08, 2010; (ii) The appellant had no reason to doubt the veracity of the facts mentioned in the KYC documents as the same had been issued by the Government of India. All these documents were submitted by the appellant to the Investigation Agency; (iii) There was no violation of regulations 10(a), 10(d), 10 (e) and 10(n) of the 2018 Regulations. Copies of the authorisation letters had been submitted as also the Importer Exporter Code number and GST number. The identity of clients was established by the KYC documents. Due diligence as per the practice was undertaken by the appellant. There was also no act or omission on the part of the F-Card holder since he acted in accordance with the Board Circular and exercised due diligence by procuring all the documents in a....
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....a would not come to the aid of the appellant; (iv) The so called authorisation letter for customs clearance dated September 19, 2016 appears to be an afterthought as it does not bear any acknowledgement or receipt. The said authorisation is dated September 19, 2016, which is nine months in advance to the first export shipment which was done in June 2017, and so makes it suspect; (v) The Director of Encanterra Traders, Rakesh Kumar never appeared before Customs or DRI during the entire investigation in spite of seven summons issued to him; and (vi) Tarun Jain and Pankaj Batra have clearly accepted and elaborated the dummy nature of Encanterra Traders in their voluntary statements which have never been retracted. 16. The submissions advanced by the learned Counsel for the appellant and the learned Authorised Representative of the Department have been considered. 17. The show cause notice alleges violation of regulations 10 (a), (d), (e) and (n) of the 2018 Regulations. They are reproduced: "10. Obligations of Customs Broker.-A Customs Broker shall- (a) obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as ....
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....h as company/trust etc., and any two of the listed documents in the annexure." (emphasis supplied) 19. The appellant has submitted a chart that contains the regulations of which violation has been alleged, the ingredient of the regulations, the findings of the Commissioner and the submissions of the appellant. The same are contained in the following Table: Regulation invoked Ingredient of the Regulation Finding of Commissioner Submissions of the Appellant 10(a) Obtain authorization from the company which has employed the Customs Broker It is stated that the authorisation is pertaining to only five export invoices and the same is issued nine months prior to the date of invoices which raised a doubt on the authenticity of the authorization. The ownership of M/s Encanterra Traders is doubtful and the CB could not produce any documents as to who signed the authorization for custom purposes. Copies of the KYC and authorisation letter dated 19.09.2016 of Encanterra Traders were submitted vide letter dated 10.09.2018, as is clear from paragraph I at page 36 of the inquiry report dated 11.04.2019. The KYC was also submitted and the same is an admitted fa....
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....tes to certain importers who were mis-using the DFIA by importing maize popcorn and declaring the same as maize corn in order to avail undue benefits of DFIA. It also mentions about exporters who had obtained DFIA. Encanterra Traders had imported and had also exported the goods. The appellant had undertaken the work of customs clearance and had acted as a Customs Broker only for Encanterra Traders, for which six export Shipping Bills were filed in the years 2016 and 2017. The appellant had not submitted documents of Encanterra Traders for import of goods. 21. It needs to be noted that the alleged fraud relates to import of popcorn by declaring the same as maize corn so as to avail undue benefits of DFIA. This fact has to be kept in mind in relation to the allegations made against Encanterra Traders because so far as the appellant is concerned, allegations have to be examined only in relation to the six export Shipping Bills. The appellant also claims that there is nothing on the record to substantiate that the appellant was aware about the ill-intention of Encanterra Traders in relation to import of goods since the appellant only undertook the clearance of export consignments and....
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.... is one of the cogs of this nefarious wheel as the CB was involved in clearing export consignment of a firm i.e. M/s ETPL which existed only on paper having doubtful ownership in view of statements dated 28.03.2018, 01.06.2018 & 04.06.2018 of Shri Pankaj Batra and statements dated 17.04.2018 & 24.09.2018 of Shri Tarun Jain wherein they disowned ownership of M/s ETPL and shifted the blame onto each other. The culpability of the CB is proven more when I find that the CB facilitated the export consignment without verifying the antecedents & working (from the declared address) of the exporter firm and the two foreign entities through which the CB got the job of Customs clearance of the six export consignments & their relation with M/s ETPL. 38. The CB had helped M/s ETPL clear their six export consignments vide Shipping Bill Nos. 1173130 dated 21.09.2016, 7732664, 7732665, 7732730, 7732720 & 7732671 all dated 01.08.2017 from ICD-Tughlakabad which implies that the CB was in touch with the operators of M/s ETPL at least for the period of September, 2016 to October, 2017. ********* 39. I find that Shri Lal Chand Sharma, F-card holder of the CB in his statements has admitted their fa....
