Custom, Excise & Service Tax Tribunal
Parvath Shipping Agency vs Commissioner Of Customs (Gen), Mumbai on 12 July, 2016
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
C/86266/14
- Mum
(Arising out Order-in-Original No. 04/2014/CAC/CC(G)/ PKA-CBS dated 10.01.2014 passed by the Commissioner of Customs (Gen), Mumbai)
Appeal No.
C/88552/14
- Mum
(Arising out Order-in-Original No. 59/2014/CAC/CC(G)/ PKA-CBS dated 15.05.2014 passed by the Commissioner of Customs (Gen), Mumbai)
For approval and signature:
Honble Shri M.V. Ravindran, Member (Judicial)
Honble Shri C.J. Mathew, 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 No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Yes
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
Parvath Shipping Agency
Appellant
Vs.
Commissioner of Customs (Gen), Mumbai
Respondent
Appearance:
Shri Z.B. Nayarkar, Consultant for the appellant Shri S.D. Sahu, AC (AR) for the respondent CORAM:
Honble Shri M.V. Ravindran, Member (Judicial) Honble Shri C.J. Mathew, Member (Technical) Date of hearing : 01-04-2016 Date of decision : 12.07.2016 O R D E R No: ..
Per: M.V. Ravindran This appeal is directed against Order-in-Original No. 04/2014/CAC/CC(G)/ PKA-CBS dated 10.01.2014. Since both the appeals are of the same appellant and raises a common issue, the appeals are disposed of by a common order.
2. Relevant facts that arise for consideration are that M/s. Parvath Shipping Agency (hereinafter referred to as main appellant) was holding a CHA licence no. 11/973. It was noticed by customs authorities that a number of consignments of Glass Sheet and coated aluminium mirror were imported in the name of two firms M/s Riya Enterprises and M/s Apex Enterprises through the CHA M/s Parvath Shipping Agency from March 2012 onwards. Further, before March 2012, the import of Glass Sheet and Aluminium coated mirror was in the name of M/s F.K. International. Total duty evasion in case of M/s Riya International is `1,96,658/-, whereas in case of M/s Apex Enterprises is `5,12,285/-. During investigation IEC user has accepted that undervaluation was done in case of import of glass sheet by M/s F.K. International as well. Duty yet to be quantified in the said case. Further, in another case duty of `35,48,409.96 was not paid on sewing machine needles imported by M/s Bombay Fashion vide Bill of Entry No. 6750589 dated 07/05/2012 which were cleared by M/s Parvath Shipping Agency. Hence total duty liability quantified in the three cases (M/s Apex Enterprises, Riya Enterprises & Bombay Fashion) as mentioned above is `42,57,352/-. Initial offence report from the Special Investigation and Intelligence Branch (Import), New Custom House, Mumbai vide letter F. No. SG/Misc-61/FN/2011-SIIB(I); SG/Inv-26/FN/2012-SIIB(I) dated 06/12/2012 incorporating the above and mentioning role of the CHA was received in this office on 06/12/2012 and further communication dated 14/12/2012 was received 18/12/2012.
3. The statement of Shri Mudassar Ilyas Shaikh, Proprietor of M/s Apex Enterprises and Shri Muzammil Ilyas, Proprietor of M/s Riya Enterprises were recorded on 22/05/2012. They have inter alia stated that they are not aware of the goods being imported on their IEC; that they are not the owner of the goods; that a person named Zeeshan had approached them and had obtained IEC in their name and imported the goods on their IEC.
4. The statement of Shri Zeeshan Anwar, the IEC user was recorded under Section 108 of the Customs Act, 1962 on 23/05/2012. He accepted that he is the owner of the goods. He accepted that the actual value of the container is around ` 2,50,000/-. The value of the Glass Sheet is 1.05 US $ per sqm. Whereas value of aluminium coated mirror is 1.17 US $ per sqm. He agreed to pay Customs Duty for the past imports in the name of M/s Riya International and M/s Apex International.
