TaxTMI 
TaxTMI 
2022 (6) TMI 784
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.... entire amount of security deposit furnished by the CB, under Regulation 14 of the CBLR,2018. (iii) The CB License No 11/435 is ordered to be revoked under Regulation 14 of CBLR, 2018. (iv) I hereby order that the CB surrender the original License as well as all the 'F', 'G' & 'H' cards issued there under immediately. 2. This order is passed without prejudice to any other action which may be taken against the Customs Broker under the Customs Act, 1962, or any other act for the time being in force in the Union of India." 2.1 A case of substitution of the export consignment at the Chennai Port, by the Red Sanders was undertaken for investigation by the Directorate General of Revenue Intelligence. During the investigation it was revealed that the shipping bills for the export of the said consignments were filed by the appellant/ employee of the Appellant as Custom Broker. 2.2 After making necessary enquiries, Commissioner Customs Chennai -VIII, vide his order dated 22.03.2019 prohibited the appellant from undertaking activities at Chennai Port. The text of order is reproduced below: "ORDER 12. In view of ....
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....firm(s) etc., under the provisions of the Customs Act, 1962, or any Rules/ Regulation framed thereunder or any other law for the time being in force." 2.4 Commissioner Customs (General) Mumbai vide his order No 20/2019-20 dated 26.06.2019 modified the above order as follows: "ORDER 13. I, Commissioner of Customs (Gen) in exercise of the powers conferred under provisions of Regulation 16 (2) of the Customs Broker Licensing Regulations, 2018, hereby order that the suspension of CB License No 11/435 [PAN AABCP0413G] held by M/s Friends Syndicate Clearing Pvt Ltd., ordered vide Order No 93/2018-19 dated 29.03.2019, will continue to remain in force at Chennai Customs Commissionerate while the suspension at other Customs Commissionerates/ Stations where the CB is authorized to operate is hereby revoked with immediate effect, pending enquiry under Regulation 17 of CBLR, 2018. 14. This order is being issued without prejudice to any other action that may be taken against the CB or any other person(s)/ firm(s) etc., under the provisions of the Customs Act, 1962, or any Rules/ Regulation framed thereunder or any other law for the time being in force."....
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....priate discharge of such trust, the relevant regulations are framed. Regulation 14 of CHA Licensing Regulations lists out obligations by CHA. Any contravention of such obligation even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulation " 08. in view of the facts stated above, it appears that the Custom Broker M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) did not exercise due diligence in discharging their obligations as mandated its duties as mandated under Regulations 10(a), 10(d), 10(n) & 13(12) of CBLR, 2018 and for wilful/ intentional violation the license of M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) was liable for revocation under Regulation 14 of CBLR, 2018. Therefore, action was taken and the Customs Broker License held by M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) was suspended vide order No 93/2018-19 dated 29.03.2019 under the provisions of regulation 16 (1) of CBLR, 2018. Thereafter Personal Hearing to the CB was given and suspension of M/s. Friends Syndicate Clearing Pvt. Ltd., (....
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....Shri Arun Jain, Advocate for the Appellant and Shri Ramesh Kumar, Assistant Commissioner (Authorized Representative) for the revenue. 3.2 Arguing for the appellant learned counsel submits that: • Undisputedly appellant had received proper authorization from the exporter (M/s. Ever Stone Minerals) on its Letter head bearing original rubber stamp. They also received KYC documents of exporter, authenticity of which has not been disputed by the department. • The genuineness of IEC, GSTIN and that of the exporter is not in dispute. The exporter has also presented himself for statement recording before DRI-CZU. Thus, it is not the case of exporter or IEC being bogus or fictitious. • The container was stuffed and sealed in the presence of the officer assigned and the employee of the Appellant. The employee of the Appellant also took photograph of the container which was also submitted as evidence to DRI- CZU. There is a specific finding that Quartz Lumps have been substituted with red sanders logs enroute to the port after stuffing. It is submitted that, pursuant to the stuffing of the container, the Custom Broker has no further obligation t....
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....ed in the impugned order submits that due to lack of negligence on the part of appellant in not undertaking the proper verification of the exporter/ IEC Holder, the act of substitution and smuggling of red sanders could have been given effect to. Since appellant has failed to perform the duties and obligations cast on him as per the CBLR, 2018 the impugned order revoking the license of the Custom Broker, forfeiture of security deposit and penalty needs to be upheld. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 While considering the charges made against the appellant, inquiry officer has observed as follows: "17. As regards to the allegation of violation of Regulation 10(a) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 10(a) of the CBLR, 2018 in the instant case. I have gone through entire documents relevant to the case and I find that is not indicated and brought any evidence in support of the said charge. During the personal hearing and through written submission also, the Customs Broker contested that the department h....
