Custom, Excise & Service Tax Tribunal
New India Shipping Services vs Commissioner Of Customs on 19 June, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
BANGALORE
Appeal(s) Involved:
C/23379/2014-DB
[Arising out of Order-in-Original No. BLR-CUSTM-000-COM-030-14-15 dt. 01/11/2014 passed by CC, Bangalore-1]
For approval and signature:
HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3
Whether Their Lordships wish to see the fair copy of the Order?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
New India Shipping Services
B.67, Cargo Village,
Next to India Oil Sky Tanking Fuel Farm,
Bengaluru International Airport,
Devanahalli, Bangalore 560 300.
Appellant(s)
Versus
Commissioner of Customs,
CR Buildings, Queens Road,
Bangalore 560 001.
Respondent(s)
Appearance:
Shri Kiran Javali and Ms. Rukmani Menon, Advocates
For the Appellant
Dr. A.K. Nigam, Addl. Commissioner(AR)
For the Respondent
Date of Hearing: 20/02/2015
Date of Decision: ..
CORAM:
HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER
Final Order No. / 2015
Per : B.S.V. MURTHY
The appellant is a Customs Broker (CB) holding a Customs Broker License valid upto 23/09/2016. On the basis of an authorization from M/s. LGC Promochem India Pvt. Ltd., Bangalore (hereinafter referred to as importer) CB filed several Bills of Entry for import of chemicals/ Laboratory reagents. The appellants claimed the chemicals as Pharmaceutical Reference Stands (PRS, for short) and classified the same under CTH 38220090. The benefit of exemption Notification No.21/2002-Cus. dt. 01/03/2002 (Sl.No.138 Condition No.l7 for the period upto 16/03/2012 ) and exemption Notification No.12/2012-Cus. dt. 17/03/2012 ( Sl.No.164 Condition No.12 for the period from 17/03/2012) was claimed. Most of the bills filed by the broker on behalf of the importer were facilitated through RMS at Air Cargo Complex, Bangalore. During the course of post-clearance audit of the Bills of Entry filed by them, it was observed that the goods had been mis-classified. Taking a view that mis-classification was done wrongly to avail the benefit of exemption notifications, proceedings were initiated against the importer under Customs Act, 1962 and against the appellant also. Besides initiating action under Customs Act, proceedings were initiated against the appellant under Customs Broker License Regulations, 2013 (CBLR). After an enquiry as per the directions of the Commissioner and based on the report of the enquiry officer and after following the due process of law, impugned order has been passed against the appellant. The licence issued to the appellant has been revoked with immediate effect. The security deposit in full has been forfeited and a penalty of Rs.50,000/- has been imposed. This appeal is challenging the impugned order.
2. Heard both the sides.
3. The learned counsels for the appellant made detailed submissions. Submissions and the contents of the appeal memorandum brought out the following points (Some points were not pressed):-
3.1. There was a dispute about the classification and the eligibility for exemption in the proceedings against the importer and the appellant under Customs Act, 1962 and without reaching conclusion, initiation of parallel proceedings under CBLR was not proper;
3.2. The observations of the Commissioner in the order that the decision in OIO dt. 28/08/2014 revealed that the appellant had committed and abetted in the evasion of customs duty and reached a conclusion on that basis under CBLR was not proper and therefore is liable to be set aside;
3.3. Appellants were not put to notice about the conclusions reached in the order dt. 28/08/2014 and this results in violation of principles of natural justice;
3.4. Imposition of penalty and action under CBLR has resulted in double jeopardy and on this ground, the impugned order is liable to be set aside;
3.5. Since there is a dispute with regard to classification, there could not have been any mis-declaration and therefore the order is bad in law;
3.6. The finding that the documents are not available in any of the dockets was not correct since this fact was not brought out in the show-cause notice and therefore this conclusion is assumptive in nature;
3.7. It was submitted that the revocation of licnece on the ground that the appellants had aided and abetted in mis-declaration of description of the goods imported thereby facilitating availment of benefit of exemption notifications is not correct since the importer did not accept the classification or denial of benefit of exemption and has challenged the same and appeals filed by the importer are already before the Tribunal on this issue;
3.8. It was also submitted that the importer has been importing these goods for more than 10 years and they have been consistently declaring the goods as PRS even before exemption was extended and therefore the allegation that there was an intention to avail the benefit of exemption notifications wrongly and therefore description was misdeclared has no basis;
