Custom, Excise & Service Tax Tribunal
Marvelous Engineers Pvt. Ltd vs Commissioner Of Customs (Export) on 22 January, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI Appln.Nos.C/S/2365, 2530, 2531, 2371 & 2378/12 APPEAL Nos.C/1007, 1114, 1115, 1013 & 1014/12 (Arising out of Order-in-Original No.18/2012-13 dated 07/08/2012 passed by Commissioner of Customs (Exports), Nhava Sheva) For approval and signature: Honble Mr. P.R. Chandrasekharan, Member (Technical) Honble Mr. Anil Choudhary, Member (Judicial) 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? ========================================
Marvelous Engineers Pvt. Ltd., Sungrace Logistics Pvt. Ltd., Shri Dattatray B. Suryawanshi Appellants Shri Sanjay Rana Shri P.B.Gupta Vs. Commissioner of Customs (Export), Respondent Mumbai Appearance:
Shri.V.B.Gaikwad, Advocate Shri R Sathyanarayanan, Advocate Shri Anil Balani, Advocate for appellants Shri.K.S.Mishra, Addl. Comm. (AR), for respondent CORAM:
Honble Mr. P.R. Chandrasekharan, Member (Technical) Honble Mr.Anil Choudhary, Member (Judicial) Date of Hearing : 22/01/2013 Date of Decision : /02/2013 ORDER NO Per: P.R. Chandrasekharan
1. There are five appeals and five stay applications directed against Order-in-original No.18/2012-13 dated 07/08/2012 passed by Commissioner of Customs (Exports), Nhava Sheva. As they arise from the same order, they are taken up together for consideration.
2. The case relates to smuggling of red sanders wood logs under the guise of machinery parts vide Shipping Bill No. 8127000 dated 08/02/2010 filed in the name of M/s. Marvelous Engineers Pvt. Ltd., Kolhapur, Maharashtra. Investigations conducted revealed that similar consignments had been exported under 6 Shipping Bills earlier during December 2009 to January 2010 in the name of the same exporter. In all the shipping bills the goods were declared as machinery parts and the details are as under:
S.No. Shipping Bill No./Date Invoice No. & Date Container No. Item FOB Value (Rs) Cnsignee 1 8127000 dated 08/02/10 EXP-055/2009 05/02/10 TCKU 3351988 Machinery Parts (Exhaust Pipe) 2,83,797.00 Star Point General Trading LLC, PO Box 81278, Dubai, UAE
2. 8076349 dated 23/01/10 EXP-054/2009 21/01/10 TTNU 2127728
-do 4,23,367.20 Al Badr Trading PO Box 30356, Sharjah, UAE 3 8070473 dated 21/01/10 EXP-053/2009 dated 19/01/10 PMLU 2056528
-do-
4,26,423.00 Al Falash Imports and Exports, PO Box No.45676, Ajman, UAE 4 8038024 dated 11/01/10 EXP-052/2009 09/01/10 TCKU 2633170
-do-
4,17,811.20 Al Manar Trading Est. PO Box 28435, Sharjah, UAE 5 8016003 dated 04/01/10 EXP-051/2009 01/01/10 PMLU 2035839
-do 2,88,449.00 Razi Exports & Imports, PO Box No.17220, Dubai, UAE
6. 7973881 dated 22/12/09 EXP-050/2009 18/12/09 PMLU 2043710
-do-
4,58,958.00 Al Falash Imports & Exports, PO Box No.45676, Ajman, UAE
7. 7910297 dated 02/12/09 EXP-049/2009 25/11/09 PMLU 2031999
-do-
6,64,366.50 Global Vision FZE PO Box No.49493,Hamriyah Free Zone, Sharjah, UAE 2.1 The investigations also revealed that red sanders wood logs are an endangered species figuring in Appendix II of the Convention of International Trade In Endangered Species of Wild Fauna and Flora (CITES) to which India is a signatory and were smuggled under the guise of machinery parts. The results of the investigations conducted by the Special Investigation and Intelligence Branch of the Jawaharlal Nehru Custom House, Nhava Sheva are discussed below.
