Custom, Excise & Service Tax Tribunal
Chandra Cfs And Terminal Operators Pvt. ... vs Commissioner Of Customs on 29 June, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH
CHENNAI
Appeal No.C/EH/40203/2015, C/MISC/40368/2015 & C/40458/2015
[Arising out of Order F.No.S Misc.13/2006 dt. Nil passed by the Commissioner of Customs, (Commissionerate VIII) Chennai]
Chandra CFS and Terminal Operators Pvt. Ltd. Appellant
Versus
Commissioner of Customs,
Chennai Respondent
Appearance:
Shri A.K. Raha, Advocate For the Appellant Shri B. Balamurugan, AC (AR) For the Respondent CORAM : Honble Shri R. Periasami, Technical Member Honble Shri P.K. Choudhary, Judicial Member Date of Hearing : 26.5.2015 Date of Pronouncement:29.6.2015 FINAL ORDER No.40710/2015 Per R. Periasami
The appellant filed appeal against the order of Commissioner of Customs suspending the custodianship of CFS vested on the appellant. Appellant filed EH application and this Tribunal Vide MISC Order No.40662/2015 dt. 29.4.2015 directed the Revenue to file a counter on the MISC application. The Commissioner of Customs, Chennai filed the counter affidavit on 11.5.2015 and the same was served to the appellant and the matter was posted for hearing on 26.5.2015.
2. Meanwhile, appellant also filed another MISC application on 12.5.2015 which was numbered as C/MISC/40368/2015 and requested that their case to be heard by the same Division Bench who heard their EH application on 29.4.2015. The above MISC application is taken up today.
3. Ld. Advocate appearing on behalf of the applicant submits that though the application was filed requesting that their case to be heard by the same Bench now, they are not insisting on the miscellaneous application and he is prepared to argue the case and submits that miscellaneous application may be disposed. The Ld. AR on behalf of the Revenue strongly objects their plea for reconstitution of the earlier Bench for no valid reasons.
4. After hearing both sides, we find when their case is at the preliminary stage and their application for early hearing is still pending for consideration, the applicant filing another application seeking their case to be heard by the same Bench is not maintainable as there is only one Division Bench functioning. Since the applicant themselves not insisting on their request the Misc. Application dt. 12.4.15 is rejected.
5. The E.H. application was taken up and considered their grounds and after disposing the MISC application for early hearing, the main appeal itself is taken up for disposal.
6. The brief facts of the case is that appellants viz. M/s. Chandra CFS and Terminal Operators Pvt. Ltd. were appointed by the Govt. as the Custodian for import and export goods as per Section 45 of the Customs Act vide Public Notice No.77/2007 dt. 2.6.2007 at Nallur Village, Minjur, Chennai 601 203. The Container bearing No.SEGU 1697558 containing Red Sander logs weighing 9430 Kgs was seized by Customs (DIU) under mahazar dt. 6.3.2014 and the same was handed over to the appellant (Custodian) for safe and secure custody of the seized cargo. There was an incident at appellant (CFS) premises on 19.12.2014, and it came to notice that the said container was removed unauthorizedly on 19.12.2014 by using forged documents. On preliminary scrutiny of the documents prima facie it appeared that illegal removal of seized goods due to failure on the part of custodian not ensuring safety and security of the seized goods kept under the appellant's custody. Since the nature of offence was very serious and cast doubt on the bonafides of the appellant, the proceedings were contemplated. The Commissioner of Customs by virtue of powers vested under Regulation 11 (2) of Handling of Cargo in Customs Area Regulations, 2009 (HCCAR, for short) ordered suspension of their CFS custodianship. Hence the present appeal.
7. Heard Both sides. Ld. Advocate appearing on behalf of the appellant filed a paper book containing summary of arguments, relevant documents, case laws etc and reiterated the same. He submits that appellants were appointed as custodian of Chandra CFS located at Chennai in June 2007. They commissioned the said CFS and discharging the obligation without committing any breach of customs laws. The said CFS was operating round the clock. As a custodian, they undertook every step on safety and security of the cargo. The container SEGU 1697558 pertaining to the exporter M/s.Jayam Plast & Co. containing 304 logs of Red Sander Wood and 51 bags of Cement was seized and it was handed over to them for safe custody. He further submits that they have immediately locked the container No.SEGU 1697558 in their computer system so as to prevent any removal from CFS. On 19.12.2014, it was found that there was a mismatch of gate passes manually generated in the system. They informed that the seized container was missing and in that place another container was substituted by falsely numbering seized container number. They immediately brought to the notice of Customs and also submitted a letter dt. 20.12.2014 addressed to the Asst. Commissioner of Customs (Docks). Immediately they filed a complaint and FIR (No.558/2014) with local police station at Minjur and also filed additional complaint before the Superintendent of Police for retrieval of seized container. They have identified the employees Mr. Kanagavel, Indital Operator and Mr.Gowtham, who were suspects in committing the offence. The police arrested Mr.Kanagavel.