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..... d. I impose penalty of Rs. 50,000/- (Rs. Fifty Thousand only) under Regulation 18 of the CBLR, 2018. 24. Each violation of the regulation alleged in the show cause notice shall be taken up separately. 10 (a) of the Licensing Regulations 25. Regulation 10(a) deals with obligations of Customs Broker and provides that the Customs Broker shall obtain an authorisation letter from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs. The Commissioner has recorded the following finding in regard to violation of regulation 10 (a): "41.1 When asked for providing the authorization from the Director of the company for clearing customs cargo as per Customs Broker Licensing Regulations, he could not provide the same. The Inquiry Officer in his report dated 11.04.2019 also talks about non-submission of authorization. The CB along with their letter dated 01.11.2018 (received in the office of the Commissioner of Customs (Airport & General), NCH, New Delhi on 01.11.2018) have submitted copy of an authorization sa....
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....ice and packing list. (Enclose Shipper's communication copy with our Office Staff) 3. As per CHA regulation and as per Customs act. We received and collect all the KYC (Original Document) from supplier and keep in our record (enclose copy for your reference) 4. Enclose Shipper's authorization letter and request for handle customs clearance of this shipment (Enclose Original Copy) 5. Enclose invoice and packing list 6. Shipping Bill copy 7. DFIC LIC application 8. Container stuffing report 9. Bill of lading copy 10. Pre Alert copy send to our Overseas office 11. Document received acknowledgment copy from customer which is taken by our office representative (physically signature and took this ack from shipper's office. (Enclose Original for your reference.)" 27. Out of the eleven documents, the document at serial number. 4 is the Shipper's authorization letter. The same is reproduced below: "The Deputy Commissioner of Customs ICD/TKD, New Delhi Subject : Authorization for Customs Clearance Respected Sir, We here by Authorize M/S. Transpeed LOGISTICS PVT LTD Address PLOT NO 47. SECOND FLOOR, KHESRA NO. 325/1/2 NATIONAL HIGHWAY-8, RANGPURI, NEW DELHI 11003....
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....n-existent firm which had doubtful ownership in view of statements dated 28.03.2018, 01.06.2018 & 04.06.2018 of Shri Pankaj Batra and statements dated 17.04.2018 & 24.09.2018 of Shri Tarun Jain wherein they both disowned ownership of M/s ETPL and shifted the blame onto each other. *************** The CB facilitated M/s ETPL in the Customs clearance of aforesaid Export shipments in the time span of September, 2016 to October, 2017. I find that the CB did not exercise due diligence and did not advise his client to comply with the provisions of the Customs Act and Customs Tariff Act as there is nothing brought on record by the CB to suggest otherwise. Thus, the CB had failed to discharge their responsibilities, duties and obligations cast upon them as a Customs broker under the provisions of the Regulation 10(d) of CBLR, 2018 [erstwhile Regulation 11(d) of CBLR, 2013] and Regulation 10(e) of CBLR, 2018 [erstwhile Regulation 11(e) of CBLR, 2013]." (emphasis supplied) 31. Learned Counsel for the appellant submitted that due diligence does not mean actual physical verification. In fact, the practice always has been to verify the correctness of the information provided by examining th....
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....as follows: "12.Clause (e) of the aforesaid Regulation requires exercise of due diligence by the CHA regarding such information which he may give to his client with reference to any work related to clearance of cargo. Clause (l) requires that all documents submitted, such as bills of entry and shipping bills delivered etc. reflect the name of the importer/exporter and the name of the CHA prominently at the top of such documents. The aforesaid clauses do not obligate the CHA to look into such information which may be made available to it from the exporter/importer. The CHA is not an inspector to weigh the genuineness of the transaction. It is a processing agent of documents with respect to clearance of goods through customs house and in that process only such authorized personnel of the CHA can enter the customs house area. What is noteworthy is that the IE Code of the exporter M/s. H.M. Impex was mentioned in the shipping bills, this itself reflects that before the grant of said IE Code, the background check of the said importer/exporter had been undertaken by the customs authorities, therefore, there was no doubt about the identity of the said exporter. It would be far too onero....
