TaxTMI 
TaxTMI 
2023 (9) TMI 1405
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....and 141(2) of the Customs Act, 1962 and also as a Customs Cargo Service Provider (CCSP) duly approved by the Commissioner of Customs (General), JNCH, Nhava Sheva under Regulation 10 of Handling of Cargo in Customs Areas Regulations (HCCAR), 2019. The CCSP license for the appellants was renewed from time to time by the Commissioner of Customs (General), JNCH and the latest approval as a CCSP was issued by Public Notice No.134/2020 dated 14.10.2020 for five years with effect from 15.03.2020. 2.2 A Shipping Bill No.5807023 dated 05.06.2013 was filed by an exporter M/s. Krish Exports, Mumbai, before JNCH Customs for export of "household articles of stainless steel, SS Utensils" to Hong Kong, in a factory stuffed container GESU-3997518 and the same was given "Let Export Order" (LEO) from the appellant's CFS. Special Intelligence & Investigation Branch (SIIB) of JNCH Customs on the basis of a specific information received about smuggling of Red Sanders wood logs stuffed into the container No. GESU-3997518 had put on hold the export goods in the said the container, and examined the same by drawing panchanama dated 14.06.2013 at the appellant's CFS. It was found that as against the decl....
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....g of Cargo in Customs Areas Regulations, 2009 (HCCAR) and Sections 45(2), 141 of the Customs Act, 1962 by issue of SCN No.1254/19-20/CFS M.Cell/CAC/JNCH dated 16.03.2020. 3. Learned Advocate appearing for the appellants stated that HCCAR is applicable only to import/export goods; these regulations will not apply to seized goodswhich have been handed over for safe custody to the appellants. Further, he stated that the provisions of Section 45(2) ibid, apply only in respect of imported goods, and since the goods involved are 'export goods', invocation of the above legal provision in the impugned order cannot be sustained. He also claimed that there was no letter or Supratnama given for handing over the seized export goods for safe custody with the appellants. Further, he stated that the appellants have not failed to provide security to the seized goods, as in the Police investigation none of the employees of the appellants were found to be involved. Hence, he stated that the appellants are not responsible for the theft which occurred due to their contractors. Learned Advocate also stated that the order for recovery of the value of seized goods which have been pilfered, in terms of....
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.... responsibility of the appellants as CCSP cannot be abdicated by claiming that no letter or Supratnama was given for handing over the seized export goods. Since the seized export goods were absolutely confiscated and were liable for disposal, the value of such goods is liable to be compensated by the appellants to the customs Department. Accordingly the value of disposal material was estimated on the basis of market value, as per valuation report dated 04.01.2016. He further submitted that the appellants have violated the provisions of section 141(2) ibid, and thus imposition of penalty under section 117 is correctly warranted. He also submitted that there have been continuous correspondences with the appellants from 2016 onwards by the Customs Commissionerate for recovering the value of pilfered cargo from them and after comprehensive investigation, conduct of inquiry proceedings as per HCCAR, the show cause proceedings have been initiated and hence the impugned order is sustainable in law. 5. Heard both sides and perused the records of the case including the additional written submissions made by both sides. 6. We find that the learned Commissioner in the impugned order dat....
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....of Chapter 44 of Schedule 2 (Export Policy) of the Foreign Trade Policy 2009-2014 which are "Prohibited" for export as per the said Export Policy, inasmuch as Red Sanders (Pterocarpus Santalinus) is an endangered species and figures in Appendix II of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Thus, we are of the considered view that it is a clear case of prohibited goods attempted for illegal export which were thwarted by SIIB wing of JNCH Customs by taking timely action and thus such export goods attempted for illegal export was rightly seized as the same were liable to confiscation under Section 113 of the Customs Act, 1962. 8. It is also a fact on record that a panchanama dated 14.06.2013 was drawn upon seizure of the prohibited goods viz. 'Red Sanders Wood of 12695 Kgs.' stuffed in container No. GESU-3997518 at the appellant's CFS and the same were handed over to the appellants for safe custody. The relevant paragraph of the panchanama dated 14.06.2013 is extracted below: "...In our presence, the said one container bearing number GESU- 3997518 (20"), re-sealed with Customs Bottle seal No.1413790 and Concor Seal No. D....
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....; xxx xxx xxx Regulation 2. Definitions.- (1) In these regulations, unless the context otherwise requires, - (a) "Act" means the Customs Act, 1962 (52 of 1962); (b) "Customs Cargo Services provider" means any person responsible for receipt, storage, delivery, dispatch or otherwise handling of imported goods and export goods and includes a custodian as referred to in section 45 of the Act and persons as referred to in sub-section (2) of section 141 of the said Act; xxx ....