7.1 Police retrieved the container on 22.12.2014 from the jurisdiction of Puzhal Police Station and the same was brought to Minjur P.S. They duly reported the retrieval of container by the police to the customs on 22.12.2014. He produced copy of F.I.R, statements recorded by police and also mahazar drawn by the appellant on 30.12.2014 and the police inspected the container and found to contain red sanders with 51 bags of cement. The container was seized by the police and as per the order of Judicial Magistrate of Lower Court the container was handed over to the appellant for safe custody pending investigation by police. He further submits that customs informed before the court their no objection for handing over the said container to the appellant for safe custody. He submits that only on account of their immediate action of filing F.I.R the container was retrieved by the police. They have also taken action against the employees involved in the offence. The police is yet to complete the investigation.
7.2. He submits that suspension order was issued by The Commissioner of Customs is not sustainable. The department has not made out any specific charge in the suspension order and also submits that there is no connivance or any failure on the part of the appellant. The lapse and connivance of employees cannot be attributed to the appellant and it is only an isolated single incident. As per Regulation 11 (2)of HCCAR the authorities can suspend the custodianship only when there is an enquiry is contemplated. Since in the suspension order has not brought out any charge the suspension order is in violation of the said regulations. He also submits that CHALR, 2009 is pari materia to HCCAR, 2009. He also relied on copy of the order dt. 4.2.2015 of Judicial Magistrate -I, Ponneri which is in Tamil and submitted a free translation in English wherein the Honble Lower Court has ordered interim custody of the said container on execution of bond. He also countered all the points raised by customs in their counter affidavit and submits that the department is alleging the past incidences of smuggling of Red Sanders, Muriate of Potash in 2009 and 2013 and it cannot be a ground for suspension of licence. He submits that alleged instances cited by the department were not only extraneous but would not answer the test of immediacy of suspension of licence. He also relied on the following citations :-
1) Freight Wings and Travels Ltd. Vs CC Mumbai 2001 (129) ELT 526 (Tri.-LB)
2) Parikh Clearing Agency Pvt.Ltd. Vs CC Ahmedabad 2010 (252) ELT 314 (Tri.-Ahd.)
8. On the other hand, Ld. A.R reiterated the counter affidavit filed by the Customs and explained the modus operandi of smuggling of Red Sanders in the guise of export cargo of Plastic Granules. He further submits that custodian appointed by the government under Section 45 of the Customs Act is bound to discharge their duties and obligations as per HCCAR for handling of import and export cargo. The government has appointed the custodianship with faith that they will diligently discharge their duties. He submits that offence case was registered against M/s.Jayam Plast & Co. who attempted to export red sanders in the container. The sealed container was originally stuffed in the appellants CFS and the container No.SEGU 1697558 already left the country on specific intelligence it was brought back to India and on examination, the said container was found to contain Red Sanders. He explained the modus operandi adopted that the container was tampered after removal from CFS enroute to the Chennai Harbour and the goods were substituted with red sanders logs. After seizure, the goods were re-stuffed in the same container and was handed over to appellant for safe custody. He submits that an offence case was registered and SCN dt. 5.2.2015 was to the exporter, to the appellants and to all the persons involved in the smuggling of Red Sanders proposing for confiscation of goods under Section 113 of Customs Act and penalty under Section 114 of Customs Act. Copy of SCN enclosed with counter affidavit.
8.1 He further submits that appellant has violated provisions of Regulation 6 (1) (k) and Regulation 6 (2) of HCCAR as they outsourced the security operations of CFS without permission from the Commissioner of Customs. There was a total lapse of security and safety of the cargo on the part of appellant-CFS and they have no control over the security staff who were outsourced. Further he submits that their statements are contradictory as initially the appellant stated that empty container SEGU 1697558 was brought inside the CFS but subsequently, they themselves stated that said container was stuffed with wooden pieces of mango/coconut/palm woods. This confirms that appellant being custodian is not aware of the contents of the container nor verified the weight. They fail to notice removal of seized container affixed with sticker with false container number GEST1896575 and pasted on it.
8.2 He further submits that it is the Superintendent of Customs in charge of CFS who first noticed the lapse and informed the CFS and the Custom House on 19.12.2014. It was only on 22.12.2014, the FIR was filed. The copies of Mahazar dt. 8.1.2015 drawn by police submitted to the Customs did not contain cement bags whereas the second copy of the mahazar dt. 8.1.2015 shows cement bags. They have admitted the role of their employees in the illegal act of removal of seized container.
