Custom, Excise & Service Tax Tribunal
Sun Impex Clearing And Shipping Agency vs Commissioner Of Customs ... on 23 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH - COURT NO.III
Customs Appeal No.55377 of 2023 (DB)
[(Arising out of Order-in-Original No.02/2023-24 dated 16.05.2023 passed by the
Commissioner of Customs (Preventive), Jodhpur.]
M/s.Sun Impex Clearing & Shipping Agency, Appellant
Office No.304, Paradise Building,
Sarojini Marg, C-Scheme,
Jaipur-302 002.
VERSUS
Commissioner of Customs (Preventive), Respondent
Jodhpur, Hqrs. NCRB Statue Circle, Jaipur-302 005.
APPEARANCE:
Shri Subham Jaiswal and Ms. Shreya Dahiya, Advocates for the appellant Shri Munshi Ram Dhaniya, Authorised Representative for the respondent CORAM:
HON'BLE MS. BINU TAMTA, MEMBER (JUDICIAL) HON'BLE MR. P.V.SUBBA RAO, MEMBER (TECHNICAL) FINAL ORDER NO.55627/2024 DATE OF HEARING: 03.04.2024 DATE OF DECISION: 23.04.2024 BINU TAMTA:
1. The appellant a Custom House Agent is aggrieved by the revocation of the custom broker license along with forfeiture of security deposit and penalty by the order-in-original no.02/2023-24 dated 16.05.2023.
2. An investigation was launched by the Customs Authorities alleging that the exporter, M/s Dyna Biotech had exported '220L Tetanus Fermenter' without obtaining license and thereby violated the export policy of DGFT as 'Laboratory Fermenter' were covered under Appendix - 3 of Special Chemicals, Organisms, Materials, Equipment, and Technologies ("SCOMET") List. It appeared that the exporter had exported SCOMET items covered under 42 shipping bills and the appellant was the custom house agent in respect of two shipping bills for export of goods with descriptions as :
"i) SCREW UNIT WITH SLIDE BEARING WGR (R)-MR- vide Shipping Bill no.1566930 dated 15/12/2017 and
ii) FGRL (R)-60 DD PARALL, SHAFT HEL GER AGIT vide shipping bill no. 2146192 dated 11/1/2018."
3. On the basis of the investigation, the license of the appellant was suspended vide Order dated 16.12.2022 under Regulation 19(1) of Customs Brokers Licensing Regulations, 2013 (CBLR) which was subsequently confirmed vide Order dated 12.01.2023. Show cause notice dated 23.01.2023 was issued proposing the impugned punishments for violation of the provisions of Regulation 11(d), 11(e) and 11(n) of CBLR, 2018. The Inquiry Officer vide Inquiry Report dated 21.02.2023 recorded the findings that the appellant failed to discharge the obligations in terms of the Regulations. The Adjudicating Authority by the impugned order has confirmed the revocation of the Customs broker license under Regulation 20(7) read with regulation 18 and 22 of CBLR, forfeiture of security deposit and penalty of Rs.50,000 under Regulation 22 read with Regulation 20 of the CBLR. The present appeal has been filed challenging the said order before the Tribunal.
4. We have heard Siri Shubham Jaiswal, the learned counsel for the appellant and Shri M. R. Dhaniya, the learned Authorised Representative for the Revenue, and have perused the records of the case.
5. The submission of the learned Counsel for the appellant is that the amendment in the SCOMET list vide Notification No.29/2015-20 dated 21.09.2017 was relatively new when the goods were exported on 15.12.2017 and it being extremely technical was beyond the knowledge and understanding of a Custom House Agent. The appellant as a CHA was required to provide the logistic support to the exporter and importer and was obliged to ensure that all the documentation is in order. The CHA cannot be expected to know the technical particulars of the goods involved in the export. The appellant denied that there was any violation of the obligations under the provisions of CBLR. The learned Counsel submitted that from the export documents sent to the appellant, i.e., invoices, packing list, and shipping bill which described the goods as Screw Unit with Slight Bearing WGR (R) - MR and from the said description, it is not possible to ascertain whether the item would fall under the SCOMET list for which export license is required from DGFT. The learned counsel has referred to various decisions clarifying the role to be played by the CHA in discharge of the obligations under the provisions of the CBLR.