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.... cannot be fastened on the agent." 18.3 in the instant case, the Customs Broker is not found to have been engaged in any unauthorized person to attend the Customs Clearance work. Vide Order No. 20/2019-20 dated 20.06.2020 passed by Commissioner of Customs(G), New Customs House, Mumbai, para 12.2 "Also I find that no material has been brought on record regarding the involvement of the CB or their directors/employees at the Customs Commissionerate/ Stations other than Chennat". Therefore, the charge of Violation of Regulation 10(d) is "not conclusively proved". 19.1 As regards to the allegation of violation of Regulation 10(n) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 10(n) of the CBLR, 2018 in the instant case. It was submitted by the Customs broker that the correctness of the IEC number and Identity of the exporter are not in doubt or dispute; that the SCN under reference also does not make an averment that IEC was forged. The exporter (IEC holder) in fact presented himself during Investigation and his statement was also recorded as can be seen from the SCN F No. DRUCZUNIH/48/ENQ-1/Int-19/2018 da....
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....ll, complete and correct. (i)Passport (ii)PAN card (iii)Voter‟s Identity card (iv)Driving licence (v)Bank account statement (vi)Ration card Note: Any two of the documents listed above, which provides client/customer information to the satisfaction of the CHA will suffice 2. Company (i)Name of the company (ii)principal place of business (iii)mailing address of the company (iv)telephone, fax number, e-mail address. (i)Certificate of incorporation (ii)Memorandum of Association (iii) Articles of Association (iv)Power of Attorney granted to its managers, officers or employees to transact business on its behalf. (v)Copy of PAN allotment letter (vi)Copy of telephone bill 3. Partnership firm (i)Legal name (ii)Permanent address, in full, complete and correct. (iii)Name of all partners and their addresses, in full complete and correct. (iv)telephone, fax number, e-mail address of the firm and partners (i)Registration certificate, if registered (ii)Partnership deed (iii)Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf (iv)Any officially valid documen....
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....tion of Regulation 13(12) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 13(12) of the CBLR in the Instant case... 20.2 The matter was adjudicated by the Joint Commissioner of Customs Chennai IV, Chennal vide F.No. Adjn/DRVEDC/02/2019- CH-N dated 24.01.2020. Vide the said order Penalty of Rs. 10,00,000/- was imposed on Sh. K Udhayarajan U/S 114 and Rs.5,00,000/- U/S 114AA of the Customs Act, 1962. There la no penalty/ fine Imposed on Customs Broker M/s, Friends Syndicate Clearing Pvt. Lid, in the above said order, 20.3 I rely upon the decision in the case of Natvar Parkh & Co. Pvt Ltd. Vs. Commissioner of Customs, Chennai, reported in 2012 (281) ELT 116 (Tri. Chennai), wherein the Hon'ble CESTAT observed that: "18. After hearing both sides / find that there is nothing to indicate that the appellant has acted malafide In any manner. It is usual in international trade these days for logistics companies to act as agents of the importers and exporters and engage CHAs on their behalf." 20.4 Thus, from the facts available in the instant case, the role of Customs Broker Ms. ....
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....ng in the evidence to indicate that these three persons were aware that the backdated document was a cover up for an offence under the Customs Act, 1962. In the absence of conscious knowledge, penalty on charge of aiding and abetting would not sustain". 21.4 Further, I rely upon the decision in the case of N.T. Rama Rao & Co. Vs. Commissioner of Customs, Chennai-Vill reported in 2020 (371) E.L.T. 789 (Tri - Chennai), wherein the Hon'ble Tribunal held that: 5. Heard both sides and perused the records of the case. On going through the records of the case, it is clear that the customs broker has filed a shipping bill for the purported export of natural slate stone on behalf of M/s. Amrita Export. The same has been permitted to be stuffed Into the container, after due examination by the Preventive Officer posted in the CFS, a onetime bottle seal has also been affixed. The allegations against the appellants appear to be based on the statements of personnel of the Customs Broker, Sh S, Muthukrishnan in charge of Customs Broker in his statement dated 28-8-2017 and Shri N.V.S. Prasad, General Manager of the Customs Broker in his statement dated 1-9-2017 have acc....
