Custom, Excise & Service Tax Tribunal
Shiraz Clearing Agencies Pvt. Ltd vs Commissioner Of Customs (G) on 17 April, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.C/87429/14 (Arising out of Order-in-Original No.CAO No.62/2014/CAC/CC(G)/PKA-CBS dated 16/05/2014 passed by Commissioner of Customs (General), Mumbai) For approval and signature: Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. P.S. Pruthi, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Shiraz Clearing Agencies Pvt. Ltd., Appellant Vs. Commissioner of Customs (G), Respondent Mumbai Appearance:
Shri.Anil Balani, Advocate for appellant Shri.M.K. Mall, Asst. Comm. (AR) SDR, for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P.S. Pruthi, Member (Technical) Date of Hearing : 17/04/2015 Date of Decision : /04/2015 ORDER NO Per: P.S. Pruthi
1. This appeal is filed against Order-in-Original No.CAO No.62/2014/CAC/CC(G)/PKA-CBS dated 16/05/2014 passed by Commissioner of Customs (General), Mumbai, revoking the Custom House Agent(CHA) licence of the appellant and ordering for forfeiture of the security deposit of the CHA.
2. The facts of the case are that, on prior intelligence, a container was found to contain cigarettes valued at Rs.4.95 crores and furniture valued at Rs.9.88 lakhs instead of furniture only as declared in the bill of lading in the name of M/s Toyo India. Investigations revealed that M/s Sea Speed Logistics Pvt Ltd, the logistics company in this case, had been clearing import consignments in the name of dummy IEC holders using the CHA license of the appellant for which they paid fixed charges per container to the CHA. Investigations also indicated that in the past, 10 consignments through which cigarettes were smuggled were cleared by the CHA. For customs clearance work in the Customs area, M/s Sea Speed had three employees, who were issued H category passes by the appellant CHA. For clearance of consignments, the director of M/s Sea Speed Logistics filed the bills of entry online by using the ID/password of the appellant. The Director of the appellant CHA Mr.Uday Khanna admitted these facts also and stated that he had falsely declared to customs authorities that the employees were on his payroll.
2.1 The appellant were charged with violation of Custom House Agents Licensing Regulations (CHALR) 2004. Specifically, the regulations violated are stated to be Regulation 12 no license shall be sold or otherwise transferred; Regulation 13 (a) CHA to obtain an authorisation from the company by whom he is employed as CHA; Regulation 13 (b) CHA to transact business personally or through approved employees; Regulation 13 (d) CHA to advise his client to comply with the provisions of the customs act and to bring non-compliance to the notice of authorities; Regulation 13 (e) - due diligence to ascertain the correctness of any information imparted to a client; Regulation 13 (n) CHA to ensure that he discharges his duties as CHA with utmost speed and efficiency; Regulation 13 (o) CHA to verify antecedents of his client .
3. After completion of enquiry proceedings under Regulation 22, the Commissioner passed an order under Regulation 20 revoking the license of the appellant CHA and ordering forfeiture of the security deposit.
4. Heard both sides and considered the submissions
5. The contention of the learned Counsel appearing for the appellant is that even though the appellant had not retracted the statements taken at the time of investigations, during the enquiry proceedings it was clarified by the appellant and the logistics company that the license was not transferred by the CHA. The logistics company was referring all its clients to the appellant for undertaking the work of clearance of goods from customs. The appellant were charging M/s.Sea Speed on per container basis for the consignments cleared for them and there is no evidence that the payments were received from M/s Sea Speed for allowing them to use the CHA license. M/s Sea speed was merely providing a one-stop solution to clients and therefore the appellant levied CHA charges through M/s Sea Speed. The salary payments of the employees who undertook the customs clearance work was also built into the charges paid to them by M/s Sea Speed.
5.1 The learned Counsel emphasized that no bill of entry had been filed by them in respect of the consignment of cigarettes which was seized. Further that no show cause notice was issued to them under the Customs Act in the case of the consignment in question as well as the past consignments, which were alleged to have been cleared in the name of dummy IEC holders.
