TaxTMI 
TaxTMI 
2024 (3) TMI 294
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....er Section 45(1) and 141(1) 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 CFS was issued on 05.02.2018 and 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.105/2022 dated 21.01.2022. 2.2 On the basis of specific intelligence received by the Directorate of Revenue Intelligence, Nhava Sheva unit of Mumbai Zonal Unit (DRI-MZU) that one import consignment in container No. GESU 4913126 of M/s Siddhivinayak Trading Company laden on Trailer vehicle No.MH-12-FZ-8978 is suspected for smuggling, the same was intercepted by DRI-MZU officers at a godown premises situated in Taloja MIDC. The DRI-MZU officers, on finding that the bottle seal of the imported container was found broken, had secured the same with lock and wrapped with cloth and seal identification 'DRI seal No.20' under a panchnama dated 05.02.2019 for its movement under DRI escort for detailed examination by them a....
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.... 2.4 Thus, the modus of removing seized foreign origin cigarettes kept in safe custody in the appellants CFS, by substituting with the packing material, by certain unscrupulous elements was identified. As a result it was found that container GESU-4913126 handed over to the appellants CFS for safe custody vide panchanama dated 05.02.2019 having seized foreign origin cigarettes, part quantity of 23,32,800 cigarette sticks were found stolen by adopting the above modus operandi. 2.5 In view of the above, the department had initiated separate show cause proceedings against the appellants for violation of HCCAR and the Customs Act, 1962, by issue of SCN No.282/2021-22 CCSP/CAC/ JNCH dated 26.07.2021. The specific regulations which are alleged to have been violated by the appellants in the show cause proceedings are clauses 5(1)(i)(n), 6(1)(f) and 6(1)(i) of HCCAR. On conclusion of the inquiry proceedings, an inquiry report dated 01.02.2022 was submitted concluding that the charges proposed in the show cause proceedings have been conclusively proved to have been violated by the appellants and recommending for suitable action to be taken under the provisions of Customs Act, 1962 and th....
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....Tribunal within a period of three months. 3.1. Learned Advocate appearing for the appellants stated that various submissions made by the appellants before the original authority have not been taken into consideration in the impugned order. He further stated that at the time of examination of the imported goods by DRI on 05.02.2019, the contraband goods were seized and post such examination and seizure the container was affixed with 'Indian Customs, Nhava Sheva Bottle Seal No.1862910'; whereas on suspicion of theft, when JNCH-CIU officers were about to open and examine the same container on 08.12.2020, it was carrying a different seal having 'Seal No. SML 1054'; there is no record indicating when the container having seized goods was opened and was resealed with different seal having seal No. 'SML 1054'. It is also a fact that the customs authorities have permitted M/s D.K. Enterprises, the successful bidder of auction of the seized goods for disposal in the month of June, 2020 and they had access to the subject seized goods for the purpose of packing and labelling of the cigarettes contained therein during September. 2020. Hence, he stated that it is clearly proved that 3rd part....
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....d Advocate also stated that the order for recovery of the value of seized goods which have been pilfered, in terms of Regulation 5(6) of HCCAR and imposition of penalties on the appellants under Regulation 12(8) of HCCAR, Section 117 of the Customs Act, 1962 are not sustainable as there is no evidence produced by the department to show the involvement of appellants and the recovery of value of goods was not even proposed in the SCN. Thus, he claimed that the impugned order is not legally sustainable and the same be set aside. 4. The Authorised Representative appearing for the Revenue reiterated the findings of the Commissioner of Customs (General) and contended that the same is sustainable in view of the legal provisions cited in the impugned order. Further, the panchanama dated 05.02.2019 specifically states that the quantity of seized foreign origin cigarettes in container No. GESU-4913126as 93,60,000 sticks and the same was handed over to the appellants CFS for safe custody. The said container with seized goods was lying with the appellants CFS and thus the responsibility of the appellants as CCSP cannot be abdicated by claiming that third party was allowed access for labelli....