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....ty on the Appellant apropos the contents of the shipping bills. Apropos any doubt about the issuance of the IE Code to M/s. H.S. Impex, it was for the respondents to take appropriate action. Furthermore, the inquiry report revealed that there was no delay in processing the documents by the Appellant under Regulation 13(n)." (emphasis supplied) 35. It is clear from the aforesaid decision of the Delhi High Court that there is no obligation on the Customs House Agent to look into the information made available by the exporter/exporter. The Customs House Agent is merely a processing agent of documents with respect to clearance of goods through Customs House and he is not an inspector to weigh the genuineness of the transaction. When the Importer/Exporter Code Number was provided and before this code was issued a background check of the said importer/exporter is undertaken by the Customs Authority, there should be no doubt about the identity of the said exporter. It would be too onerous to expect a Customs House Agent to inquire into what is stated in the documents when there is a presumption that an appropriate background check is done by the Customs Authorities. In fact, the grant....
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.... considered as the law laid down by the Delhi High Court and so the decisions of the Delhi High Court in Kunal Travels and Shiv Khurana should not be considered to have laid good law. 40. The submission advanced by leaned Authorized Representative is mis-conceived. In Millennium Express Cargo decided by the Tribunal, another issue that had arisen for consideration was the time line prescribed in regulation 22 of the 2004 Regulations and it is in this context that the Tribunal observed as follows: "6. The appellant is right in contending that the time line prescribed in Regulation 22 ibid have been violated in that present case. However, it is pertinent to note that the appellant had approached the Hon'ble Delhi High Court which vide its order dated 25-2-2015 observed as under: "This Court is conscious of the fact that inquiry proceedings under Regulation 22 have got prolonged to an extent. The respondents are directed to complete the enquiry proceeding after giving two opportunities to the appellant in accordance with the provisions of Regulations and other provisions of law and pass final order at the earliest preferably within 3 months from today." The appellant had not ta....
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....5, the Court did not set aside the order dated 19th January, 2015 passed by CESTAT rejecting the stay application of the appellant. In effect, the Court permitted the orders suspending the appellant's licence to continue to operate as such. It is in this context that the direction used in para 2 of the order dated 25th February, 2015 requires to be examined. 20. Regulation 22(1) of the CHALR reads as under:- "22 Procedure for suspending or revoking licence under Regulation 20. - (1) The Commissioner of Customs shall issue a notice in writing to the Customs House Agent within ninety days from the dated of receipt of offence report, stating the grounds on which it is proposed to suspend or revoke the licence and requiring the said Customs House Agent to submit within thirty days to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by him, a written statement of defence and also to specify in the said statement whether the Customs House Agent desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs. 21. It is, therefore, clear that Regulation 20 provides for suspension or revocation of licence an....
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....bed under the Regulation. The appeal is accordingly dismissed." 43. It is, therefore, clear from the aforesaid judgement of the Delhi High Court that the only issue that was examined was as to whether the Tribunal committed an error in rejecting the contention of the appellant that the revocation of License was not sustainable in law for exceeding the time limit prescribed under the Regulations. There was no occasion for the Delhi High Court to examine the order revocation on the merits since the scope of the appeal was restricted to the sole question of law that had been framed when the appeal was admitted. 44. The Learned Authorized Representative of the Department is, therefore, not justified in contending that the view taken by the Tribunal in Millennium Express Cargo should be followed as against the views express by the Delhi High Court in Kunal Travels and Shiv Khurana. 45. The findings that the appellant had not followed the provisions of Regulations 10(d) and 10(e) of the Licensing Regulations are, therefore, erroneous. 10(n) of the Licensing Regulations 46. Regulation 10(n) requires the Customs Broker to verify the correctness of Importer/Exporter Code Number, S....
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.... of export), can hardly be the subject matter of "due diligence" expected of such agent unless there are any factors which ought to have alerted it to make further inquiry. There is nothing in the Regulations nor in the Customs Act which can cast such a higher responsibility as are sought to be urged by the Revenue. In other words, in the absence of any indication that the CHA concerned was complicit in the facts of a particular case, it cannot ordinarily be held liable." 49. The basic requirement of Regulation 10 (n) is that the Customs Broker should verify the identity of the client and functioning of the client at the declared address by using, reliable, independent, authentic documents, data or information. For this purpose, a detailed guideline on the list of documents to be verified and obtained from the client is contained in the Annexure to the Circular dated April 8, 2010. It has also been mentioned in the aforesaid Circular that any of the two listed documents in the Annexure would suffice. The finding recorded by the Commissioner that the required documents were not submitted is, therefore, factually incorrect. 50. As noticed above, the KYC documents were submitted b....