2.2 The shipping bills in respect of above consignments were filed by one Shri Manoj Vichare (the actual exporter) in the name of M/s. Marvelous Engineers Pvt. Ltd. by misusing their IEC code. Statement of Shri. Sangram V. Patil, Managing Director of M/s. Marvelous Engineers Pvt. Ltd., Kolhapur, was recorded under section 108 of the Customs Act, 1962, wherein he denied having filed the above shipping bills in their Companys name. They were not aware that Shri Manoj Vichare had misused the IEC of M/s. Marvelous Engineers Pvt. Ltd., till the department informed them of the fraud.
2.3 M/s Sanjay Rana, the CHA, undertook the clearance work in respect of the above shipping bills. Shri. Premchand B Gupta, employee of the CHA firm and Power of Attorney Holder in his statement recorded under the Customs Act submitted that they had obtained the documents for export from M/s. Sungrace Logistics Pvt. Ltd. who are the freight and logistics providers. The CHA firm of Shri Sanjay Rana was situated in the very same premises of M/s. Sungrace Logistics. The CHA filed the shipping bills without obtaining any proper authorisation letter from the exporting firm. The CHA also did not get any confirmation whether the clearance job for export was issued by M/s. Marvelous Engineers Pvt. Ltd. The letter produced by them purported to be in the letterhead of M/s. Marvelous Engineers Pvt. Ltd. was undated, did not indicate the phone number, e-mail/web addresses of the said firm. Thus, there was negligence on the part of the CHA firm in filing the export documents as representing M/s. Marvelous Engineers Pvt. Ltd. without any authority from them and without verifying the genuineness of the transaction. Mr. Sanjay Rana the proprietor of the CHA firm owned up the responsibility for the mistake committed by his employees. M/s. Sungrace Logistics Pvt. Ltd. had provided the containers for the above exports and they had procured these containers from M/s. Prema Shipping Line (India) Pvt. Ltd. and handed over the same to one Shri Manoj Vichare of M/s Sara Logistics. The booking for the container was done through e-mail and the containers were delivered to Shri Manoj Vichare on the basis of the e-mail booking. M/s. Sungrace Logistics Pvt. Ltd. did not know Shri Manoj Vichare of M/s. Sara Logistics nor did they cause any enquiry about the existence of M/s. Sara Logistics. They also received the export documents in the name of M/s. Marvelous Engineers Pvt. Ltd. assuming that M/s. Sara Logistics represented M/s. Marvelous Engineers Pvt. Ltd. even though there was no authority letter from M/s Marvelous Engineers Pvt. Ltd.
2.4 On conclusion of the investigation, a show-cause notice dated. 07/07/2011 was issued proposing to impose penalty on M/s. Marvelous Engineers Pvt. Ltd., Shri Sanjay Rana, the CHA, and Sri. P.B. Gupta, employee of the CHA firm, M/s. Sungrace Logistics, the freight forwarder and its director Shri. Dattatray B Suryawanshi, under the provisions of Sections 114/117 of the Customs Act, 1962, amongst others. The case was adjudicated vide the impugned order and penalties of Rs.1 crore each was imposed on M/s. Marvelous Engineers Pvt. Ltd, Shri Sanjay Rana, Sri. P.B. Gupta, M/s. Sungrace Logistics Pvt. Ltd. and its Director, in respect of shipping bill No.8127000 dated 08/02/2010 and a penalty of Rs.30 lakhs each was imposed on the above parties in respect of the previous six shipping bills. Hence, the appellants are before us.
3. The Ld. Counsel for M/s. Marvelous Engineers Pvt. Ltd., Kolhapur, submits that it is evident from the show-cause notice and the impugned order that they were not at all involved in the smuggling transaction in any way and they were not aware of misuse of their IEC code by Shri Manoj Vichare. They came to know about the misuse only after the Customs authorities informed them and therefore, imposition of penalty on them is unsustainable in law. The only charge alleged against them is that they did not take any action required under Public Notice No. 10/2010 dated 03/02/2010 issued by the Commissioner of Customs, JNCH, Nhava Sheva. The said notice directed that in case of any discrepancy or if any Bill of Entry/Shipping Bill, which was not filed by the CHA/Importer/Exporter, has been registered in his/their name, he/they should immediately report the matter to the Customs and it would be the responsibility of the CHA/Importer/Exporter to verify both the above aspects on daily basis and in case they fail to do so, the concerned CHA/importer/exporter will be precluded from pleading ignorance at the time of subsequent investigation, if any. The said public notice was issued only on 03/02/2010 whereas shipping bill No. 8127000 was filed on 08/02/2010 immediately after the issue of public notice and with respect to the previous transactions which took place prior to 08/02/2010, they could not be held responsible for not monitoring the transactions undertaken by others in their name. Therefore, there is no omission or commission on their part and hence, the provisions of Section 114 is not attracted at all and they are not liable to any penalty. He relies on the decision of this Tribunal in the case of Prakash Freight Movers Ltd. 2010 (261) ELT 269 in support of his contention.