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....rt of Bombay in its judgement dated 19.06.2023 had observed as follows: "5. Having heard learned counsel for the parties and having perused the record, in our opinion, it would be appropriate for the Petitioner to avail of the remedy of an appeal, so that the rival contentions of the parties on the aspects of facts and law can be adjudicated before the Tribunal. We, therefore, do not dwell into the merits of the rival contentions. We are also informed by Mr. Dada that the limitation under the provisions is of three weeks which would come to an end on or about 6th July 2023. 6. Insofar as the protection granted by this Court as noted above is concerned, in our opinion, the protection needs to be continued till the Petitioner approaches the Tribunal alongwith a stay application and till the orders are passed on the stay application. We, accordingly, dispose of this Petition in terms of the following order:- ORDER (i). Petitioner is permitted to approach the Tribunal in an Appeal to assail the order dated 5th April 2023. Let the Appeal be filed along with the stay application. (ii). The protection granted by this Court vide order dated13th April ....
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.... safely or not. Earlier, on specific intelligence received by DRI-MZU that imported foreign origin cigarettes in container No. GESU 4913126 belonging to M/s Siddhivinayak Trading Company laden on Trailer vehicle No.MH-12-FZ-8978 is suspected for smuggling, the same was intercepted by DRI-MZU officers at a godown premises situated in Taloja MIDC and were escorted for detailed examination and seizure of the contraband. The DRI-MZU officers completed the detailed examination and handed over the seized foreign origin cigarettes on 05.02.2019 to the appellants CFS, being the custodian duly appointed by jurisdictional Customs authorities. The verification conducted under panchnama proceedings with independent witnesses revealed that as against the 93,60,000 sticks 'Gudang Gram' brand cigarettes seized by DRI and handed over on 05.02.2019 to the appellants CFS as a custodian, actually only 70,27,200 sticks were found available on 08.12.2020 at the time of such verification, and there was a shortage of 23,32,800 cigarettes sticks. 8.1 It is also fact on record that on 05.02.2019 when the seized goods were handed over to appellants CFS in container No. GESU-4913126, it was sealed with 'D....
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....an has recently resigned from the services of our company and he is no more working with us. ... 3) when we started our own enquiries from our direct as well as indirect employees, we came to know that the said the container number GESU- 4913126-40' was moved out of CFS by using tractor trailer no. MH-46-H- 5856 on 19.09.2020...." 8.2 The above details indicate that despite laying down a system of control over seized goods, the container having the seized goods were allowed for clearance outside the appellants CFS without the permission of customs authorities. Further, the appellants CFS have also issued gate passes to one Shri Nawaz Khan another nine persons on 08.09.2020, 10.09.2020 and 12.09.2020 to undertake the work of affixing labels containing statutory declaration in the packets of foreign cigarettes. The detailed investigation conducted by the customs authorities also revealed that Import Operations Manager of the appellants CFS and his staff were taking cash benefits from bidders in an unauthorised manner. The appellants were not maintaining 'seal cutting register' and the seized containers was allowed for de-stuffing of labelling work without CCTV co....
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.... Regulation 5. Conditions to be fulfilled by Customs Cargo Service provider - The Customs Cargo Service provider for custody of imported goods or export goods and for handling of such goods in a customs area shall fulfill the following conditions, namely:- (1) Provide the following to the satisfaction of the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, namely : (i) Infrastructure, equipment and adequate manpower for loading, unloading, stacking, handling, stuffing and de-stuffing of containers, storage, dispatch and delivery of containers and cargo etc., including :- (a) standard pavement for heavy duty equipment for use in the operational and stacking area; xxx xxx xxx xxx (n) security and access control to prohibit unauthorized access into the premises, and xxx xxx xxx xxx (o) such other equipment or facilities as the Board or Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may specify having regard to the screening, examination, custody and handling of imported or export goods in a customs area. (ii) safe, secure and spacious premise....