5. The differential duty in the case of M/s Apex Enterprises works out to be ` 5,12,285/- of which ` 3,30,938/- is yet to be recovered. As the importer failed to make the payment, summons were issued to IEC user as well as CHA on 08/10/2012 to appear o 16/10/2012 and 17/10/2012. However, the IEC user did not appear. The CHA also did not turn up in response to the summons. The CHA submitted a letter dated 17/10/2012 stating that payment would be made by 30/10/2012. However, the payment was not received and hence fresh summons were issued to the CHA as well as IEC user to appear on 06/11/2012 and 07/11/2012. CHA has sent letter that he is unable to appear that he is travelling on 06/11/2012. The investigating unit has reported that further progress in the case could not be made due to non-co-operation of the importer as well as the CHA. Accordingly, a Warning Memorandum vide F. No. S/8-56/2009-Admn/1348 dated 12/12/2012 was issued to the CHA by this office directing them to fully co-operate with the department and report to the investigating unit as and when summoned failing which disciplinary action would be initiated against them.
6. The statement of Shri Sundaram, proprietor of the CHA from M/s. Parvath Shipping Agency was recorded on 23/07/2012 under Section 108 of the Customs Act, 1962. He admitted that the import documents were received by him through Shri Zeeshan Anwar. He was not aware about the IEC being used by Shri Zeeshan Anwar, who used to pay money to the IEC holders.
7. Coming to a conclusion that the prima facie CHA has derelicted their duties, the licence was suspended and a charge sheet was issued and inquiry was conducted for failure to discharge obligation of CHA under Regulation no. 13(a), 13(d), 13(e), 13(n) and 13(o) of CHALR 2004.
8. Inquiry proceedings were conducted by inquiry officer. Appellant participated in the inquiry and cross examined persons. Inquiry officer held all the charges stand proven. Consequent to such inquiry report, the appellant filed a detailed written submission vide letter dated 02.01.2014 disputing the upholding of the charges. Adjudicating Authority after following due process of law revoked the CHA licence and also forfeited the security deposit.
9. Ld. Consultant appearing for the appellant submitted as under:-
9.1. The learned Counsel for the appellant urges that the IEC holders have not denied the fact that they were in the partnership with the said Rizwan Bhai and/or Z.A. Khan and have allowed the use of their IEC. So far the allegation of the CHA knowing that there is under-invoicing, has no legs to stand, as CHA filed the Bill of Entry based on the documents supplied to him by the importer.
9.2. The CHA has followed the official procedure and not had any occasion to inspect the goods before the filing of Bill of Entry. Further in the case of import in the name of Harmony Trading, the proprietor/IEC holder is Hamid Bhai Ansari and pursuant to assessment of the import consignment, the import duty was paid, but the Customs were not releasing the consignment. The said Hamid Bhai Ansari moved the Honble Bombay High Court in Writ Petition wherein the Honble High Court taking notice of the facts that the duty have been paid and there is no other dispute as regards the classification or valuation and further the importers/IEC holders was found to be existing, it was observed by the Honble High Court that the Revenue has been unable to point out any violation under the Customs Act or any Rule or regulation framed thereunder by which a person having valid IEC No. and having paid the customs duty is prevented from importing goods. In case of any misrepresentation in obtaining the IEC code, it is the office of the DGFT to take action for the same. Accordingly, the said IEC holder/Writ Petitioner Hamid Bhai Ansari was held to be entitled to release of the goods 2009 (24) ELT 168. Thus, in view of the order of the Honble High Court, it is established that there is no violation under the imports in question, particularly on part of the appellant CHA and as such the impugned orders are fit to be set aside and the appeals allowed.