3.9. They relied upon a certificate issued by the supplier dt. 30/09/2014 stating that the reference standard supplied by EQDM supplier are not Certified Reference Material (CRM) as neither certificate of analysis nor data relevant to the use of the products as defined by the Ph.Eur. monograph are provided with the reference standard;
3.10. They also submitted copies of Bills of Entry along with relevant commercial invoices in support of their submission that benefit of exemption notification has been extended right from the year 2011 to 2014 wherein invoices showed that what was imported was PRS and in some cases the invoices did not even mention that the goods imported were PRS;
3.11. It was also submitted that contrary to the observations of the Commissioner in the impugned order, examining officers were required to call for the documents and certificates as per the conditions (12 and 17 of the notifications) and the examining officers had seen the documents as per the examination report submitted by them;
3.12. Under the circumstances, the importer as well as the appellants had reasonable grounds to entertain a bona fide belief that the chemicals imported by them were eligible for exemption under Notification No.21/2002 and Notification No.12/2012 Customs (the words used for exemption PRS are same in both the notifications);
3.13. It was also submitted that according to Regulations, revocation coupled with forfeiture of security deposit and imposition of penalty is not allowed and if the licence is revoked, forfeiture of security and penalty cannot be resorted to.
4. Learned AR would submit that the Customs Broker, according to the Regulations, advises his clients to comply with the provisions of Act and in case the importer does not do so, brings the matter to the notice of the Deputy Commissioner. In this case, even when the Department advised the CHA that exemption is not available, the broker continued to file the Bills of Entry claiming exemption for PRS. It was also submitted that in many invoices, it was clearly mentioned that the imported chemicals were CRM and in many of the other invoices, the invoices did not specifically mention that they had imported PRS. He also drew our attention to the observations of the Commissioner that in the relevant dockets of several Bills of Entry, the documentary evidences showing the eligibility of the importer for exemption were not available. It was also submitted that once broker was advised that the exemption is not available and especially in view of the fact that in many cases the importer paid duty at merit rates, the customs broker should have filed or advised the importer to file Bills of Entry claiming merit rate only. It was also submitted that in several cases, the importer had paid merit rate of duty and had not even claimed exemption. Therefore there is a clear failure on the part of the customs broker and thereby violation of Regulation 11(d) of CBLR. The learned AR also submitted that the customs broker did not exercise due diligence to ascertain the correctness of the information provided. Therefore the customs broker has clearly violated Regulation 11(e) also. He also submitted that because of the omissions and commissions on the part of the appellant, there was evasion of customs duty amounting to Rs.10,86,08,476/- and therefore the revocation of licence and penalties imposed and forfeiture of security is appropriate and proper.
5. From the submissions of both the sides, what emerges is the fact that most important aspect that has to be decided is whether there was a mis-declaration on the part of the importer and the appellant to claim exemption under notifications referred to herein above. Therefore it would be appropriate to consider the facts and background and also the documents submitted during the hearing relating to assessment.
6. It was submitted that the importer has been importing these materials right from 1996 onwards and the items always have been classified under CTH 3822. CTH 3822 at present reads as under:-
3822
Diagnostic or laboratory reagents on a backing, prepared diagnostic or laboratory reagents whether or not on a backing, other than those of heading 3002 or 3006; certified reference materials
3822 00
3822 00 11
3822 00 12
3822 00 19
3822 00 90
Diagnostic or laboratory reagents on a backing, prepared diagnostic or laboratory reagents whether or not on a backing, other than those of heading 3002 or 3006; certified reference materials.
---- For medical diagnosis:
---- Pregnancy confirmation reagents ..
---- Reagents for diagnosing AIDS ..
---- Other
----Other
Kg.
Kg.
Kg.
Kg.
10%
10%
10%
10%
-
-
-
-
7. Initially, the heading did not contain CRM and the sub-headings. These were introduced subsequently. At Sl.No.164 of Notification No.21/2002, a concessional rate of 5% was provided for PRS falling under Chapter 2852 or 3822 subject to condition No.12. The condition No.12 reads as under:-
12.