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....d stored, delivered, despatched or otherwise handled in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in the aforesaid activities shall be such as may be prescribed." In terms of the Rules of Procedure and Conduct of Business in Lok Sabha, there is a requirement for any bill providing for giving law making power on the subject or to any person i.e., power to make delegated legislation in the form of Regulations in this case, to follow the requirements of Rule 70. The said rule is extracted below: "70. A Bill involving proposals for the delegation of legislative power shall further be accompanied by a memorandum explaining such proposals and drawing attention to their scope and stating also whether they are of normal or exceptional character." In this regard, We find that the Memorandum regarding Delegated Legislation contained as a part of the Finance Bill, 2008, provided the powers to the Central Board of Excise & Customs (CBEC) to make regulations as extracted below: "Clause 69 of the Bill seeks to insert a new sub-section (2) to section 141 of the Customs Act empowering the Central Board of Excise and Custo....
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....nd the imposition of penalty in the impugned order. 10.2 It could be seen from SCN dated 26.07.2021, that it has been proposed for initiating action under Regulation 11 of HCCAR for suspension/revocation of the appointment as CCSP by initiating a separate inquiry proceedings under Regulation 12 HCCAR, besides imposition of penalty. It is also seen that Regulation 12 ibid provide for detailed procedure for appointment of inquiry authority, providing sufficient opportunities for the CCSP who are alleged to have violated HCCAR and in the course of inquiry consider all documentary evidences, take all evidences for the purpose of ascertaining the correct position and for arriving at the conclusion to submit the inquiry report the Commissioner of Customs. Further, the CCSP is given a copy of the inquiry report, an opportunity for giving a written submission against the inquiry report, and a representation to the Commissioner of Customs. On the basis of all the above details contained in the inquiry report and from the representation given by the CCSP, the jurisdictional Commissioner of Customs is required to pass a speaking order under HCCAR. Thus it appears that detailed procedure ha....
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....lays down the basic law relating to customs was enacted more than 80 years ago. It has been amended from time to time and some important amendments were made by the Sea Customs (Amendment) Act, 1955. General and comprehensive revision of the Act has not so far been undertaken. 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 a....
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....ers the provisions in the existing Sections 77 and 78." The plain reading of the above provisions and the notes on clauses explain that the earlier system of imported goods being discharged to the Port Commissioners or Port Trust were being replaced 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 co....
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....s Act, 1962 as a whole including Section 141 of the said Act. 12. The background behind the legislation of Section 141(2) ibid, indicates that the Comptroller & Auditor General of India (C&AG) had undertook 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 relat....
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....9 (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 Regulation 5 and 6, within the specified time period. It was also clarified by the CBIC in the circular No.13/2009-Customs dated 23.03.2009, that on fulfilment of the prescribed conditions the approval letter shall be issued by the jurisdictional Commissioner of customs to the existing custodians for having approved the facility for a period of 5 years and its renewal thereafter, as per Regulation 13 of HCCAR. Accordingly, we find that in this case the appellants were appointed as a custodian unde....
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....on 2 of the Customs Act, 1962, the phrases 'import' and 'imported goods' have been defined. The relevant provisions have been extracted as below: "Section 2 Definition: In this Act, unless the context otherwise requires- (18) "import", with its grammatical variations and cognate expressions, means bringing into India from a place outside India; (19) "imported goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption;" In the present case, the imported foreign origin cigarettes which are being attempted to be smuggled were seized and handed over in container No. GESU- 4913126 for safe custody with the appellants CFS, and have not yet been cleared by the customs authorities out of the appellants CFS, at the relevant time of verification of the cargo by a CIU-JNCH authorities on 08.12.2020. 15.2 However, before the imported goods were cleared by disposal through auction and delivery to home consumption, the theft of part of the cigarettes have occurred at the appellants CFS. As the said imported foreign origin cigarettes were attempted for "smuggling", the same ....
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....ms F.No.450/55/2008-Cus.IV Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs 159A, North Block, New Delhi - 1. 23rd March, 2009. Subject: "Handling of Cargo in Customs Areas Regulations, 2009"- regarding. *** A reference is invited to Notification No.26/2009-Customs (N.T.) dated 17.3.2009 bringing into effect the "Handling of Cargo in Customs Areas Regulations, 2009" (referred in short as 'regulations'). The regulations provide for the manner in which the imported goods/ export goods shall be received, stored, delivered or otherwise handled in a customs area. The regulations also prescribe the responsibilities of persons engaged in the aforesaid activities. It may be recalled that the Public Accounts Committee (2005-06) in its twenty-seventh report had recommended for formulating appropriate legal provisions and guidelines to control the activities of custodians. In pursuance of the recommendations made by the Public Accounts Committee (PAC), the Government had inserted a new sub-section (2) to section 141 of the Customs Act, 1962. These Regulations have been framed by the Department in ....