9.3. The learned Counsel further submits that while holding the Article of Charge i.e. violation of Regulation 13(a) of CHALR, 2004 as proved in the impugned order, the Commissioner at para 11(iii) has recorded a finding that mere possession of letter of authorization in the name of Custom Broker cannot by itself absolved the Customs Broker of its responsibility under Regulation 13(a) of CJALR, 2004. The appellant further submits that the Commissioner totally failed to appreciate that as per Article of Charge I in the notice dated 20.4.2010 the allegation was the CHA had accepted the clearance document from one Shri Rizwanbhai who is neither the IEC holder nor the representative of the ICE holders. In other words, the case of the Department is that since the proprietor of the appellant-CHA had not verified IEC holders address personally and had not interacted with any of the importers directly he had not obtained authorization letter, which is in violation of the provisions of Regulations 13(a) of CHALR, 2004. The appellant submits that the said findings mean that the appellant had obtained the authorization letter but through Shri Rizwanbhai. In other words, the authority letters were in existence based on which the appellant had filed the Bills of Entry. While holding that it is no ones case that Custom Broker was not in possession of any authorization documents and accepting that the documents were obtained from Shri Rizwanbhai, the Commissioner has failed to appreciate that when both the authority letters were received by the appellant, the charge of violation of Regulation 13(a) cannot be said to be proved. As per provisions of Regulation 13(a) A Custom House Agent shall obtain an authorization from each of the companies, firms or individuals by whom he is for the time being employed as Customs House Agent and produce such authorization whenever required by the Dy. Commissioner of Customs or the Assistant Commissioner of Customs.
9.4. The appellant further submits that the findings of the Commissioner that the appellant is liable for contravention of Regulation 13(e) of the CHALR, 2004 are not supported by any documentary evidence to the effect that the appellant was aware of under invoicing by the importers. While holding the said charge as proved the Commissioner has failed to appreciate that the Inquiry Officer in his report has clearly stated that nowhere in the statements or at any time during the inquiry the appellant admitted that he was aware of the import of goods being under invoiced. The said findings have not been proved to be wrong by the Commissioner by producing any evidence thereto. As such, the findings that the CHA is responsible for violation of Regulation 13(e) of the CHALR, 2004 are bad in law and required to be set aside.
9.5. The Commissioner failed to appreciate provisions of Regulation 22(5) of CHALR, 2004 wherein it is stipulated that the DC or Assistant Commissioner of Customs shall submit his report of the inquiry within 90 days from the date of issue of a notice. In the present case, the notice was issued on 20.4.2010 and inquiry report was completed on 5.3.2014 which is after four years and therefore the whole proceedings are hit by limitation and the findings of the Commissioner that mere technicalities cannot be allowed to frustrate statutory proceedings are grossly incorrect and contrary to the facts. The Commissioner has also not followed CBEC Circular No. 9/2010 dated 8.4.2010 which is issued prior to the issuance of notice of Inquiry dated 20.4.2010. It is a settled law that CBEC Circulars are binding upon the Departmental officers. On this ground too the impugned order is not legally sustainable.
9.6. The appellant further submits that the show-cause notice dated 8.12.2009 in respect of imports by M/s Harmony Trading was adjudicated upon by Add. Commissioner of Customs, Gr. 11A/JNCH vide Order-in-Original No. 1493/2010AM(I) dated 4.3.2010 wherein it is an admitted position that the appellant had obtained all the requisite documents from the importer. In respect of show-cause notice dated 15.12.2009, the Order-in-Original No. 1/230/2010 AM(I) dated 22.2.2010 was passed by the Add. Commissioner of Customs, JNCH, wherein it is also recorded that the appellant had obtained all the requisite documents from the importer. In other words, the finding that the appellant has violated regulation 13(a) of the CHALR, 2004 is not legally sustainable.
10. Ld. Departmental Representative would submit that the issue is not as simple as the ld. Consultant has put up. It is his submission that the main appellant was very well aware of the fact that imports undertaken by person who was holder of IEC; that the main appellant has not conducted any background checks before undertaking the clearance work; that due to such negligence there is a loss of exchequer which was noticed due to alertness of the Departmental authorities. It is his submission that action under CHALR has been initiated against the appellant as his action is found wanting as a responsible CHA.
11. We have considered the submissions made at length by both sides and perused the records. The CHA licence of the appellant is revoked and security deposit is forfeited by the Adjudicating Authority based on the inquiry report filed by the inquiry officers against various charges.
12. We proceed to record our findings in this case change wise, hence we reproduce the various violations as alleged against appellant as per Regulations of CHALR.