6. The learned AR has reiterated the findings of the Adjudicating Authority and submitted that the appellant failed to advise their client to comply with the provisions of the Customs Act, Rules & Regulations and therefore lacked the awareness of export guidelines pertaining to SCOMET items and thereby neglected the obligations under the Regulations. He further elaborated that the CHA did not verify the products or parts manufactured in the factory nor did they verify the intended use of the export products. The Regulations make it mandatory for the CHA to advise the clients so as to comply with the legal provisions, exercise due diligence in verifying information related to cargo clearance and verify the authenticity of documents and information provided by the clients. Therefore, the revocation of the customs broker license, forfeiture of security deposit and imposition of penalty is justified.
7. The issue for consideration in this appeal is whether the goods exported were falling under SCOMET list and the same were exported without obtaining the license from the DGFT and for which the action taken against the appellant under the provisions of CBLR is sustainable.
8. To verify whether the export items as described in the export documents would fall under the SCOMET List, we need to first examine the amendment introduced in the SCOMET List. Notification No. 29/2015-20 dated 21.09.2017 was issued by the DGFT whereby amendments were introduced in Appendix -3 of SCOMET List. The entry number 3D00615 is reproduced below:
"SCOMET Entry 3D006 shall be substituted as follows:-
(1) Fermenters capable of cultivation of micro-
organisms or of live cells for the production of viruses or toxins, without the propagation of aerosols, having a total internal volume of 20litres or greater;
(2) Components designed for such fermenters, as follows:-
a. cultivation chambers designed to be sterilized or disinfected in situ;
b. cultivation chamber holding devices; or c. process control units capable of simultaneously monitoring and controlling two or more fermentation system parameters (e.g. temperature, pH, nutrients, agitation, dissolved oxygen, air flow, foam control).
Technical Note:
Fermenters include bioreactors (including single- use (disposable) bioreactors), chemostats and continuous-flow systems."
If we examine the description of goods as mentioned by the exporter in the invoice, packing list and shipping bill with the description given in the entry, we do not find any similarity to connect the goods in question to fall in the amended entry. The components designed for such fermenters in the entry have been specifically provided as cultivation chambers designed to be sterilised or disinfected, cultivation chamber, holding devices or process control units, capable of simultaneously monitoring and controlling two or more fermentation system parameters. That is the reason why neither the appellant nor the Customs Authorities were able to ascertain that the goods are covered as fermenters or as components for which export license is required. The export was allowed by the Customs in the normal course and it is only subsequently on the basis of investigation by SIIB that the issue of export authorization was realized by the Department. The appellant is right in saying that from the description of the two items exported, no lapse could be attributed to him. In fact we are of the opinion that the goods in question being Screw Unit with Slight Bearing WGR (R) - MR and Shaft cannot be equated with the description in the entry and could not be construed as prohibited, the export of which is permissible only on the basis of the license issued by DGFT in that regard. Since the goods exported do not fall in terms of the entry in the notification, there is no justification to penalise the appellant.
9. Having concluded that the goods in question do not fall in the respective entry in the SCOMET List, we may now consider whether the appellant has contravened the obligations under the provisions of Regulation 11(d), 11(e), 11(n) of CBLR.
10. Regulation 11 reads: --
"Obligations of Customs Broker - A Customs
Broker shall -
(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."
The allegations in the show cause notice is that the appellant as CHA failed to advise his clients to comply with the provisions of the Act, Rules and Regulations, that for export of goods, license should have been obtained nor did he brought the matter to the notice of the Customs Authorities. The stand of the Revenue is that in the statement recorded on 26.08.2020, the Operation Manager of CHA admitted that they never verified the product or parts manufactured in the factory and also not verified the uses of the export product and their parts. The relevant contents of the statement is quoted below:-
"That when specifically asked to confirm whether the SCOMET items require licence from the DGFT they replied in affirmative and stated that as per their knowledge, if the product is coming under SCOMET list, then the licence from DGFT is required for clearance of the same; that when specifically asked and asked to confirm whether M/s. Dyna Biotech is exporting fermenters and their components; that when specifically asked to confirm the export of Fermenters and their parts made by M/s. Dyna Biotech, will require the export authorization for the export or not, in reply they have confirmed that the export of Fermenters and their parts made by M/s.Dyna Biotech will require the export authorization for the export; that when specifically asked during the exports have they ever informed the exporter regarding export authorization for their item of exports, in reply in negative and they have stated that they were not aware that the Fermenters and their components are falling under SCOMET list and the export of the said items require export authorization for the clearance of the same; that in addition they have stated that they were not aware that the Fermenters and their components are falling under SCOMET list and the export of the said items require export authorization for the clearance of the same. The mistake has happened due to lack of knowledge and has happened inadvertently and lenient view may please be taken."