If the importer produces a certificate of the Reference Standard and copies of documents to substantiate that the organization or institution from where the Reference Standard has been imported is approved by the World Health Organization or International Organization for Standards.
8. The description of the item and the condition remain the same till date and there is no change for the past 12 years. The disputed period for recovery of revenue for more than Rs.10.86 crores on the ground that the importer is not eligible for the exemption starts from the year 2010 onwards. In paragraph 13, the Commissioner has reproduced the allegations in the show-cause notice. The same is reproduced below:-
13. A gist of allegations against the CB are brought out in para 4 of the show-cause notice dated 19.5.2014. It is indicated that the Customs Broker while acting as agents for M/s. LGC Promochem India Pvt. Ltd. have filed the Bills of Entry for import of various chemical/pharmaceutical formulations declaring them as Pharmaceutical Reference Standards claiming classification under CTH 38220090 together with the benefit of Sl. No.138 of Notification No.21/2002 dated 1.3.2002 (Condition No.17) and Sl. No.164 of Notification No.12/2012 dated 17.3.2012 (Condition No.12) for the corresponding periods. As per the conditions of the Notifications, the importer shall produce (a) A Certificate of Reference Standard and (b) Copies of the documents to substantiate that the Organization or the Institution from where the Reference Standard has been imported is approved by the World Health Organization or International Organization for the Standards. It is the allegation of the department that the CB has not obtained and produced the required documents like the Certificates of Reference Standards. Further, the suppliers of the goods indicated on the invoices that the imported goods were certified reference materials which had been altered as pharmaceutical reference standards. It is alleged that the CB failed to seek any clarification from the importer as to why the nomenclature used by the supplier was so altered and had acquiesced to the mis-declarations of the importer. The CB also failed to bring these facts to the notice of the Assistant/Deputy Commissioner of Customs and failed to produce the requisite documents. Thus, the CB appears to have been an active party to the misclassification, wrong claim of concession and thereby to evasion of duty. It is further alleged that the fact that same CB handled Bills of Entry filed by the importer paying merit rate of duty for the same goods further substantiates the position that the CB intentionally suppressed the facts and was an active party to mis-declaration and duty evasion.
9. The Commissioner has taken a view that the description of the goods was mis-declared as PRS on the Bills of Entry even though the supplier had indicated the same as CRM on the invoices. To come to this conclusion, Commissioner has observed that he called for dockets of the import clearances. He found that in none of the dockets of Bills of Entry filed and assessed and taken up for examination by him during the previous 5 years, certificates/copies of documents required as per the conditions of notification were available. On this basis, he observed that the claim of the appellants that all the requisite documents were shown to the proper officer at the time of assessment has no basis. There was no explanation as to why these documents are not available in any of the dockets. He also takes note of the fact that during the proceedings under Customs Act, the importer had contended that they were not required to produce the requisite certificates unless asked for. On this basis, he comes to the conclusion that the averments of the Customs Broker are only after thoughts. He has also given the list of Bills of Entry which he has perused from 2010 onwards wherein he did not find the dockets.
10. It was submitted before us that non-availability of documents in the dockets cannot lead to the conclusion that they were not seen by the officers. The appellants produced a set of Bills of Entry and commercial invoices (for Customs purposes) running into 105 pages. On going through randomly selected documents, the observations can be summarized as under:-
Bill of Entry No.4852963 dt. 07/10/2011: In the examination order, it has been mentioned that mandatory compliance requirements have to be verified. In the examination report, there is no mention about verification of documents. The examination report dt. 10/10/2011 simply gives the description found after opening the package in the presence of CHA. In the commercial invoice relating to the Bill of Entry, description of the content is given as dangerous goods in excepted quantities.
Bill of Entry No.5140919 dt. 09/11/2011: In this case also, the examination order mentioned Notification No.21/2002, Condition No.17 and required the examiner to look at the compliance requirements. In the examination report dt. 11/11/2011, once again the result of examination of package has been reported. In this case also, the invoice gave the description of the content as above and the invoice number tallied with the invoice number given in the Bill of Entry.