5.2 The learned Counsel stated that Regulation 13 (a) was not violated because authority letters were produced before the enquiry officer. Regulation 13 (b) was not violated because the employees were being shared with M/s Sea speed; lower amount bills were raised on M/s Sea Speed as compared to other customers being compensation for sharing of employees. Regulation 13 (d) is not violated because they had not filed any bill of entry for the subject consignment and they have not been made party to proceedings for confiscation of consignments cleared in the past. Regulation 13 (e) is also not violated because it has not been pinpointed as to what incorrect information had been imparted by them to the customer. The finding that the appellants actions led to smuggling of cigarettes is false because in the present case no show cause notice has been issued to them under the Customs Act. Therefore, Regulation 13 (n) is not violated. The IEC code was validly issued to Toyo India by DGFT and therefore, there is no question of violation of Regulation 13 (o) as the appellant produced an authorisation letter from the importer to the enquiry officer. The learned Counsel relied on the case of Ashiana Cargo Services Vs. Commissioner Delhi High Court 2014 (302) ELT 161 (Delhi) in which the Honble Delhi High Court set aside the revocation even though that case was more serious inasmuch as narcotics was smuggled.
6. The learned Assistant Commissioner (AR) appearing on behalf of revenue reiterated the findings of the Commissioner. He relied on the Bombay High Court judgement in the case of Worldwide Cargo Movers 2010 (253)ELT 190 (BOM) in which the Honble High Court upheld the revocation of the license. Similarly he also relied on the Tribunal judgement in the case of Dhakane and Co., 2014TIOL2274CESTAT-Mum which held that a Commissioner is best placed to understand the importance of CHA in the customs area and the trust reposed in him by the Department.
7. We have carefully considered the facts of the case and the submissions made by both sides
8. We find in this case that the CHA license was first placed under suspension vide order dated 08/04/2013. After a post decisional hearing, the suspension was continued vide order dated 23/04/2013. The Tribunal vide order dated 15/07/2013 set aside the suspension order and allowed the appeal giving liberty to the Commissioner to proceed with the matter under Regulation 22 of the CHALR. In compliance, the CHA license was restored vide notice dated 18/07/2013. The enquiry proceedings under Regulation 22 culminated in the impugned order against which the appellant are in appeal before us.
9. As regards the violation of Regulation 12, the thrust of the Commissioners findings is that the appellant had allowed M/s Sea speed to use the CHA license and receive payments on monthly basis by cheque. Further that violations of Regulations 12, 13 (a), 13 (o) is established by the confessional statements of Shri.Uday Khanna, the Director of CHA who also admitted that the employees who undertook the customs clearance work for M/s Sea speed were not on his payroll. And his statement was corroborated by the statement of Shri.Nayan Gor director of M/s Sea Speed. We find that accepting business through a logistics company, that is M/s Sea Speed, by itself is not a violation of the CHALR. This has been held in various Tribunal judgements such as Commissioner Vs. Chaganlal Mohanlal & Co., - 2006 (203) ELT 435 (Tri-Mum). Therefore, the finding of Commissioner that M/s Sea Speed, being a logistics company, should not be aiding in the customs clearance work is unfounded. Even the payment mode by cheque on per container basis cannot and does not lead to the conclusion that the CHA had transferred the license to M/s Sea Speed. Once it is admitted that the CHA got his clients through an intermediary that is M/s M/s.Sea Speed, the violation of regulation 12 is not established beyond doubt. The appellant have not denied that the bills of entry were filed in their name and once the CHA has agreed to receive charges from M/s Sea Speed, the fact that the entire administrative work relating to clearance was done by the employees of M/s Sea Speed under a mutual agreement, it cannot be said that the CHA license had been sublet or transferred.
10. As regards regulation 13 (a), it is seen that the appellant during the enquiry proceedings have produced an authorisation letter from M/s Toyo India, the IEC holder, although during investigations the Director of the appellant had stated that he had not obtained an authorisation. The genuineness of the letter has been doubted by the Commissioner because it is not dated and is not written on a proper letterhead of the company nor does it mention the details such as telephone number and fax number of the company. But the fact remains that the appellant had received import documents to be filed on behalf of the IEC holder. The flaws in the authorisation letter do not established beyond doubt that the same is not genuine. Customs did not verify the genuineness of the letter either by cross-examination or by signature verification by a forensic laboratory. There is no stipulation in the regulations that the appellant should have met the person signing the authority letter. But the appellant has not cared to verify the antecedents of his client as any prudent businessman would do.
