TaxTMI 
TaxTMI 
2023 (9) TMI 668
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....l Matrix 3. The appellant is a custom broker holding a license to act as a Customs Broker (CB License No.R-37/DEL/CUS/2015 - hereafter 'the CB License'), which was valid up to 25.04.2023. Proceedings under the Customs Brokers Licensing Regulation, 2013 (hereafter 'CBLR-2013') were initiated against the appellant by the respondent on receipt of an offence report in the form of an Order-in-Original dated 15.03.2017 passed by the Additional Commissioner of Customs. 4. The controversy relates to clearance of goods imported under Bill of Entry No.8606801 dated 18.02.2017. The appellant had filed the said Bill of Entry on behalf of M/s Tim Delhi Airport Advertising Pvt. Ltd. (hereafter 'TDAAL') in respect of the clearance of goods declared as "71 pieces of Samsung 65 LED Monitor of Model No. LH65QMFPLGC/XL" (hereafter 'the goods') declaring an assessable value of Rs.1,50,59,101/-. TDAAL declared that the goods were purchased on High Sea Sales (HSS) basis from M/s Infosoft Digital Designs and Services Pvt. Ltd. (hereafter 'IDDSL'). IDDSL had imported the goods from M/s Beetel Teletech Singapore Private Limited, Singapore (hereafter 'Beetel'). TDAAL had purportedly purchased the good....
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....y. 11. The appellant furnished a letter dated 08.03.2017, inter alia, stating as under: "As per the provision of custom manual on self assessment 2011, the HSS agreement in respect of BE 8606801 is found to be incorrect. So please allow us the BE by changing importer name to Infosoft Digital Design & Services pvt. ltd." 12. The concerned authority found that HSS Agreement was not in accordance with relevant statute and IDDSL should have filed the Bill of Entry (and not TDAAL) and was therefore, liable to pay the duty. It was also held that IDDSL was not eligible for using the SFIS scrip in question as the same was issued to TDAAL and was not transferable. The aforesaid findings were in turn based on the findings that the goods were dispatched on 17.02.2017 and 18.02.2017, and the HSS Agreement was entered into prior to the said dispatch, that is, on 16.02.2017. On the aforesaid basis, the concerned authority, inter alia, imposed penalties on TDAAL as well as on the appellant. 13. The proceedings under the CBLR-2013 were initiated against the appellant. The Inquiry Officer submitted a report dated 18.08.2017, whereby it concluded that the appellant had violated var....
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....ellant that HSS Agreement was found to be incorrect, without seeing the mens rea behind the letter? c. Whether the CESTAT was justified in passing the impugned order which has caused revocation of the Custom Broker License despite the matter being Revenue Neutral in nature, where High Sea Sales lead to Custom Duty on an enhanced value of the goods by 2%. d. Whether the CESTAT was justified in passing the impugned order by following Strict Interpretation of the term High Sea Sale, since revocation of Custom Broker License has caused loss of employment and livelihood to its many employees. e. Whether, in the facts of the case and in law, the revocation of the Custom Broker license of the Appellants is commensurate with the alleged contravention of the CBLR, 2013." 18. Although the appellant has projected several questions for consideration of this Court, Mr. Jain, learned counsel appearing for the appellant had confined the challenge to the punitive measures imposed on the appellant on two grounds. First, that the learned CESTAT had failed to consider the appellant's case that the HSS Agreement between TDAAL and IDDSL was valid, on merits. And second, th....
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....ll of Entry on behalf of TDAAL on the basis that TDAAL had purchased the goods on HSS from IDDSL. The allegation in respect of the transaction as noted by the Adjudicating Authority in the offence report (Order-in-Original dated 15.03.2017), as relied upon by the respondent in the Order-in-Original dated 15.11.2017, is that the HSS was not in accordance with the provisions of the Sales Tax Act, 1956, Sales of Goods Act, 1930 read with Section 14 of the Customs Act, and in terms of the Customs Manual on Self-Assessment - 2011. It was alleged that the actual importer of goods was IDDSL and that it should have filed the Bill of Entry instead of TDAAL. The relevant extract of the offence report as also noted in the Order-in-Original dated 15.11.2017 is set out below: "i. The High Sea Sale is not in accordance with the provisions of Central Sales Tax Act, 1956 and Sales of goods Act, 1930 read with section 14 of the Customs Act, 1962 and in terms of Customs Manual on Self-Assessment - 2011 available in Public Domain. The actual importer of the goods in this case is M/s IDDSL who should have filed the B/E under Section 46 of the Customs Act, 1962. Therefore, M/s Infosoft Digital....
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....done at Geneva on 29th April, 1958, United Nations, Treaty Series". The said convention defined 'High Seas' to mean "all parts of the sea that are not included in the territorial sea or in the internal waters of a state." Thus, according to the concerned authorities, HSS necessarily mean sale in respect of the goods that are outside the territorial waters of the country of export or the country of import. This is the foundation of the punitive measure imposed on the appellant. However, none of the authorities have discussed as to how the sale and purchase of the goods between IDDSL and TDAAL offended the Sales tax Act, as according to the said authorities the said transaction was effected while the goods in question were still in Singapore. 27. The term 'High Sea Sales' has not been defined in the Customs Act or the Rules. The respondent's case is, essentially, based on the Customs Manual on Self Assessment - 2011 although the relevant extract of the said Manual has not been quoted in either of the concerned orders - the offence report, the orders passed by the respondent, and the impugned order. 28. The concerned authorities referred to HSS at Page 20 of the Customs Manual o....