3.1 The Ld. Counsel for the CHA, Shri Sanjay Rana, submits that they had obtained all the export documents such as ARE-1, export invoices etc. from M/s. Sungrace Logistics Pvt. Ltd. and the documents indicated that the stuffing has been done under Central Excise supervision. They did not know that the entire documents were fabricated by forging the signatures of the Central Excise Officers and their rubber stamps and seals. Thus the CHA was an innocent victim and was not a party to the conspiracy for smuggling of red sanders. They had verified the existence of M/s Marvelous Engineers Pvt. Ltd. from the internet and relied upon the copy of the IEC issued by the DGFT. They were not aware of the contraband nature of the goods under export. Therefore, they cannot be alleged to have abetted the smuggling transaction. He relies on the decision of the Tribunal in the case of Swaroop Shipping Services Vs. CC (Seaport-Exports), Chennai, [2008 (227 ELT 555], Neptunes Cargo Movers Pvt. Ltd., Vs. CC (Export), Channai [2007 (219) ELT 673 (Tri-Chennai)] and U Sivasubramanian Vs. CC, Trichy [2004 (165) ELT 97]. He also relies on the decision of the Tribunal in the case of Natvar Parikh & Co. Pvt. Ltd., Vs. CC, Chennai, [2012 (281) ELT 116 (Tri-Chennai)] wherein it was held that it is usual in international trade for logistics companies acting as importers or exporters and engaging CHA on their behalf. Further, in the proceedings under the CHALR, 2004, in respect of the above transaction, the Commissioner of Customs, New Delhi, conducted an inquiry which revealed that the charge against the CHA of any mis-conduct could not be established and there was no evidence that CHA was aware of the fraud. Since the CHA had a clear track record in the past, the suspension of their CHA licence was lifted and the licence was restored by forfeiting the security deposit.
3.2 The Ld. Counsel for M/s. Sungrace Logistics Pvt. Ltd., and its Director submits that they were innocent victims and they were not party to the fraud. The documents submitted by Sri. Manoj Vichare indicated that the examination /stuffing of the goods was undertaken under Central Excise supervision and therefore, they accepted the documents in good faith. Mr. Sanjay Rana, the CHA in his statement undertook full responsibility for the act and omission of his firm. Therefore, they are not liable to any penalty.
4. The ld. Addl. Commissioner (AR) re-iterates the findings of the adjudicating authority against the appellants and pleads for upholding the impugned order.
5. We have carefully considered the rival submissions.
5.1 With the consent of all the parties, we take up the appeals themselves for final disposal after dispensing with the requirement of pre-deposit.
5.2 It would be useful at this juncture to consider the provisions of section 113 (d) & (i) & 114 (i) of the Customs Act, 1962 under which the goods have been confiscated and penalties have been imposed on the appellants. The said sections reads as follows:
SECTION 113. Confiscation of goods attempted to be improperly exported, etc. The following export goods shall be liable to confiscation:-
(a) .
(d) any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;
.
(i) any goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made under this Act or in the case of baggage with the declaration made under section 77;
.. SECTION 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 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;
.
In the present case, there was a ban on export of red sanders and the goods were mis-declared as automotive parts in the export documents. Therefore, the provisions of clauses (d) & (i) of section 113 are clearly attracted and the confiscation of the goods is clearly sustainable in law.
5.3 Penalties have been imposed on the appellants under the provisions of clause (i) of section 114. The said section has two limbs. The first limb envisages commission of an act or omission to do any act which would render the goods liable to confiscation. The second limb is abetting the omission or commission. The first limb does not envisage any mens rea on the part of the person who undertook the commission of the act or omitted to do any act. Therefore, mere contravention without any intention is sufficient for imposition of penalty. The honble apex court in the case of Gujarat Travancore Agency vs. CIT [1989 AIR 1767] held as follows:-
In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need of establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in s. 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum, volume 85, page 580, paragraph 1023:
A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws."