11. Regarding Regulation 13 (b), the directors of both the appellant as well as the logistics company admitted that the work of customs clearance was looked after by employees of M/s Sea Speed. It was also admitted that the employees were on the payrolls of M/s Sea speed but were doing customs clearance work on the basis of customs passes got issued by the CHA for his company. The appellant have put up a weak defence in claiming that the employees were working under him. They have not been able to show any proof to the effect that the salaries of the employees undertaking customs clearance work were paid by them. Therefore, by not transacting business through approved employees, the appellant are guilty of violating Regulation 13 (b).
12. A significant factor for consideration in the present case is that no bill of entry had been filed by the appellant in respect of the consignment which was found to contain cigarettes. Therefore the violations of Regulation 13 (d), Regulation 13 (e) and Regulation 13 (n) is difficult to sustain. Even if we consider the violation of these regulations in the context of past consignments alleged to have been smuggled, we find that no show cause notice has been issued to the appellant under the Customs Act, in respect of the past consignments. Therefore, the violations are not proved even in respect of the past consignments alleged to have been smuggled by the logistics company/so called dummy IEC holders.
13. Coming to the last Regulation 13 (o) said to have been violated, the CHALR of 2004 require the CHA to verify the antecedents, correctness of the IEC number, identity of his client and functioning of his client at the declared address. The stand of the appellant is that they had verified the IEC code on the DGFT website and had also verified the pan number. Their defence is that since consignments had been cleared in the past, they had no reason to doubt the bonafide of the importer. But the appellant has shown laxity in not verifying the antecedents and functioning of his client at the declared address by using independent information. To this extent there has been a violation of Regulation 13 (o).
14. The Commissioner in his conclusion has opined that the case involving smuggling of cigarettes with duty evasion of Rs.20.79 crores in the name of dummy IEC holders by subletting of CHA license makes it incumbent upon the CHA to receive the most rigorous punishment. We do find it a little strange that, on the one hand the Commissioner is almost accusing the appellant of aiding in duty evasion of a large amount, yet, on the other hand he has not implicated the appellant under the Customs Act. In fact we find that the Commissioner has directly accused the appellant CHA of abetting the smuggling of foreign cigarettes. In paragraph 52 of the order, the Commissioner states that Hence the present case where the CHA by their acts of omission and commission have aided and abetted and organised syndicate indulging in the smuggling of foreign origin cigarettes from Malaysia by mis declaration is a very serious one involving outright smuggling through the use of bogus IECs attempting huge loss of revenue to the government exchequer. The CHA has miserably failed in the discharge of their obligation by aiding and abetting in the smuggling of large quantity of cigarettes and thereby deserving of punishment commensurate with the grave offence of smuggling. Hence no leniency can be shown in the case of this nature. Once the Commissioner accuses the appellant of abetment in smuggling, the appellant could have been charged under the relevant provisions of the Customs Act. Having not been made a noticee in the show cause notice issued to the logistics company under the Customs Act for the offence of smuggling, we hold that the appellant do not deserve the most stringent punishment, that is permanent revocation of the CHA license.
15. We have considered the judgements cited by the learned AR. In the case of Worldwide Cargo Movers (supra), the employee of the CHA was directly involved in misdeclaration in one case and abetment in the smuggling of a Mercedes car in another case. Here the facts are different because the CHA did not file a bill of entry in respect of the consignment which was seized. The CHA has also not been charged for abetment in the smuggling in the past cases. In the case of Dhakane (supra), it was established that the importer had never issued an authority letter in favour of the applicant. Therefore the facts are distinguishable.
16. In our discussion above we found the appellant guilty of violating Regulations 13 (b) and 13 (o) and also guilty of not taking adequate care to check the antecedents of the IEC holder who signed the Authorisation letter. We hold that revocation of the license up to December 2015 would be adequate punishment for these violations of the CHALR.
17. We order that the revocation of the license will continue till 31st of December 2015. However the license is ordered to be made operative from 1st January 2 016. The entire security deposit of the CHA is ordered to be forfeited.
(Pronounced in Court on .) (M.V. Ravindran) Member (Judicial) (P.S. Pruthi) Member (Technical) pj 1 12