8.3 He further submits that this is not the first instance of lapse of safety and security of containers under HCCAR as claimed bythe appellant. In the year 2009, an offence case was registered against M/s.Point to Point, an exporter for an attempt to export Pottash (MoP), a restricted item and goods were seized and it was handed over to the appellants CFS. The appellant had allowed entry of goods without any export documents. The appellant and the AGM of the appellant was imposed penalty of Rs.25.0 lakhs and Rs.10.0 lakhs respectively vide OIO dt. 5.5.11. The Honble Tribunal vide order dt. 28.2.2013 directed for predeposit of Rs.5.0 lakhs and Rs.2.0 lakhs respectively and their appeal was dismissed by Tribunal vide Order No.40132-40133 dt. 23.4.2013 for non-compliance.
8.4 He further submits that again an offence was registered against another exporter M/s.M.M. Industries for attempting to illegally export red sander logs of 14.750 MTS in the appellants CFS and also SCN dt. 12.9.2014 was issued to the appellant for their lapse. The same modus operandi has been adopted in the present case for smuggling of red sanders. He further submits that the police is yet to complete their investigation and yet to file the charge sheet, the department is yet to complete their investigation. He submits that they have requested the Lower Jurisdictional Court for permission to examine the containers which is under the custody of police. Any revocation of suspension would cause serious jeopardy to the investigation. Therefore he prayed for dismissal of appeal. He relied on the following citations :-
(i) Commissioner of Customs Vs Raj Clearing Agency 2006 (199) ELT 602 (Bom.)
(ii) Tribunal Finals Order No.40132 & 40133 dt. 23.4.2013 (in Appeal No.C/252 & 253/2001 in appellant's case)
9. We have carefully considered the submission of both sides and perused the records and other relevant documents. The issue in the present appeal relates to suspension of custodianship of the appellant under HCCAR. The appellant was appointed as custodian of import and export of goods at CFS under Section 45 of the Customs Act. The Commissioner of Customs, Chennai in the impugned order suspended the approval granted to the CFS in terms of powers vested under Regulation 11 (2) of HCCAR, 2009. The reasons for suspension of their custodianship has already been set out in the facts of the case as narrated above. The container bearing No.SEGU 1697558 containing 9.430 kgs was seized by Customs authorities and the same was handed over to the appellant for safe and secure custody pending further investigation and adjudication proceedings. There is no dispute on the fact that said seized container was illicitly / fraudulently removed from appellant CFS by adopting modus operandi in such a way that the seized container has been substituted with another fake container No.SEGU-1796588 which was illicitly brought inside appellant CFS and replaced in the seized container'S place by affixing sticker of seized container No.1697558. Appellants initially stated that it was an empty container whereas the fake container contained wooden logs. It is also on record that the said seized container SEGU-1697558 was removed/cleared out of appellant CFS by using forged gate pass and false container No.SEGU-1896575 were affixed on the seized container by sticker. From the above, it is clear that the seized container No.SEGU 1697558 was illicitly removed which was in the custody of the appellant and they have admitted these facts. The appellants main contention that they have not involved in the modus operandi of illicit removal but only two of their employees Mr. Kanagavel, Operator and Mr. Gautham, Shift Supervisor have indulged in the fraudulent activity. They also vehemently contended that it is they who initiated immediate action on noticing the lapse and filed complaint and F.I.R with the police. The police has retrieved the said container based on their complaint and the seized container was again handed over to them for interim custody by the police as per the order dt. 4.2.2015 of Judicial Magistrate, Ponneri in C.M.P.No.165/2015 subject to execution of Bond for Rs.2 crores with other conditions. Appellants also relied on the statements recorded by police and mahazar drawn dt. 8.1.2015 by police in support of their contention.
10. On perusal of records and the counter affidavit filed by the Commissioner of Customs, the department contended that it was the Superintendent of Customs who was on duty at the CFS on 19.12.2014 had noticed missing of the container and instructed the custodian to verify their records and also physical stock of containers available at the CFS who undertook physical stock which is evident from the note signed by Superintendent (Preventive) of Customs on 19.4.2014. Whereas the appellant on the other hand submits that they have only informed the Customs about missing container. We find that both the police and the Customs have yet to complete their investigation and their veracity of their contentions to be taken by the competent authority based on the evidences only after completing detailed investigation. As already discussed above, we find that there is "Amanat Main Khayanat" breach of obligation entrusted with the custodian i.e appellant for safe and security of the cargo.