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.... export goods in a customs area. (ii) safe, secure and spacious premises for loading, unloading, handling and storing of the cargo for the projected capacity and for the examination and other operations as may be required in compliance with any law for the time being in force; (iii) insurance for an amount equal to the average value of goods likely to be stored in the customs area based on the projected capacity, and for an amount as the Principal Commissioner of Customs or Commissioner of Customs, as the case may be may specify having regard to the goods which have already been insured by the importers or exporters. xxx xxx xxx &nbs....
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....bsp; xxx (i) be responsible for the safety and security of imported and export goods under its custody; (j) be liable to pay duty on goods pilfered after entry thereof in the customs area; xxx xxx xxx xxx (q) abide by all the provisions of the Act and the rules, regulations, notifications....
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....cised, in respect of the above amendment. Thus the sub-section (2)n of Section 141 became part of the Customs Act, 1962, upon passing of Finance Act, 2008 w.e.f. 10.09.2008. Therefore, we find that the Handling of Cargo in Customs Areas Regulations, 2008 (HCCAR) which had been framed by CBEC in exercise of the powers thereof, as provided under Section 141(2) ibid, has proper force of law. Thus, an order passed by the learned Commissioner in exercise of the powers vested with him under Regulation 12(7) of HCCAR for suspension, imposition of penalty is legally sustainable. 10.1 Learned Advocate appearing for the appellants giving his written submission during the hearing challenged the impugned order on the grounds that the provisions of Section 45(2) of the Customs Act, 1962 apply only to imported goods and seized container which was meant for export, under the provisions of Section 50 and 51 do not have any restriction; and that HCCAR do not apply to seized goods given for safe custody. Thus he claimed that the learned Commissioner has erred in his order and thus the impugned order is not sustainable. Further, he had questioned about the legality of the order on recovery of the ....
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....ken. Several provisions of the Act have become obsolete. Difficulties have also been experienced in the implementation of certain other provisions. The trade has been pressing for certain changes and facilities. Smuggling, consequent to controlled economy, has presented new problems. To meet these requirements, it has become necessary to revise the Act. The Land Customs Act was passed in 1924. It is not a selfcontained Act and applies by reference provisions of the Sea Customs Act to land customs with certain modifications. There is no separate law relating to air customs, and the administration of air customs is governed by certain rules made under the Indian Aircraft Act, 1911. While revising the Sea Customs Act, it is proposed to consolidate the provisions relating to sea customs, land customs and air customs into one comprehensive measure. The Notes on Clauses explain in detail all the changes which are proposed to be introduced in the new law as compared with the existing law. NEW DELHI; The 8th June, 1962." Extract of Section 45 &141 of the Customs Act, 1962 and relevant notes on clauses Clearance of imported goods "45.(1)....
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....ced with the new provision of appointment of custodian under Section 45 of the newly introduced Customs Act in 1962. The then existing system of shipping agents being responsible for discharge and damage, if any, were deleted and under the new dispensation, the custodian was being made responsible for accounting and holding custody of the imported goods, till the time these goods were cleared for home consumption or for transhipment or to be moved to bonded warehouses. At that relevant time, since port trusts were handling the activities in respect of major sea ports and similarly Airport Authority of India were handling such function in respect of all international airports, they were the natural custodians, being established by the respective acts of parliament. Thus, when the section 45 was first introduced in the year 1962, it started with the non-obstante clause for granting superimposing authority for those natural custodians to continue to function while granting approval by the Collector of Customs for the new persons being appointed as custodian of imported goods under Section 45(2). However, in respect of export goods, as such goods after customs processing were allowed t....
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.... a review on the working of ICDs/CFSs by conducting test check of records of customs as well as custodians for three years from 2000-2001 to 2002-2003 in relation to transmission of import/export goods between ICD/CFS and gateway port, proper storage, safe custody and clearance thereof on payment of appropriate Customs duty to the Government. The report of C&AG presented to the Parliament in paragraph 3.7 of Report of C&AG for the year ended March, 2004, No. 10 of 2005, Union Government (Indirect Taxes - Customs) were further examined by the Public Accounts Committee (PAC) and in its 27th Report (2005-06), the PAC had recommended for formulating appropriate legal provisions and guidelines to control the activities of custodians. The relevant recommendations of the PAC in this regard are extracted below: "59. The Committee's examination of the subject is based on the Audit Review on the working of Inland Container Depots (ICDs)/Container Freight Stations (CFSs) in relation to clearance/disposal of uncleared/ unclaimed cargo on payment of appropriate customs duty to the Government. For this, Audit had conducted test-check of records of customs as well as custodians i.e. ICDs....