From the aforesaid, it appears that the CHA was aware and had knowledge that the products falling under the SCOMET list required license from DGFT for its clearance but they were not aware that the fermenters and their components are falling under SCOMET list and export of the said items required export authorization for their clearance. As discussed above, from the export documents, it is apparent that the description of the goods is not such which would fall under the SCOMET list and therefore there was no scope for the appellant to advise the exporter for compliance of the export authorisation. Moreover, the amendment was introduced on 21.09.2017 and within two months thereafter the goods were exported and since it is an extremely technical matter, it appears that neither the CA nor the customs authorities were aware of its applicability. The Revenue has not clarified as to how the goods in question would fall under the entry of fermenters and components thereof nor the Adjudicating Authority has applied its mind to the respective shipping bills covering different items with reference to the description given in the entry. In that view of the matter, we are of the view that the appellant who is merely a Customs House Agent cannot be expected to be an expert in SCOMET List and therefore the provisions of Regulation 11(d) cannot be invoked against the appellant.
11. Regulation 11(e) provides - "exercise due diligence to ascertain the correctness of any information which the imparts to a client with reference to any work related to clearance of cargo or baggage."
The allegation on which the violation of Regulation 11(e) has been made out is the statement of the appellant where they have admitted that they never verified the product or parts manufactured in the factory nor verified the use of the export product and their parts. The allegation do not fall within the obligation as provided in Regulation 11(e) which requires the CHA to exercise due diligence to ascertain the correctness of information which he imparts to a client with reference to any work related to clearance of cargo baggage and hence, invocation of Regulation 11(e) is unsustainable. We would like to take note of the observations made by the Delhi High Court in Kunal Travels (Cargo) Vs. CC (I&G), IGI Airport, New Delhi - 2017 (354) ELT 447 (Delhi) that "the CHAs due diligence is for information that they may give to its client and not necessarily to do a background check of either the client or the consignment." Taking note of the said decision of the Delhi High Court, this Tribunal in Perfect Cargo & Logistics Vs. C.C. (Airport & General), New Delhi - 2021 (276) ELT 649 (T-Del.) analysed the role which is required to be played by the CHA in discharge of his obligations under the Regulations as under:-
"27. It is clear from the aforesaid decision of the Delhi High Court that there is no obligation on the Customs House Agent to look into the information made available by the importer/exporter. The Customs House Agent is merely a processing agent of documents with respect to clearance of goods through Customs House and he is not an inspector to weigh the genuineness of the transaction."
Also the discussion on the provisions of Regulation 11(e), the Tribunal in M/s. Trinity International Forwarders Vs. Commissioner of Customs (Preventive) - Final Order No.50978/2023 dated 02.08.2023 held:-
"15. This Regulation requires the Customs Broker to not impart any incorrect information to the exporter. After perusing the records and the appeal we find no allegation that the appellant, as the Customs Broker, has imparted incorrect information. The case of the Revenue is that the exporter had over-valued export goods and the appellant did not report it. Therefore, evidently, the appellant did not violate Regulation 11(e)."
The aforesaid observations squarely apply to the facts of the present case and therefore, we conclude that the appellant cannot be held guilty for violating Regulation 11 (e).
