Custom, Excise & Service Tax Tribunal
Sourendra Nath Mallick vs Kolkata(Port) on 6 February, 2024
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.2
Customs Appeal No. 76489 of 2019
(Arising out of Order-in-Original No. KOL/CUS/COMMISSIONER/PORT/06/2019 dated
14.02.2019 passed by Commissioner of Customs (Port), Kolkata.)
M/s. Sourendra Nath Mallick
(847/5, Sarat Chatterjee Road, Balepole, Howrah- 711104, W.B.)
...Appellant
VERSUS
Commissioner of Customs (Port), Kolkata
(Customs House, 15/1 Strand Road Kolkata- 700001.)
...Respondent
APPERANCE :
Present for the Appellant: Shri B. N. Pal, Advocate Present for the Respondent: Shri F. Ahmad, Authorized Representative CORAM:
HON'BLE MR. R. MURALIDHAR MEMBER (JUDICIAL) HON'BLE MR. RAJEEV TANDON MEMBER (TECHNICAL) FINAL ORDER No...75142/2024 DATE OF HEARING :24.01.2024 DATE OF PRONOUNCEMENT : 06/02/2024 PER: RAJEEV TANDON The appellant has filed the present appeal assailing the Order in Original No. KOL/CUS/COMMISSIONER/ PORT/06/2019 dated 14.02.2019, whereby the learned Commissioner of Customs (Port), Kolkata has imposed 1 a penalty of Rs.10 lakh under Section 114(i) of, the Customs Act, 1962 .
2. Briefly stated the facts of the case are that the appellant is a partner
1. The Act.
2 of 11 Customs Appeal No. 76489 of 2019 of Mallick Clearing Agency registered as a Customs Broker and attended to the export jobs of a consignment of 16000 kgs of HC Binding Wire at Kolkata Port. The goods were sealed under Central Excise supervision at the factory gate and an ER-1 issued for purpose of export of the said goods. At the time of examination of the cargo at the docks, the Custom Seals were found intact, however upon opening of the said container, the officers of the DRI recovered 8940 kgs of red sanders wood kept below 7260 kgs of HC Binding Wire. As the export of red sanders is prohibited the said goods were seized by the department under the provisions of Section 110 of the Act. Upon conclusion of investigations a show cause notice under Section 124 of the Act was issued to the appellant among others, proposing imposition of penalty under Section 114(i) of the Act for his role in attempted smuggling of red sanders. The show cause notice also proposed the imposition of penalty under Section 114 AA of the Act, however no such penalty has been imposed by the learned adjudicating authority.
3. The subject show cause notice has been adjudicated confirming a penalty of Rs. ten lakh on the appellant as stated supra, and reiterating and confirming the earlier order No. Kol/Cus/Commissioner (Port)/54/Adjn./2018 dated 29.06.2018. It would be interesting to point out for records that the said issue had earlier been adjudicated by the Commissioner of Customs (Port), whereupon penalties were imposed on various noticees, including the appellant and the seized goods ordered to be confiscated. Subsequently, the appellant had filed a petition bearing No. 420/2018 before Hon'ble High Court of Calcutta, praying for cross-examination of the other noticees. The present adjudication is a culmination of the said process, affording cross- examination as requested by the appellant. In the case before us, the 3 of 11 Customs Appeal No. 76489 of 2019 question of non-adherence to principles of natural justice is no longer in question. As also noted in the adjudication order, opportunity of cross- examination was afforded to the appellant and at this juncture no grudge is raised thereto.
4. The appellant have submitted that vide this Tribunals Order No. FO/77031/2019 in Customs Appeal No. 79329 of 2018, the co-ordinate bench of the Tribunal had revoked the Customs Broker License of the appellant firm. While doing so it had held as under:
" 11. In view of the above discussions, we are of the opinion that revocation of the license of CHA is disproportionate of the offence committed by them under the various provisions of CBLR 2013 as amended. So is the case of forfeiture of the Security Deposit. But in the fact and circumstances of the case, we also find that the appellant deserves to be cautioned and vigilant in future for taking appropriate precaution while entering into the business through intermediaries."
The appellant's firm was thus let off with a direction of caution to be vigilant in future and advised for taking appropriate precautions while entering into business through intermediaries.
5. As the learned Adjudicating Authority has imposed penalty on the appellant under Section 114(i) of the Customs Act, it would be appropriate to refer to the same, and the same is reproduced hereunder:
" 114. Penalty for attempt to export goods improperly, etc. Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable 4 of 11 Customs Appeal No. 76489 of 2019 to confiscation under Section 113, or abets the doing or omission of such an act, shall be liable,-
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding three times the value of the goods as declared by the exporter or the value as determined under this Act, whichever is the greater;
(ii) ××××××
(iii) ××××××"
6. Given the context, before deliberating further, it is necessary to examine as to how the learned Adjudicating Authority has dealt with the subject matter, holding the appellant liable to penal consequences. Thus, the following para of the adjudicating order are extracted hereunder:
" 9. Submissions were made by the Customs Broker Sourendra Nath Mallick on 15.01.2019. In the submissions the following contentions were made:
i) The container had been loaded and sealed at the factory premises in presence of Pratip Moltra, Manager of M/s Panel Pin Manufacturing Pvt. Ltd.