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.... Invoice descriptions are vague, listing only part of numbers, truncated or coded descriptions, or lumping various articles together as one when several distinct items are included. (A) For valuation in normal commercial transactions between unrelated parties: (i) Invoice, contract etc. evidencing transaction value and that sale does not involve abnormal discount /reduction or special discounts limited to exclusive agents. (ii) Declaration about relationship in GATT declaration form. (iii) Documents confirming goods are correctly declared in parameters such as description, quality, quantity, country of origin, year of manufacture or production, brand, grade, specifications that have relevance to value. (iv) Documents establishing Customs accepted value of identical / similar goods imported at or about the same time in comparable quantities incomparable commercial transactions. (v) Documents evidencing costs and services listed under Rule 10, if warranted. Examples are: commission, cost of containers, packing cost, freight etc. (vi) For goods Sold on High Seas i.e. sale by the consignee while the goods are yet on high seas or after their dispatch abroad an....
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.... about relationship in GATT declaration form. (iii) PD Circular No. if order for provisional assessment is given by a PD circular (iv) Completed Questionnaire given by SVB with required documents. Also, when SVB order is due for review after 3 years. In this case change in collaboration /agency / distribution/agreements/arrangements and method of invoicing or pricing should be declared. (v) Documents, if any, to demonstrate the arms length nature of transaction through examination of the circumstances of sale or by using the test value method. vi) SVB order (or its number), if any, after verifying business facts of transaction are unchanged." 29. The Order-in-Original dated 15.11.2017 as well as the impugned order does not indicate any issue regarding valuation of the goods imported. This Court had also pointedly asked the respondent whether there was any question as to valuation of the goods or the quantum of duty payable on the said goods. The learned counsel fairly responded in the negative. 30. It was also not disputed that IDDSL could have sold its right to TDAAL at any time prior to the said goods leave the shores of Singapore. The learned counsel for the Re....
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....onsidering that his challenge was in respect of a harsh penalty imposed on him. 35. Since there is no statutory definition of the expression 'High Seas Sale' in the Customs Act, and the issue relates to imposition of a heightened penalty that prevents the appellant from carrying on his business, the understanding of the concerned parties of a HSS, at the material time, would be relevant. 36. The allegation against the appellant is that he had contravened the Regulations 11(d), 11(e) and 11(m) of the CBLR-2013. The said Regulations are set out below: "11(d) advise his client to comply with the provisions of the Act and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be; (e) exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage; (m) discharge his duties as a Customs Broker with utmost speed and efficiency and without any delay;" 37. Insofar as the violations of Regulation 11 of the CBLR-2013 is concerned, the respondent relies on ....
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....ged his obligations faithfully and with due diligence. Therefore, the punitive measure imposed by the Department is normally not required to be interfered with. However, in cases where it is found that the measure imposed is disproportionately excessive, the order of punishment would require to be interfered with. 42. The Supreme Court has in a number of decisions interfered with the punitive measures on the ground of the same being disproportionate. In Management of the Federation of Indian Chambers of Commerce and Industry v. Their Workmen AIR 1972 SC 763, the Supreme Court considered a case where the services of an employee were terminated on the allegation that he had issued legal notices to the appellant and to the International Chamber of Commerce, which had allegedly brought discredit to the reputation of the appellant. In this context, the Supreme Court observed that "the federation had made a mountain out of a mole hill and made a trivial matter into one involving loss of its prestige and reputation". The Court upheld the decision of 'reinstating' the employees. Similarly, in Hind Construction and Engineering Co. Ltd. v. Their Workmen AIR 1965 SC 917 , workmen were dism....
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....arded as one indication of manifest unreasonableness."" 43. It is relevant to note that CBLR-2013 provides for various punitive measures including levy of penalty under Regulation 22, if it is found that the custom broker has contravened the provisions of the said Regulations. Regulation 18 of the CBLR-2013 enables the Commissioner of Customs to revoke the custom broker's license and order forfeiture of the security (in part or in whole) or impose a penalty not exceeding Rs.50,000/-. CBLR-2018, which has since replaced CBLR-2013 also contains similar provisions. There is a range of punishment that can be imposed by the Commissioner of Customs and it is not necessary that every contravention of the Regulations be visited with the extreme punishment or revocation of license, which in effect would deprive the custom broker of his livelihood. 44. As noted above, the Commissioner has discretion in imposing an appropriate measure of punishment. Coupled with this power is a duty to exercise this discretion to ensure that the punishment imposed is commensurate with the custom broker's contravention of his obligations. 45. It is also well settled that the Court in exercise of judic....
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....ording to the learned counsel for the Revenue, the fact that the transaction was revenue neutral was of no consequence. We are unable to agree with the aforesaid contention. The revocation of license and imposition of penalty are punitive measures, it would be necessary to examine the harm and potential harm caused by the infraction in respect of which the punitive measure is imposed. The question whether there was any loss of revenue as a consequence of actions of the appellant is a material factor for consideration by the respondent while determining the punitive measure to be inflicted on the appellant. It is also a settled law that failure to take into account the relevant factors in the decision making process render the decision arbitrary and thus, amenable to challenge as offending the equal protection clause. 49. In M/s Ashiana Cargo Services v. Commissioner of Customs (I&G) 2014 SCC OnLine Del 1161, the Co-ordinate Bench of this Court had, in case of concerning revocation of Custom House Agent license, observed as under: "9. The consequence of revocation being serious, the proportionality doctrine must inform the Commissioner's analysis. This is also the exerci....