11. It is pertinent to see that appellant was duly appointed by the Government as a Container Freight Station in terms of provisions of the Customs Act read with relevant public notice issued by the Customs. It is abundantly clear that being a CFS as a custodian, they are responsible for safe and secure clearance of import cargo in their Container Freight Station and equally responsible for safety and security of the cargo. The government entrusted the work of handling the cargo to the appellant only with the faith that custodian will perform his duties diligently and in a dedicated manner. Appellant cannot plead ignorance of such security lapse of removal seized containers and they cannot fasten on the responsibility on co-workers. It is also relevant to state that prior to the concept of appointment of Container Freight Station, for handling Customs cargo outside port of import the entire customs cargo clearance was being done only at the port itself which was handled by the Port Trust Authority who are appointed under the Port Trust Act. We are unable to accept the appellant contention that it is stray and isolated incident of lapse of security of cargo as it is evident from the Revenue' counter affidavit that similar instance of smuggling of Red Sanders, Muriate of Pottash (Mop) restricted item have been seized in the past in 2009 and 2013 in the appellant CFS. In the case of smuggling of Muriate of Pottash, a restricted item and adjudication order was passed vide OIO No.15880/2011 dt. 5.5.2011 where the goods were confiscated and the appellants were imposed with penalty and this Tribunal dismissed their appeal for non-compliance of predeposit vide Order No.40132, 40133/2013 dt. 23.4.2013. In the case of smuggling of Red Sanders another offence case was registered in September 2013 and Customs seized 14.750 MTs of Red Sanders in appellants own premises. On perusal of SCN dt. 12.9.2004 issued by Commissioner of Customs, Chennai, the modus operandi adopted is identical to the present case where the substitution of the cargo was done by tampering of the container doors/hinges with seals intact and the appellant was issued SCN for imposition of penalty under Section 114 of the Customs Act. In the present case, the Commissioner of Customs already issued SCN dt. 5.2.2014 where the appellant is a co-noticee for contravention under the Customs Act. We also noticed the appellant had outsourced the security CFS to other persons without approval/permission from competent authorities. The above repeated instances of smuggling of goods in the appellant CFS confirms there are serious lapses on the part of custodian and this cannot be overlooked or treated as isolated incident as claimed by the appellant. In the interest of Government revenue and safety and security of Customs goods, the Department has the right to take action under Regulation 11 (2) of HCCAR. Therefore, we are unable to accept the appellant contention that the impugned order has not brought out any charges.
12. In terms of Regulation 11 (2) of HCCAR, 2009, the Commissioner of Customs has rightly exercised the power to suspend the custodianship of appellant. Appellants reliance on case laws which are related to suspension of CHA licence under CHALR and the appellants plea is that provisions of CHALR and HCCAR are pari materia not acceptable for the reasons that Container Freight Station (CFS) who is appointed by the Government for handling import and export cargo as Terminal operator cannot be equated with licence issued to Custom House Agent under CHALR. The obligation of custodian of CFS and the role played by them in handling the cargo including safety and security of the cargo are entirely governed by strict conditions as set out in HCCAR whereas the CHA only acts as an agent between customs & importer/exporter in processing of document and clearance of cargo. Therefore, the role of CFS as custodian and role of CHA are far different and cannot be termed as pari materia. Therefore, the citations relied by the Appellant in support of their plea are all related to suspension of CHA licence and same is not applicable to the appellant CFS. We also find that suspension was ordered only in December 2004 and the Custom Department is yet to complete their investigation. We also find that seized containers are recovered by the police the subsequent investigation and filing of charge sheet by the police is still pending. Therefore, by considering the serious nature of offence and breach of conditions of regulations and also taking into account the past adverse instances and conduct of the appellant of identical smuggling of Red Sanders and other goods detected in appellants own premises, we hold that the bonafide and credibility of conduct of custodian-appellant raises serious doubt and the investigation by Customs and Police authorities is still pending and yet to be completed and if appellants are allowed to continue as custodian it will certainly cause jeopardy and hamper the process of investigation. Accordingly, we hold that appellants plea for setting aside the suspension order does not merit consideration and the suspension order is liable to be upheld. However, we direct the Commissioner of Customs, Chennai to complete the investigation proceedings and take appropriate action under HCCAR as expeditiously as possible preferably within 3 months subject to receiving the investigation report from Police authorities. We make it clear that Commissioner of Customs shall not be prejudiced by this order and is at liberty to decide independently based on the facts and evidences available in accordance with law. The impugned order is upheld and the appeal is dismissed.
(Pronounced in open court on 29.6.2015)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
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