Again in the case of Chairman, SEBI vs. Shriram Mutual Fund & Anr. decided on 23-5-2006, in Civil Appeal No. 9523-9524, the honble apex court held as follows:-
In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulation is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must made by the defaulter with guilty intention or not. We also further held that unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. It is in the light of these decisions, one has to see whether in the present case, penalty is imposable on the appellants.
5.4 As regards the penalty imposed on M/s. Marvelous Engineers Pvt. Ltd., it is clear from the show-cause notice as also in the adjudication order that misuse of IEC code by Shri Manoj Vichare was not known to them at all until the department informed them of the same. As regards the non-compliance to Public Notice No.10/2010 dated 03/02/2010, in respect of 6 export transactions, they took place prior to the issue of the public notice and in respect of the 7th transaction, where the goods were seized, the shipping bill was filed on 08/02/2010, barely one week after the issue of public notice; the appellant situated far away in Kolhapur could not have been even aware of the said notice. The statute does not envisage monitoring of the import/export transactions on a daily basis and bringing any discrepancy to the notice of the Customs authorities. Therefore in the absence of any evidence establishing the involvement of the appellant in the smuggling of red sander wood logs, it cannot be alleged that there is an omission and commission on their part so as to attract the provisions of Section 114 (i) of the Customs Act. The said Section can be invoked only when any person, who in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 113, or abets the doing or omission of such an act. There is no such allegation against the appellant either in the show cause notice or in the impugned order. If somebody else misused their IEC code, the responsibility for the same cannot be passed on to the appellants. In the Prakash Freight Movers case cited supra, this Tribunal held that in the absence of any knowledge about the mis-use of IE code and lack of involvement in facilitating such mis-use, penalty can not be imposed under section 114. Therefore, penalty on the appellant, M/s. Marvelous Engineers Pvt. Ltd., is not sustainable in law . Accordingly we set aside the same.
5.5 As regards the imposition of penalty on Shri.Sanjay Rana, CHA from the records it is evident that they did not know the exporter nor did they obtain any authorization to undertake the transaction. They got the documents through the freight forwarder M/s Sungrace Logistics. This negligence on the part of the CHA to verify the antecedents of the exporter has occurred not once but on seven occasions. It is CHAs responsibility to ensure that he has the proper authorization from the importer/exporter, as the case may be, to undertake the transaction since he is the agent of the importer/exporter and by definition in CUSTOM HOUSE AGENTS LICENSING REGULATIONS, 2004, (CHALR in short) "Customs House Agent" means a person licensed under these regulations to act as agent for the transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any Customs Station Further, as per Regulation 13 of the CHALR, the CHA shall obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as a Customs House Agent and produce such authorization, whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs. In other words he should know his customer. In the instant case there is a clear omission on the part of the CHA to ascertain the genuineness of the transaction and whether the transaction is undertaken by the M/s. Marvelous Engineers Pvt Ltd., whose name figures in the export documents. Thus, there is a clear omission on the part of the CHA. If the CHA had taken care to verify the genuineness of the transaction by contacting the exporter and obtaining his authorization, he could have easily prevented the smuggling transaction by informing the Customs authorities about the suspicious nature of the transactions.