12. Regulation 11(n) requires the CHA to verify antecedent, correctness of Importer 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. Here, also, we find that Regulation 11(n) has been invoked on the same statement of the appellant that he was not aware that the fermenters and their components are falling under SCOMET list and the export of the said items required export authorisation for their clearance. These allegations are not relevant for the purposes of Regulation 11(n). Neither the Revenue has pointed out, nor the Adjudicating Authority has ascertained the actual violation in terms of Regulation 11(n), though the appellant claimed that in compliance to its obligations, they had verified the correctness of IEC code of the exporter, identified its client and its functioning as per the KYC norms as also the statutory documents issued by other Government Authorities. It is not the case, where the IEC was incorrect or fraudulent or that the exporter was untraceable or was not functioning at the declared address. In the absence of any such allegations, it is unreasonable to say that the appellant had violated the provisions of Regulation 11(n) of the CBLR and hence we reject the findings that the appellant failed to discharge their obligation under Regulation 11(n). Reference to the decision in Commissioner Vs. Shiva Khurana - 2019 (367) ELT 550 (Delhi) while dealing with the provisions of Regulation 13(o) of CBLR, 2004, which is identical to Regulation 11(n) of CBLR, 2013, where the Delhi High Court observed as under:-
"7. This Court is of the opinion that the impugned order is justified in the facts and circumstances of the case. The reference to the verification of "antecedents and correctness of Importer Exporter Code (IEC) Number" and the identity of the concerned exporter/importer, in the opinion of this Court is to be read in the context of the CHA's duty as a mere agent rather than as a Revenue official who is empowered to investigate and enquire into the veracity of the statement made orally or in a document. If one interprets Regulation 13(o) reasonably in the light of what the CHA is expected to do, in the normal course, the duty cast is merely to satisfy itself as to whether the importer or exporter in fact is reflected in the list of the authorized exporters or importers and possesses the Importer Exporter Code (IEC) Number. As to whether in reality, such exporters in the given case exist or have shifted or are irregular in their dealings in any manner (in relation to the particular transaction of export), can hardly be the subject matter of "due diligence" expected of such agent unless there are any factors which ought to have alerted it to make further inquiry. There is nothing in the Regulations nor in the Customs Act which can cast such a higher responsibility as are sought to be urged by the Revenue. In other words, in the absence of any indication that the CHA concerned was complicit in the facts of a particular case, it cannot ordinarily be held liable."
13. In similar circumstances, this Tribunal in the case of M/s. Trinity International Forwarders (supra) concluded that the Customs broker cannot be held guilty for violating the Regulation 11(d), 11(e) and 11(n) of CBLR, 2013 where the case of the Revenue was that the Customs Broker by filing the shipping bills with over- invoiced export values of the garments exported by the exporter so as to claim ineligible drawback. In that context, it was observed that the Customs Broker has no authority to inspect or examine the goods and the possibility of the Customs Broker suspecting that the goods may have been overvalued also does not arise.
14. The Adjudicating Authority in the impugned order has basically relied on the order-in-original dated 31.10.2022 which was passed on adjudicating the show cause notice dated 03.03.2020 issued to the exporter and also the appellant (CHA) where the Commissioner of Customs on the basis of the statement recorded on 26.08.2020 under Section 108 of the Customs Act recorded a finding that CHA was well aware that the goods being exported was SCOMET item and they facilitated the clearance and thus aided and abetted the exporter. Accordingly, penalty of Rs.20,000/- under Section 114(i) and Section 114 AA of the Customs Act, 1962 was imposed separately on the CHA. Though the Adjudicating Authority could have relied on the decision in the collateral proceedings, however, it was necessary to have analysed the requirements for complying with the obligations enshrined on the CHA under the CBLR with the facts of the present case. We do not find any specific discussion on the applicability of the parameters provided in the regulations so as to hold the appellant guilty of contravention thereof. The punishment of forfeiture of license is a very serious punishment affecting the livelihood of a person for all times to come, hence it was necessary for the Adjudicating Authority to have considered the issue of violation of the provisions of the Regulations on merits with an open mind as the punishment imposed on the appellant in the proceedings under the Customs Act was only penalty of Rs.20,000/- separately under both the Sections.
15. We, therefore, conclude that the appellant has not violated the obligations under Regulation 11(d), 11(e) and 11 (n) of CBLR, 2013 and therefore the punishment of revocation of the Customs Broker License, forfeiture of security deposit and imposition of penalty is unsustainable. Consequently, the impugned order deserves to be set aside.
16. The appeal, is accordingly allowed.
[Order pronounced in open court on 23rd April, 2024] (Binu Tamta) Member (Judicial) (P. V. Subba Rao) Member (Technical) Ckp.