Bill of Entry No.7815467 dt. 31/08/2012: In this case, the examination order is more detailed. It specifically mentioned that certificate of the reference standard and copies of documents to substantiate that the organization or institution from where the reference standard has been imported is approved by the World Health Organisation or International Organisation for Standards besides mentioning the notification number have to be verified. In this case also, the examination report dt. 01/09/2012 did not give any comments regarding document verification but specifically says that packages were opened and examined. In this case also the description of the content is given as dangerous goods in excepted quantities.
Bill of Entry No.8715244 dt. 10/12/2012: In this case also, the examination order is similar to the one given for the earlier Bill of Entry discussed above. Once again the examination report talks of opening the package and verifying the contents.
Bill of Entry No.6005890 dt. 03/07/2014: In this case also, the examination order was detailed as in the case of earlier Bills of Entry but the examination report mentioned pharmaceutical reference standard description and part number were as per documents. In this case also in the invoice, description of the content is dangerous goods in excepted quantities.
Bill of Entry No.7542044 dt. 29/11/2014: In this case also the examination report and examination order are as in the earlier case. However in the invoice in the description of the content, it is stated Pharmacopoeial reference standards not restricted. Appellants also produced several invoices wherein it has been stated specifically that the invoice and the goods are pharmacopoeial reference standards.
11. What emerges from the verification of Bills of Entry, examination reports and the examination orders is that as is the normal practice in the customs, in this case also, the examination order required the officer examining the consignment to check the description of the goods and also verify documents which are required to be produced before clearing the goods. The conclusion of the Commissioner is based on the fact that in the dockets of Bills of Entry verified by him at random, these documents were not available. Apparently the examining officer was satisfied that importer is eligible for the exemption in the case of bills of entry seen by us. It was not brought to our notice at the time of hearing nor is there an observation to this effect indicating statutory provisions that it is the responsibility of the CB to ensure that all the documents produced are in the dockets. Unless this is shown, it is not possible to sustain the observation that non-availability of documents in the docket can lead to a conclusion that at the time of importation, the appellants did not produce the documents. The examining officer would have definitely seen the commercial invoices, because it is one of the examination requirements. If the examining officer had seen the commercial invoice, he would have definitely noticed the difference in the description of the goods in the certificate, bill of entry and the commercial invoice. In any case, if the examining officer has verified the test report for the reference standard and the documents required as per the condition, there cannot be any conclusion that there were no commercial invoices.
12. The Commissioner has observed that the appellant should have explained as to why the documents were not available in the dockets when the goods have been cleared under self-assessment procedure. The conclusion seems to be on the basis that in self-assessment procedure, the documents have to be kept in the dockets by the Customer Broker. Self-assessment procedure was introduced in Customs Act with effect from 08/04/2011 by Section 38 of the Finance Act, 2011. The section is reproduced below for better appreciation:-
SECTION 17. Assessment of duty. (1) An importer entering any imported goods under section 46, or an exporter entering any export goods under section 50, shall, save as otherwise provided insection 85, self-ssess the duty, if any, leviable on such goods.
(2) The proper officer may verify the self-assessment of such goods and for this purpose, examine or test any imported goods or export goods or such part thereof as may be necessary.
(3) For verification of self-assessment under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, brokers note, insurance policy, catalogue or other document, whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which is in his power to produce or furnish, and thereupon, the importer, exporter or such other person shall produce such document or furnish such information.
(4) Where it is found on verification, examination or testing of the goods or otherwise that the self- assessment is not done correctly, the proper officer may, without prejudice to any other action which may betaken under this Act, re-assess the duty leviable on such goods.
(5) Where any re-assessment done under sub-section (4) is contrary to the self- assessment 25 done by the importer or exporter regarding valuation of goods, classification, exemption or concessions of dutyavailed consequent to any notification issued therefore under this Act and in cases other than those where the importer or exporter, as the case may be, confirms his acceptance of the said re- assessment inwriting, the proper officer shall pass a speaking order on the re-assessment, within fifteen days from the date of re-assessment of the bill of entry or the shipping bill, as the case may be.
(6) Where re-assessment has not been done or a speaking order has not been passed on re- assessment, the proper officer may audit the assessment of duty of the imported goods or export goods at hisoffice or at the premises of the importer or exporter, as may be expedient, in such manner as may be prescribed.