ii) The seal of the container had been found intact at the time of interception by DRI at NS Dock.
iii) M/s. Mallick Clearing Agency processed the documents and filed S/Bill on the basis of Letter of Authorisation signed by P. Moitra, Manager and Authorised Signatory of M/s. Panel Pin Mfg Co. Pvt. Ltd. and other documents like 5 of 11 Customs Appeal No. 76489 of 2019 KYC, PAN, IEC, Bank details duly signed by the Director of Export Co.
iv) During investigation statements of T.K. Saha, Assistant Commissioner and P. Bala, Inspector, who sealed the container were not recorded by DRI. As such the DRI is not justified in involving M/s. Mallick Clearing Agency, CB, for omission and commission and M/s. Mallick Clearing Agency, CB, is not liable for penal action under Section 112(a) and (b) of Customs Act, 1962 as proposed in the Show Cause Notice.
10.1. As I have already held in my adjudication order in this case dated 29.06.2018 that the exporter M/s. Panel Pin Manufacturing Company Ltd. did not act properly as a exporter as they dealt with dubious middlemen and agents like Sandip Ghosh even without knowing about their antecedents. They obtained their IEC for making the subject exports for the first time ever in this manner. They did not procure the export order directly having had no contact with the foreign buyer. These are said very clearly in my order at Para 56.2. Infact the overseas export order was found to be fake. There are no new revelations from the cross examinations held.
10.2 Customs Brokers are a very important part of the global trade and global supply chain. This global supply chain has to be properly regulated by the authorities so that it is not subverted by terrorists and smugglers-criminals to carry out offences. In 6 of 11 Customs Appeal No. 76489 of 2019 order to secure global supply chain for international trade, all concerned involved in the process, especially suppliers or exporters and importers have to be clearly identified through antecedent verification by Customs Brokers, Shipping Lines, Freight Forwarders and others so that only trusted and bonafide such entities are allowed to trade across borders. This is a very important requirement to maintain national and International security.
10.3. Hon'ble Supreme Court of India in the case of Commissioner of Customs Vs. K.M. Gantra & Co. in Civil Appeal No. 2940 of 2008 has observed that trust is kept in CHA not only by the importer/exporters but also by the Government Agencies and to ensure that there is no breach of such trust, the relevant regulations are framed. Regulation 11 of the Customs Brokers Regulation, 2013 list out the obligations of the CHA wherein it has been stipulated that even without intent, it would be sufficient to invite upon the CHA the punishment listed in the Regulations. This is not a case of double jeopardy. The actions under Customs Brokers Regulations and the subject case under the said Sections of Customs Act are distinct and separate. 10.4. I find that Sourendra Nath Mallick, Partner of M/s. Mallick Clearing Agency also indirectly enabled the said smuggling cartel to attempt the smuggling of Red Sanders Wood, a prohibited item for export, by acting as the Customs Broker (CB) to the exporter. He neither properly checked nor verified the 7 of 11 Customs Appeal No. 76489 of 2019 credentials of the said exporter and of Sandip Ghosh which is mandatory as per rules and regulation. This clearly caused the violation of Regulation 11(n) of Customs Brokers Licensing Regulations, 2013 (CBLR) read with Circular No. 9/2010- Customs dated 08.04.2010. Sourendra Nath Mallick claimed to have procured the export clearance work from Raj Kumar Mondal and Pradip Deb through one of his staff Amar Chandra Roy. The said procurement of order was not done from the IEC holder/Exporter as it should have been. Sourendra Nath Mallick admitted that he had never seen the exporter before or had any contact with the exporter earlier. These acts of the CB made it possible for such smuggling attempt to take place in the first place. There have been similar cases of smuggling of Red Sanders by adopting same modus operandi involving other exporters and which is known to the trade. Being in the business of clearing/forwarding of export/import Sourendra Nath Mallick, Partner of M/s. Mallick Clearing Agency should have been alert to such possibilities. The present consignment too would have met the same fate had the same been not intercepted by the DRI. CB, therefore, cannot escape the consequence associated with such attempted export of prohibited goods on the stated ground of purported innocence, lack of mala-fide intention, etc. For invoking Section 114(i) of the Customs Act, 1962, knowledge, complicity, mala-fide intention etc. are not important pre- requisites. Even if, the question of knowledge is to be taken into account it is well known in the trade that fictitious/non-
8 of 11 Customs Appeal No. 76489 of 2019 existent/unaware exporters have been involved in effecting/attempting various kinds of smuggling through the exports route. There have been many such cases booked by several investigating agencies and they have also been widely reported. The modus operandi in this case can be used by criminals and terrorists to smuggle other prohibited goods including weapons, narcotics, etc. with the help of such pliant exporters and Customs Brokers who act unprofessionally for personal gains. The CB is therefore, liable to penal action under Section 114 ibid as proposed in the show cause. They should have checked authenticity/genuineness of the exporter and dealt with him directly. The CB is clearly unfit to handle export Import related work because of their unprofessional conduct. M/s. Mallick Clearing Agency have therefore rendered themselves liable for penal action under Section 114 (i) of the Customs Act, 1962 as well as under provision of Customs Brokers Licensing Regulations for their aforesaid omission and commission."