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....ubstance has been brought to light regarding the direct involvement of CB in smuggling of Red Sanders................. Also, find that no material has been brought on record regarding the involvement of the CB or their directors/employees at Customs Commissionerates Stations other than Chennai " 21:7 The documentation, carting, stuffing, examinations, sealing are carried out in the presence of authorized representative of the CB and Customs Officers. The transportation of CFS stuffed & sealed containers from CFS to the port, is the sole responsibility of the CFS. I have perused the copy of the said Shipping Bill as submitted by the Customs Broker, bearing No. 6605230 dated 01.08.2018 and endorsement of the P.O. Viking CFS, wherein details of the said five containers and packages/crtns., sealed with Customs OTL No. and Liner Seal number duly endorsed by the Customs Officer after stuffing and examination is over. It is evident that no irregularity has taken place during the material period i.e. stuffing, examination and upto sealing, which was held in the premises of Viking CFS. 21.8 In view of the fact that the substitution of stuffed goods by the contraband ....
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....e the red sanders smuggling as per the instructions and the supervision of one- Shri Meeran. Also Shri K. Udhayarajan (Business development manager of the CB firm) admitted in his statement dated 23.08.2018 that they did not know the actual exporter M/s. Ever Stone Minerals, Chennai and they received all the documents from Shri' S. Venkatesan, forwarder M/s. VKR Impex.The investigation revealed that the CB accepted the documents from a person who was not an employee of the exporter and CB never tried to find out the genuineness and antecedents of the exporters. The CB had no interaction with the exporter IEC holder. Despite enough experience in Customs Broking, it is strange that this did not arouse suspicion in mind of CB especially when CB was not in touch with their clients by any means. Thus it is evident that Customs Broker was deliberately not dealing with the exporter and he obtained authorization without proper verification of KYC documents in order to run their business. The whole purpose of obtaining authorization has been defeated i.e. to ensure that the CB has interacted with the genuine exporter and is aware of the goods to be cleared on behalf of the client. The C....
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....ta or information. 10.1 Shri K, Udhayarajan in his statement recorded on 23.08.2018 under Section 108 of the Customs Act, 1962 admitted that they had received the subject business reference, IEC copy and other documents for export from Shri S. Venkatesan Forwarder of M/s. VKR Impex. During the course of investigation, when he contacted Shri R. Paneerselvam, the actual proprietor of IEC of M/s. Ever Stone, Minerals, Chennai, had refused to accept any relations with the subject export consignment and the persons Shri, Murugan of M/s. Marvels Exports. Shri K. Udhayarajan also admitted that they did not verify the KYC of the exporter as mandated by the CBLR, 2013 (Now CBLR, 2018) and they had blindly trusted the forwarder Shri S. Venkatesan for want of runs business. They also accepted that if they had verified the genuineness of the forwarder, they would not have taken this business reference from him and could have avoided this kind of smuggling of red sanders and admitted their mistake. The CB conveniently made no efforts to know if the exporter was genuine or not and instead consciously turned a blind eye to all discrepancies as they were a part of the syndicate. As ....
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....Exporter Code (IEC) Number, identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information for want of business and failed the trust reposed in them by the Customs Department. Hence these above judgements and also the other judgements cited by the CB in their support are not applicable in the instant case in spirit and in rem." 4.4 From the above facts as stated in the inquiry report and in the impugned order, it is quite evident 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 ....
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.... the correctness of the documents submitted before taking up of the work for any importer. There is no stipulation or legal requirement to physically verify the business premises or residential premises of the importer and also to have a personal meeting with the importer before taking up the work for any importer. 8. We also note that in the present case the contravention alleged against the importer is non-declaration of retail sale price on auto parts imported by them for assessment under Section 4A of the Central Excise Act, 1944 for CVD. We find that the bill of entry was filed by the appellant after the goods were detained by the officers of DRI. The said bill of entry was filed on first check basis for verification of the goods before assessment. In such a situation, we find that no mala fide or intentional violation of any provisions of the Customs Act can be alleged on the part of the Customs broker. Regarding KYC norms and obligations under Regulation 11, we find that case as made out in the original order is neither convincing nor sustainable. 9. We find that the impugned order did not make out a sustainable case for revocation of licence. I....
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....This Court notices that the CESTAT construed the provisions of Regulation 11 and the Board Circular of 8-4-2010 and found that the partnership firm involved in the import of consignment was an existing concern, duly registered under a partnership deed and two existing partners and that its IEC copy, PAN Card, telephone bill of the firm, Voter ID of the partners, copy of the partnership deed have been verified by the respondent." 4.7 In view of discussions as above we do not find any 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. In the case of ACE Global Industries [2018 (364) ELT 841 (Tri Chennai)] tribunal observed as follows: "6. We are unable to appreciate such a peremptory conclusion. The CBLR, 2013 lays down that stepwise procedures are to be followed before ordering any punishment to the Customs broker. True, the said regulations do contain provisions for revocation of the license and for forfeiture of full amount of security deposit, however th....