Explanation. For the removal of doubts, it is hereby declared that in cases where an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section50 before the date on which the Finance Bill, 2011 receives the assent of the President, such imported goods or export goods shall continue to be governed by the provisions of section 17 as it stood immediately before the date on which such assent is received..
13. As can be seen, the proper officer may verify the self-assessment of such goods and for this purpose examine any imported goods as may be necessary. Further the proper officer also may require the importer to produce documents or evidence or furnish any information. From the documents produced before us, it can be seen that in several cases there was examination order requiring the officer examining the packages to verify the documents and the eligibility for exemption. Therefore it cannot be concluded that in all the cases there was no examination of the goods and there was no examination or reconsideration of the self-assessment done by the importer/ Customs Broker.
14. Further it was also brought to our notice that on 23/01/2014, in the case of several Bills of Entry, the importer was required to pay duty at the merit rate without allowing the exemption and therefore since no order was passed, the importer filed an appeal before the Commissioner(Appeals) after paying duty under protest. Commissioner(Appeals) in his OIA No.22 to 57/2014 Cus(B) dt. 28/04/2014 passed an order directing the adjudicating authority to pass speaking order in compliance with the provision under Section 17(5) of the Act, in respect of re-assessment of Bill of Entry duly observing the principles of natural justice and re-assessment should be based on statutory provisions and facts on record.
15. The observations above would show that self-assessment does not mean or does not give complete freedom to an importer to take the goods out of Customs charge without the knowledge of the Customs or without producing the documents which are required by Customs and when we see the fact that the OIA passed by the Commissioner(Appeals) covered 13 Bills of Entry of the importer, it would show that even though the self-assessment procedure was adopted by the importer, Department had not accepted and allowed the goods to go in all the cases without verification. This is further substantiated by the Bills of Entry details which we have examined, considered and given the details therein above right from 2011 onwards.
16. Therefore the Commissioners observation that the fact that documents were not found in the dockets would show that the defence of the Customs Broker is nothing but an afterthought does not emerge from the facts and circumstances. The conclusion that there is no doubt that Customs Broker did not obtain necessary documents and did not produce the same is also not a conclusion that can emerge, especially in view of the fact that in the case of Bills of Entry produced before us, the examining officer was specifically directed to get the documents. It is quite possible that in some Bills of Entry the examination order may not have required the importer / Customs Broker to produce evidence for eligibility of the exemption and especially in view of the fact that risk management system has been introduced in Customs, it is quite possible that there was random selection of Bills of Entry. We cannot really say anything since these facts can be verified only by going through the system.
17. Nevertheless what comes out is that just as the Commissioner has examined some Bills of Entry and found that the documents are not available, we cannot say that itself is sufficient to come to the conclusion that there was a mis-declaration. The non-availability of documents in the dockets, in our opinion, cannot lead to a conclusion of attempt to evasion in view of the observations made by us and the analysis made by us hereinabove. In paragraph 14.4.1 of his order, the Commissioner has observed that Customs Broker has described the goods as PRS which was different from the nomenclature used by the supplier of the goods. No doubt this is so as has been examined by us and considered by us in respect of many Bills of Entry. But in view of the specific directions given in the examination order in the Bills of Entry referred to by us and placed before us covering the period 2011 onwards, despite the difference between the description in the commercial invoice and the Bill of Entry, which would have definitely come to the notice of the examining officer since he was required to get the documents to support the exemption claim and examining the same, it cannot be said that merely because the Customs Broker had described the goods differently in the Bills of Entry, he could have enabled the importer to successfully evade the duty.