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....he activities of the Custodians so that in the event of their failure to adhere to the obligations, the Department/Board can take suitable punitive action against the erring Custodians so that revenue could be protected. For this, if necessary, the Customs Act, 1962 may be amended." In pursuance of these recommendations, the Government had inserted a new Section 141(2) to the Customs Act, 1962 and thereafter under its authority framed the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR, 2009). The HCCAR, 2009 provide for the manner in which the imported goods/export goods shall be received, stored, delivered or otherwise handled in a Customs area. These regulations also prescribe the responsibilities of persons engaged in the aforesaid activities. The said regulations also provided for transitional provisions under Regulation 4, whereby the existing custodians who were earlier appointed under Section 45 of the Customs Act, 1962 shall continue to operate without any disruption in their export/import operations. However, the regulations stipulated that the existing custodians would be required to provide specified facilities and fulfil the conditions mentioned in Regul....
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....rder. 13. In terms of Section 2 of the Customs Act, 1962, the phrases 'export' and 'export goods' have been defined. The relevant provisions have been extracted as below: "Section 2 Definition: In this Act, unless the context otherwise requires- (18) "export", with its grammatical variations and cognate expressions, means taking out of India to a place outside India; (19) "export goods" means any goods which are to be taken out of India to a place outside India;" In the present case before us, the export goods stuffed in container No. GESU- 3997518 were brought in to the customs area and after completing the customs procedures was given clearance for exportation in the form of "Let Export Order". However, before the export goods were loaded on the vessel/conveyance and it leaving India, timely action taken by SIIB JNCH Customs detected the attempt of smuggling Red Sanders wood logs stuffed into the said container No. GESU-3997518. As the said export goods were "prohibited" in terms of FTP, the same being liable for confiscation were promptly seized by the customs authorities and were handed over to the appellants for safe custody. From the ....
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....toms who are responsible for the loss or pilferage of the goods and not the appellants. On the contrary, the export goods upon seizure on 14.06.2013 were handed over for safe custody with the appellants as custodian/CCSP, and before these could be confiscated and the property on such goods being vested with the Central Government, the pilferage of the seized goods from the custody of the appellants had occurred in this case. Hence, the value of such seized goods could not be confiscated and be disposed/ sold by following the due process of law, denying the entire disposal value of such goods being credited to the government's exchequer. In fact special dispensation had been provided for relaxation of the condition of the Chapter 44 of Schedule 2 of the ITC (HS) Classifications of Export and Import Items for allowing export of 9784.1363 MT of Red Sanders wood, in the form of log obtained out of confiscated/seized stock in respect of the Government of Andhra Pradesh & Directorate of Revenue Intelligence (DRI) Vide DGFT Notification No. 47 (RE-2013)/2009-2014 dated 24.10.2013 as amended. Further, CBED also followed and e-auction process for sale through MSTC, a Government of India com....
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.... 2.1. The regulations shall be applicable to all 'Customs cargo service providers' (CCSPs) that is to say all persons operating in a customs area and engaged in the handling of import/export goods. These include the Custodians holding custody of import / export goods and handling such goods and all persons working on behalf of such custodians such as fork liftor material handling equipment operators, etc. The regulations would also cover consolidators/ break bulk agents and other persons handling imported/export goods in any capacity in a customs area. The regulations provide for various responsibilities and conditions for different kinds of CCSPs. The conditions prescribed under Regulation 5 would apply to the CCSPs who desire to be approved as custodians of imported /export cargo and thus handle goods in customs areas. These conditions shall not apply to those persons who only provide certain services on their own or on behalf of the custodians referred above 2.2. Responsibilities prescribed in Regulation 6 on the other hand apply to both categories of persons i.e. all Custodians and persons who provide various services as above. Certain responsibilities sp....