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....ect of activities under taken by him as custodian as well as in respect of various service providers contracted or employed by the CCSP for providing the services on their behalf. One of the conditions to be fulfilled for appointing as CCSP under Regulation 5(i)(n) and 5(ii) is that the CCSP shall provide security and access control to prohibit unauthorized access into the premises, as well as provide safe, secure and spacious premises for loading, unloading, handling and storing of the cargo and for the examination and other operations as may be required in compliance with any law for the time being in force. In the present case, the DRI-MZU sealed imported goods were handed over to the appellants for safe custody of the seized goods in container No.GESU-4913126 at the appellants CFS. The facts of the case and the customs, as well as police investigation brings out clearly the conclusion that the appellants facilities at Speedy CFS, particularly the trailer truck, entry/exit gates were used for pilferage of customs seized goods contained in container No.GESU-4913126. 18.1 Investigation conducted by Customs authorities also indicated that in the recent past in the same premises ....
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....ppellants under Regulation 12(8) of HCCAR and Section 117 of the Customs Act, 1962, is sustainable. 19. It further transpires from the records of the case that a separate Police investigation had been conducted on the theft of seized goods in FIR dated 28.07.2021 by Uran Police Station; nine persons were arrested as accused in the above fraud including Shri Anand G Shinde, then Supervisor and Shri Ganesh Krishna Mhatre, then Assistant Junior Officer who are the employees of appellants CFS. It is also a fact on record submitted by the appellants that one Shri Vinay Tandel, employee of the appellants was receiving acknowledgement on all copies of panchnama dated 05.02.2019 and 11.12.2020 and he had vested interests in keeping copy of such documents and the appellants were never got to know of these documents. However, learned Advocate for the appellants attempted to project that the police investigation has not implicated the appellants CFS and only their employees of appellants, and thus they are not responsible for the pilferage of the seized goods/container. The facts indicate that the employees of appellants in connivance with the certain unscrupulous persons had allowed in an....
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....e an undertaking to indemnify the Commissioner of Customs from any liability arising on account of damages caused or loss suffered on imported or export goods due to various unnatural causes or otherwise handling of such goods. Customs investigation conducted with regard to the imported goods clearly proved that the imported foreign origin cigarettes were stored for safe custody and due to various acts of negligence on the part of the appellants, part of such seized goods were pilfered. Further JNCH Customs have found one another attempt for removal of seized red sanders, by the same Speedy CFS. The serious violations on security of the CFS and the goods stored inside the CFS, established through inquiry report under HCCAR and Police investigation, have led to the action to safeguard government interest on the seized goods, and thus recovery of the above amount. Hence, we find that there is no illegality in the impugned order in seeking recovery of the value of the goods which were pilfered from the custody of the appellants as CCSP, due to aforesaid act of negligence and improper handling of cargo in customs area. Hence, we find that there is no illegality in the action taken by C....
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....importers. Further, auction of the goods for which notices have been issued under Section 48 by the custodian/CCSP and under other auction process were also permitted during such suspension period. Hence, the export and import trade has not been affected by this suspension action. Further, it is clear that the appellants work was not entirely shutdown and that there was sufficient work for the personnel employed and the contractors engaged by the appellants, disproving the appeal made by the learned Advocate that the suspension action has adversely affected the importers and exporters community and that livelihood of a large number of persons employed by them were affected. However, as the period for which the suspension of 15 days was ordered was in terms of specific dates, i.e., from 16.04.2023 to 30.04.2023, which had expired during the process of this appeal, and stay of the order given by the Hon'ble High Court of Bombay vide judgement dated 19.06.2023 in Writ Petition No. 5415 of 2023, no precipitative action was taken by the Customs pending this appeal, and the impugned order to this extent has become infructuous. Thus, even the illusory adversity of closure of the appellant....