18. Further we also find that the Commissioners observation that the allegation made in the show-cause notice that the goods were declared as CRM on the respective invoices but importer / Customs Broker had declared them as PRS on the Bills of Entry is not coming out of his observations on the Bills of Entry selected by him. The invoices and the Bills of Entry produced before us also show that in none of the invoices CRM was mentioned. Whether CRM and PRS are one and the same and what would be the implication on demand for duty is not the subject before us. However, in the Bills of Entry examined by the Commissioner, in none of the cases he has recorded that the description of the goods was indicated as CRM in the commercial invoice. In the case of invoices examined by us, we have indicated that the description of the content are given in the commercial invoices. But we could not find the HSN code number in the invoices placed before us. In fact in the invoices seen by us, there is a remark: The importer shall be personally responsible for the tariff classification in the country of import and will assume the ensuing regulatory, fiscal, health and safety obligations. We reproduce the observations of the Commissioner in respect of one Bill of Entry, below:-
Bill of entry No. and date 5599833/29.12.2011 Description on Bill of Entry Invoice No. & Date SCR 2011-036859 Name of the supplier Conseil De L Europe EDQM Allee Kastner 7 CS300266 Strasbourg Description on the Invoice Various chemical names HS code in invoice 3822000000 Certified reference materials
19. The fact that the Commissioner has indicated description in the invoice and HSN code separately would show that it does not make it clear whether the supplier had mentioned the goods as CRM in the description. Apparently description of the goods had the chemical names and it appears that CRM reference is taken out from HSN code. It has to be noted that there is no specific term PRS used in the tariff heading. Whether a chemical is PRS has to be based on documentary evidence. Further some PRS materials are classifiable under CTH 28 also. While we have a certificate from the supplier that the chemicals supplied are PRS only, observations of the learned Commissioner in support of his conclusion that there is a mis-declaration because of difference in the description in the invoice and the Bill of Entry are not supported by any technical opinion. If the invoice does not have the description CRM but merely gives the chemical names and the HSN code number, then the case for the Department becomes weak. This is because the PRS can fall under 2852 or 3822 as mentioned in the notification itself. Moreover it was also submitted that even prior to addition of CRM in CTH 3822, the appellants were importing PRS and it is the submission on behalf of the appellants that PRS can fall under CTH 3822 or 2852 as the case may be. When so many conclusions are possible and when we find that goods have been examined, documents have been examined, even though there is no mention, if the examiner of the packages has called for the other documents, he would have definitely seen the invoice also. Moreover the Commissioner himself agrees that commercial invoices were available in the dockets. If the appellants intention was to deliberately evade duty and ensure that misdeclaration does not get detected, the commercial invoices would not have been placed in the dockets (assuming that the dockets were not seen by the Customs officers but prepared and placed in the Customs Office by the Customs Broker). Because there is a difference of description between commercial invoice and the Bill of Entry, the whole case has been made out. Therefore it is difficult to uphold, in fact, impossible to uphold the conclusion of the learned Commissioner that this establishes the deliberate attempt of the Customs Broker to help the importer to evade the tax.
20. As regards the observations of the learned Commissioner in paragraph 14.5 that in some cases, goods were reassessed and merit rate of duty was collected and importer had paid the duty and did not challenge, it was submitted that importer had challenged it. It is in support of this submission that appellants have produced the copy of the OIA which we referred to earlier, directing reassessment and passing of a speaking order by the adjudicating authority. It has been mentioned in the order, more than 50,000 consignments have been considered and conclusion has been reached that there was a need for reclassification and demand for duty. We can only consider the documents placed before us and consider the observations in the impugned order and the submissions made before us and in such a situation we cannot specifically say anything about 50,000 consignments since they are the subject matter of another appeal. Further it was also submitted that appeals filed by the importer challenging the classification is also before the tribunal and amount involved is more than Rs. 10 crores.
21. The Commissioner has also dealt with the letter dt. 30/09/2014 issued to the importer. He observes that the catalogues do not correspond to any material imported by the importers but are general in nature and how to use reference standards. He does not say why the suppliers letter specifically stating that chemicals supplied by them are PRS is not acceptable but goes through the catalogues produced and makes his observations on the same. Further he observes that reliance on the catalogues does not absolve the Customs Broker of the failure to explain as to why there was misdeclaration and as to why the required documents were not filed. Both these observations, in our opinion, are not sustainable on the basis of the evidence placed before us, documents before us and submissions made before us. Further he goes on to observe that the Customs Broker had not explained as to why they did not seek clarification from the importer throughout the period and were filing the Bills of Entry. At this juncture, it would be appropriate to consider the statement made by Shri S.S. Prasad and he had stated that:
(i) There was no description as Pharmaceutical Reference Standard in the invoice; that the importer had confirmed that the item imported from USP, USA were Pharmaceutical Reference Standards only; (ii) they examine the eligibility of the said chemical with regard to the policy and statute; (iii) with regard to description of the chemical materials, they look into the classification as given by the suppler in their invoice; (iv) if no such information was available in the import invoice, they refer to the HSN index for specific classification of the products mentioned in the invoice and other documents; (v) if no specific entry was available in the HSN, based on the technical write-up, the classification would be decided by them in consultation with the importer; and (vi) that they were fully aware of the Customs requirements with regard to the correct classification.