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....nquiry Officer in his report exonerated the appellant against the charge of violation of regulation 11(a), (d), (e), (n) of the CBLR 2013. The main charges made against the appellant are regarding violation of the following regulations : (i) Regulation 11(a) for failure to obtain proper authorization before filing the Bill of entry. (ii) Regulation 11(d) for failure to advice the importer to comply with custom provisions. (iii) Regulation 11(e) for failure to exercise due diligence to ascertain the correctness of information he imparts to his client. (iv) Regulation 11(n) for failure to verify antecedent, correctness of IEC no. and identity of the client. 8. The investigations undertaken by DRI has established that the imports have been made making use of the IEC Code number of M/s. Unisys Enterprises. The partners of M/s. Unisys Enterprise have admitted that they were not the actual importers but the import was organized by Shri Amar Vachhar. For monitory considerations, the IEC code number was allowed to be utilised by M/s. Unisys Enterprise. It is further on record that Shri Amar Vachhar has been in touch....
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....ation 11(n) stands established for failure to verify antecedents, correctness of IEC details. 13. As discussed above, we conclude that the appellant is guilty of violations of CBLR 2013. However, considering all the facts and circumstances, of the case, we are of the view that revoking the CB license is too grave a penalty to be imposed for the above violations. The ends of justice will be met by imposing a penalty of Rs. 50,000/- on the appellant, in addition to the forfeiture of the whole amount of security deposit. 4.10 Principal Commissioner has relied upon the following decisions in his order: Rubal Logistics Pvt. Ltd. [2019 (368) E.L.T. 1006 (Tri. - Del.]. "6.1 These provisions require the Customs Broker to exercise due diligence to ascertain the correctness of any information and to advice the client accordingly. Though the CHA was accepted as having no mens rea of the noticed misdeclaration/under- valuation or mis-quantification but from his own statement acknowledging the negligence on his part to properly ensure the same, we are of the opinion that CH definitely has committed violation of the above mentioned Regulations. These Regulatio....
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....rtionate 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. 4.12 Delhi High Court has in case of Falcon Air Cargo and Travels (P) Ltd [2002 (140) ELT 8 (DEL)] held as follows: "13. By order dated 15-7-2000, licence was revoked. It is not clear how there could be revocation when the licence itself was not functional after 13-1-2000. Licence can be suspended or revoked on any of the grounds as mentioned in Regulation 21. It is, therefore, clear that if any of the grounds enumerated existed, two courses are open to the Commissioner. One is to suspend the licence and the other is to revoke it. Suspension would obviously mean that licence would be for a particular period inoperative. An order of revocation would mean that licence is totally inoperative in future, it loses its currency irretrievably. Obviously, suspension/revocation, as the case may be, has to be directed looking to the gravity of the situation in the background....
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....STAT (majority) hold that ―there is no finding nor any allegation to the effect that the appellant was aware of the misuse if the said G cards, but do not give adequate, if any weight, to this crucial factor. There is no finding of any mala fide on the part of the appellant, such that the trust operating between a CHA and the Customs Authorities (as a matter of law, and of fact) can be said to have been violated, or be irretrievably lost for the future operation of the license. In effect, thus, the proportionality doctrine has escaped the analysis. 12. Learned Senior Standing Counsel for the Customs has stressed that the infraction in this case is not a routine matter, but rather, illegal smuggling of narcotics by the G card users. However, given the factual finding that the CHA was not aware of the misuse of the G cards (and thus, also unaware of the contents being smuggled), no additional blame can be heaped upon the CHA on that count alone. Rather, the only proved infraction on record is of the issuance of G cards to non-employees, as opposed to the active facilitation of any infraction, or any other violation of the CHA Regulations, whether gross or otherwise. Ne....
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....ply used the same card without any intention of making any false representation was not accepted by respondent no. 2. In our opinion, the explanation offered by Mr. Unnikrishnan was a plausible explanation and there was no material on record, that for except giving of the visiting card to the respondent no. 2 himself at the time of hearing that the petitioner was using the visiting cards anywhere else and/or misrepresenting that they were still possessing CHA licence. In our view, giving of the visiting card to respondent no. 2 was even assuming if amounted to misconduct was too insignificant a thing warranting cancellation of the licence or its refusal of its renewal." 4.15 Madras High Court has in case of Transport Logistics [2016 (338) ELT 380 (Mad)] held as follows: "13. In any event, for giving signed blank forms to third parties, the revocation of licence is harsh penalty and the punishment should commensurate for guilty of offence. Therefore, the order of the Commissioner of Customs revoking the CHA licence as confirmed by the CESTAT is set aside. 14. By this order, this Court only restore the CHA licence. However, forfeiture of the security deposi....