5.6 The ld. Counsel for the CHA has placed reliance on the decision of the Tribunal in the case of Swarooop Shipping, Neptunes Cargo Movers Pvt. Ltd., U. Sivasubramanian and Natvar Parikh & Co. Ltd., cited supra. We have perused all these decisions and they are all Single Member Bench decisions and are not binding on us and the facts of those cases were also different. In the case of U Sivasubramanian, the case was that the documents were signed by the CHA without verification of the contents of the goods. In the case of Neptunes Cargo Movers Pvt. Ltd. also the penalty imposed was set aside on the ground that the CHA had no active role in the transaction that led to confiscation of the goods. In the case of Swaroop Shipping Services, the goods were swapped after the let export order was given and the goods were no longer under the control of the CHA. It was in these circumstances, it was held that the CHA had no role to play and therefore, no penalty was imposable. In all these cases, the CHA had proper authorization to undertake the transaction and the documents were also received from the exporter. In the present case, the CHA did not receive any document from the exporters themselves nor did they receive any proper authorization from the exporter to undertake the transaction. M/s. Sungrace Logistics Pvt. Ltd. got the documents not from the manufacturer/exporter but from M/s. Sara Logistics, which was a fictitious firm and was not in existence. If ordinary precautions of Know Your Customer (KYC) had been taken by the CHA, the fictitious nature of the transactions could have been easily found out. Therefore, even though there was no active involvement of the CHA firm, there was clearly an omission on their part in verifying the genuineness of the exporter/export transaction. This omission occurred not once but seven times. Section 114 covers not only abetment but also the omission to do any act envisaged under the law and the CHALR issued under section 146 of the Customs Act casts a responsibility on the CHA to verify the existence of the exporter and obtaining a proper authorization for undertaking the transaction. Therefore, in our view, imposition of penalty on the CHA in the instant case under Section 114 of the Customs Act is sustainable in law. However, while imposing penalty, the quantum thereof has to be commensurate with the gravity of the offence. In the present case the adjudicating authority has imposed a penalty of Rs.1.30 Crore on the CHA firm as also its employee, Mr. P.B. Gupta, which is very harsh and totally unreasonable, considering the role played by the CHA. From the records of the case, it is evident that the CHA did not have any knowledge about the goods under export nor did they actively participate in facilitating the illegal transaction. There was only an omission on their part in ascertaining the genuineness of the transaction and obtaining proper authorization. For such omission, the penalty has to be nominal and reasonable. In our considered view, a penalty of Rs. One lakh is sufficient considering the nature of the offence committed by them. Accordingly, we reduce the penalty from Rs.1.30 Crore to Rs. One lakh. Since the CHA Mr. Sanjay Rana has owned up the responsibility for the omission, there is no need to impose separate penalty on the employee, Mr. P.B. Gupta. Accordingly we set aside the penalty imposed on Mr. Gupta.
5.7 As regards the penalty imposed on the freight forwarder M/s. Sungrace Logistics Pvt. Ltd. and its Director Shri. Dattatray B. Suryawanshi, the negligence on their part is very evident. They undertook the transaction on the basis of e-mail received from Shri Manoj Vichare of M/s. Sara logistics. The did not verify whether M/s. Sara Logistics existed at all. Being a freight forwarder, they are expected to know the existence or otherwise of M/s. Sara Logistics, which is also in the same business. However, the fact is that M/s Sara Logistics did not exist at all. They were not vigilant about the probable misuse of the container and the seal provided by them by unscrupulous elements. By providing the container and the seal to persons who were neither the legal exporters nor to the CHA, they committed a grave error. Further, they received the export documents from M/s. Sara Logistics only on the basis of e-mail correspondence and this has happened not only once but in respect of seven transactions. Thus, there is a clear omission on their part as a result of which the container provided by them was misused for the smuggling of red sanders, which is a banned item for export. Therefore, they are liable to penalty under Section 114 (i) of the Customs Act. But the penalty has to be commensurate with the gravity of the offence committed. There is no evidence available on record to establish their active involvement in the smuggling activity. Taking into the facts and circumstances of the case and also noting the fact that there was no deliberate involvement on their part in the smuggling of red sanders wood logs, we reduce the penalty from Rs.130 lakhs to Rs.1 lakh. Since the penalty has been imposed on the firm, there is no need to impose a separate penalty on the Director of the company and the same is set aside.
6. In sum, we set aside the penalties imposed on M/s.Marvelous Engineers Pvt. Ltd. as unsustainable in law. We reduce the penalty imposed on the CHA, M/s Sanjay Rana from Rs.130 lakhs to Rs. 1 lakh and set aside the penalty on Sri. P.B. Gupta, employee of the CHA firm. We reduce the penalty on M/s Sungrace Logistics Pvt. Ltd. from Rs.130 lakhs to Rs.1 lakh and set aside the penalty on Shri. Dattatray B Suryawanshi, its Director. The appeals are disposed of in the above terms. Stay applications are also disposed of.
(Pronounced in Court on..) (Anil Choudhary) (P.R.Chandrasekharan) Member (Judicial) Member (Technical) PJ 16