7. From the above, it is evident that nothing specific alleging a positive role played by the opponent in the attempted export of red sander wood is forthcoming from the order of the learned adjudicating authority least of all carrying out an act or omission to render the seized goods liable to confiscation. In fact in para 10.1 of his order reproduced supra, there is a certain reference to the wrong doings on part of the exporter, undoubtedly pinning the blame on the exporter and not the Customs Broker. Para 10.2 thereof makes a general reference to the important role played by a Customs Broker in discharge of international trade and commerce, while 9 of 11 Customs Appeal No. 76489 of 2019 para 10.3 makes a reference to the Hon'ble apex court's decision on the subject issue in the case of K.M Ganatra & Co. It is only para 10.4 of his order where the adjudicating authority adverts to the role of the appellant. However, there is no specific reference or a finding of any omission on the part of the appellant but for violation of Regulation 11(n) of the CBLR, which concerns with the verification and ascertainment of the credentials of the exporter. It may also be pertinent that for imposition of penalty under Section 114(i), it is necessary to show contumacious action with regard to the subject goods, as the opening clause itself of the section as well as sub- clause (i) talks of and concerns the goods for which a violation or a contravention arises leading to the imposition of penalty therein.
8. We note that in the aforesaid findings of the learned Commissioner there is nothing to impute by way of a categorical assertion the conspiring of, or an express omission or commission, leading to the fraud on the part of the appellant. There is nothing in the findings of the learned Commissioner to assert a positive role or to impute abetment on the part of the appellant in the attempt to smuggle out Red Sander Wood. Thus, in view of anything specific on the part of the appellant being brought on record, it would be completely inappropriate to subject the appellant to penal provisions under Section 114(i). Further, the order of the learned adjudicating authority, fails to show that the appellant had in effect supplemented the efforts to smuggle out Red Sander wood. For any failure of nonperformance of the obligation under the CBLR, appropriate orders have already been passed by this Tribunal and referred to in para 4 above. Thus, in order to take penal action against the present appellant, a partner of the Customs Brokerage firm, it is necessary in law to show that the appellant had in any way connived in the 10 of 11 Customs Appeal No. 76489 of 2019 substitution of the declared cargo, or was in the knowledge of the fact that the declared cargo loaded in the container was substituted with prohibited goods. There is no such finding by the adjudicating authority in the matter. It is on record that the bottle seals were intact when the goods were subjected to examination in the docks. Further, the container was factory sealed, where the Customs Broker had no role to play.
9. It be noted that in terms of the obligations under the CHALR,- i.e. Violation of Regulation 11(n), no case remains any further in view of the said proceedings, having attained finality. It is expressly incumbent on the department to have pointed out the role played by the appellant herein for imposition of penalty on them under Section 114(i) of the Customs Act. We also note that there is no finding by the adjudicating authority to indicate any beneficial consideration having been passed on to the appellant by way of a monetary reward or otherwise for his assumed role for which the appellant has been penalised by the adjudicating authority.
10. In view of the above and as it is a settled proposition in law that for imposition of penalty, it is necessary to establish a positive role on the part of the concerned person or the establishment of mens rea on part of such a person is a must. Vague allegations of negligence, non-verification of identity and functioning of the client etc. howsoever grave cannot be assumed to mean abetment and a case of deliberate act or omission, so as to invoke penal action. For any penal action to be enforced, the establishment of an active role on the part of the accused is imperative. For 11 of 11 Customs Appeal No. 76489 of 2019 the said propositions in law, reliance is placed on the ratio of the law as propounded in the following cases:
1. Commissioner of Customs Export Chennai Vs. Sahaya 2 Edin Prabhu ,
2. Ashok Kumar Vs. Commissioner of Customs Export 3 (Port), Chennai ,
3. Neptune Cargo Movers Pvt. Ltd. Vs. Commissioner of 4 Customs Export Chennai , 5
4. AN Bhatt Vs. Collector of Customs ,
5. Sahaya Edin Prabhu Vs. Commissioner of Customs, 6 Chennai , 7 as affirmed by Madras High Court ,
11. In view of our findings above and the ratio of the law as flowing from the aforesaid case laws, we are of the view that the order of the learned adjudicating authority cannot be sustained and needs to be set aside. We therefore, quash the order passed by the learned Adjudicating Authority and allow the appeal, with consequential relief, if any, in law.
(Pronounced in the open court on...06.02.2024..) Sd/-
(R.Muralidhar) Member (Judicial) Sd/-
(Rajeev Tandon) Member (Technical) K.M
2. 2015 (320) ELT 264 Madras
3. 2010 (262) ELT 321 Tribunal
4. 2007 (219) ELT 673 Tribunal, Chennai
5. 1991 (55) ELT 580 Tribunal
6. 2008 (222) ELT 308 Tribunal Chennai
7. 2015 (320) ELT 264 Madras High Court