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.... proceedings under HCCAR reveals that during a surprise visit conducted by JNCH Customs officers at the premises of the appellants CFS on 14.08.2014, the entire modus of removing the Customs seized goods in a container XINU 1349960, kept under safe custody with the appellants, by substituting similarly numbered container by fabricating the unique container number (obliterating by repaint of the container number on all four sides from XINU 1106045 to XINU 1349960) were identified. Further, JNCH Customs undertook complete physical inventory of containers having seized goods which had led to the present case of theft coming to the fore, and it was found that one another container GESU-3997518 handed over to the appellants CFS for safe custody vide panchanama dated 14.06.2013 having seized red sanders of 12695 Kgs. were found stolen by adopting the above modus operandi. Thus, it transpires that there was a serious attempt to undermine the safety and security of the customs seized goods in the appellant's premises at CONCOR-DRT CFS and certain unscrupulous persons had succeeded in pilferage of the goods kept under the safe custody of the appellants. This fact is duly supported by the vo....
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....r fulfilment of the conditions of these Regulations even in respect of CCSPs working on their behalf or with their permission". Hence the appellants cannot escape from the responsibilities cast upon them under HCCAR, claiming that the theft has happened due to their contractual employees. 16.3 Thus, we find that it is clearly proved by the above factual reports arising out of the investigation conducted by Customs and Police authorities, and hence we do not have any hesitation in arriving at the conclusion that the appellants did not fulfil the conditions of Regulation 5(1)(i)(n) and 6(1)(i), by their failure to restrict unauthorized access into the premises and allowing the pilferage of goods and by their failure to provide safe and secure storage facility of customs seized goods kept in the containers within CONCOR-DRT CFS premises and allowed certain unauthorized persons to remove the customs seized goods. 17. It further transpires from the records of the case that a separate Police investigation had been conducted on the theft of seized goods and the final report/Charge Sheet No.182/14 dated 31.12.2014 in FIR 132/14 was filed by Uran Police before the Hon'ble Court of Fir....
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....stoms seized goods container, without any authority of Customs department would have been very easily detected by the appellants themselves. The HCCAR apply to the custodian under the provisions of Section 141(2) of the Customs Act, 1962 which interalia prescribe the manner in which the goods shall be handled in a customs area and the responsibilities have been framed accordingly. Besides this, the responsibility of the custodian under Section 45(2) is to keep the imported goods in safe custody, maintaining of records and not to permit its removal without any authorization from Customs. The absence of proper system of security, control and maintenance of records in the present case of seized export goods mutatis mutandis apply to the imported goods also. Hence the appellant cannot escape from the responsibilities and obligations cast upon them as CFS operator under HCCAR for proper handling of import/export goods. In view of this, we find that the appellants have failed to fulfil the responsibilities entrusted on them under Regulation 6(1)(a) and 6(1)(b) of HCCAR. 18.1 We also find from comprehensive insurance package policy produced by the Advocate for the appellants that relev....
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.... exercise of alteration of number on all the sides could have been committed, if reasonable and proper care had been taken by the appellants. Thus they closed the insurance claim filed by the appellants as 'No claim'. The above facts indicate that this rejection of the insurance claim of the appellants does not entail the claim of the appellants that on account of no export duty, the claim has been rejected and hence they are not liable to pay for the pilferage of goods given to them for safe custody. Such rejection as discussed above is purely on the basis of the appreciation of the factual matrix in the specific claim by the insurance company and it does not have any bearing on the responsibility of the appellants towards the HCCAR. 18.2 The Chief Manager of Container Corporation of India Ltd. Shri Arujay Kumar Singh had given a voluntary statement before Customs, stating that they suspect a criminalized act in the theft of containers and their security system and operational procedures have been tampered by some unscrupulous persons with involvement of few of their contractor's staff. The aforesaid detailed discussion of the factual matrix of the case clearly points out that ....
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....at there is no undue delay or any illegality in the action taken by Customs department. 20. Regulation 11 of HCCAR provide for suspension of approval for appointment as the Customs cargo service provider by the jurisdictional Commissioner of Customs, by following the prescribed procedure. In this case show-cause notice dated 16.03.2020 was issued and upon completion of inquiry, the enquiry report dated 27.05.2012 was submitted and on this basis the impugned order dated 18.04.2023 was issued. It is on record that the adjudicating authority has given personal hearing to the appellants on 17.03.2023 and 05.04.2023 and after taking into account the submissions made by them, the learned Commissioner under Regulation 12(8) ordered for suspension of the operation of CCSP for 15 days besides imposition of penalty for the contravention of the provisions of HCCAR for an amount of Rs.50,000/-. Hence, we find that there is no illegality in the action taken on imposing penalty and for suspension of CCSP approval granted to the appellants for limited number of 15 days. We also find that in the clarification issued by CBEC vide circular No. 13/2009-Customs dated 23.03.2009, the provisions of R....