22. The statement is in line with the submissions made by Customs Broker referred to by the Commissioner in paragraph 15.3 and his observation is reproduced below:-
The CB has submitted that the imported goods always carried the labels as Reference Standards and they had perused the certificates furnished by the importer before submitting the same to the assessing officers and such certificates always carried the words Pharmaceutical Reference Standards.
23. What the Customs Broker stated is that in the imported chemicals, the label mentioned the item as PRS and in their discussion with the importer, they were told that these are PRS and on that basis and as per the instructions of the importer, they had filed the Bills of Entry. While the Commissioner observes that in respect of the examined documents, the Customs Broker should have verified with the importer, the question that arises is in spite of the fact that goods were examined and examination orders required detailed examination of goods and documents, how the Customs officers also missed the difference in description between the invoice and the bills of entry and also the labels on the goods. There is no observation as to whether goods were allowed to be cleared in spite of the difference between the invoices and the Bills of Entry. The Customs officer examined the goods and the documents has to be considered as obvious because customs officers have to be considered as more knowledgeable than the staff of the Customs Broker. There is no specific detail as to the date or time when the issue came to the notice of the Customs. Obviously, during the post audit of documents, this was found out and admittedly the dockets contained only the commercial invoices and the Bills of Entry.
24. The discussion above would show that it is not possible to come to the conclusion that the Customs Broker has aided or abetted the importer in evasion of duty by misdeclaring the description. If the Customs Broker was knowledgeable about Customs procedure which he is expected to be, he would have ensured that the description in the invoices tallied with the description in the Bills of Entry. Therefore, the submission of the Broker that they were advised by the importer and they were convinced that items were PRS by verifying the label on the goods has to be believed in the absence of any evidence to the contrary. Nevertheless, we find that Customs Broker should have ensured that the items were actually PRS by ensuring that the clarification from supplier was received and relevant materials were available with the importer to show that despite the description in the invoice, the goods actually were PRS. If there was an intended evasion, in our opinion, the difference between the customs invoice and the Bill of Entry itself should have facilitated revision of classification or questioning the eligibility for exemption and matter could not have and should not have continued for a period of 5 years. The only omission, we can find is that the Customs Broker did not ensure that they had evidence to show that they had advised the importer suitably and importer had given the clarification to them and the difference between the Bill of Entry and the invoice was found by them. To this extent, it can be said that they have not fulfilled their obligations to the extent expected of them. But the revocation of licence and forfeiture of security and imposition of maximum penalty is warranted for this omission is the question to which our answer would be a clear NO. Without manipulating the invoice and ensuring that the description in the invoice and the Bill of Entry tallies, it cannot be said that there was a deliberate attempt to evade duty and hoodwink the Customs authorities who invariably verified the invoices and in this case at least in the sample Bills of Entry produced before us, even the documents supporting the claim for exemption have been asked for. While we agree that the appellants have not fulfilled their obligations to the extent expected, we do not agree with the quantum of punishment. Regulations 11(d) and 11(e) specify the following obligations of the Customs Broker.
11. 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;
(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;
..
25. In our opinion, a penalty of Rs.25,000/- would be sufficient for non-fulfillment of obligations cast on the Customs Broker.
26. In view of the above discussion, we set aside the revocation of licence of the Customs Broker with immediate effect and set aside the forfeiture of security. We reduce the penalty imposed from Rs.50,000/- to Rs.25,000/- (Rupees twenty five thousand only). Appeal is disposed of in above terms.
(Pronounced on ) B.S.V.MURTHY TECHNICAL MEMBER ARCHANA WADHWA JUDICIAL MEMBER Raja.
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