11(i) Article of Charge I: Regulation 13(a) of CHALR 2004 states that A Customs House Agent shall obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as Customs House Agent and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs.
11(ii) Article of Charge II: Regulation 13(d) of CHALR 2004 states that A Customs House Agent shall 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. 11(iii) Article of Charge III: Regulation 13(e) of CHALR 2004 states that A Customs House Agent shall 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. 11(iv) Article of Charge IV: Regulation 13(n) of CHALR 2004 states A Customs House Agent shall ensure that he discharges his duties as Customs House Agent with utmost speed and efficiency and without avoidable delay. 11(v) Article of Charge V: Regulation 13(o) of CHALR 2004 states that A Customs House Agent shall verify antecedent, correctness of Importer Exporter Code (IEC) Number, identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information.
13. Regulation 13(a) of CHALR 2004 The finding of Adjudicating Authority on this charge are as under:-
20(v). Shri Zeeshan has admitted in his statement recorded on 03.01.13 that he had signed on the authority letter and various import documents of M/s. Apex Enterprises & M/s. FK International; that he accepted that it is a mistake to sign the documents as Proprietor of the IEC concerns. Besides the above confessions it is seen that the copy of authorisation letter dt l6.04.11 of M/s Apex Enterprises and declaration form for Invoice No. 120221-3 seized from the CHAs premises shows that these are not signed by the importer as the signatures do not tally with the signature on the KYC forms. Moreover the variation in signature is very evident and obvious even to the naked eye and evidently indicates that the authorization is fabricated. It is thus clear beyond any doubt that Shri Zeeshan has himself signed the authorization letter in the capacity of Proprietor of the IEC holding concern which is not permissible even if he were a Power of Attorney holder. Moreover in view of the admitted and established fact that IEC holders had no clue about the imports being made in the names of their concerns, it is clear that they could not have authorized the CHA to carry out clearance of goods of which they themselves had no idea. The admissions make it abundantly clear that the IEC holders were dummies and the real imports were effected by Shri Zeeshan Anwar. A Power of Attorney cannot eliminate the requirement for a genuine authorization. The misuse of IEC by a person other than the IEC holder cannot be legitimized merely on the ground of a Power of Attorney in favour of the IEC user.
20(vi). I also note that Shri Zeeshan Khan has admitted in his statement dt 23.05.12 that due to some legal problems he cannot start a company in his name and hence he is importing goods in the name of different companies. Shri Zeeshan Khan has not made any mention of a Power of Attorney. It is pertinent to note that neither Shri Zeeshan Khan nor any of the IEC holders nor the CHA have ever alluded to the existence of a Power of Attorney in any of their statements recorded under Section 108 of the Customs Act, 1962. Even when Shri Sundaram, Proprietor of the CHA was asked why he was dealing with Zeeshan Anwar there was no mention by Shri Sundaram that Zeeshan was holding a Power of Attorney on behalf of the IEC holders. It is also to be noted that the Power of Attorney is not registered. All these facts tend to the conclusion that the Power of Attorney is the result of afterthought in an attempt to circumvent the allegation of mis-use of IEC.
14. We find that the Adjudicating Authority has totally misdirected the issue. It is on record that Shri Zeeshan Anwar is a power of attorney holder. This fact is not denied but sought to be brushed aside on the ground that power of attorney was not brought before investigating authorities. It is to be noted that the said power of attorney as given to Zeeshan is not disputed nor it is controverted by the Adjudicating Authority. The said power of attorney holder has signed few authorisations and produced authorisations signed by IEC holders. We note that during examinations and cross examination Shri Zeeshan Anwar, it was clearly recorded that he had presented the proprietor of Apex Enterprises and Riya Enterprises and another before the CHA in the office of CHA, while giving papers for clearance of consignment, it is also recorded that CHA advised him to give all proper papers and enquired about genuineness of the consignment and the payment. During cross examination by the presenting officer, Shri Zeeshan Anwar has admitted he was responsible for all the faults in importation of consignments. This would indicate that main appellant herein was not at fault. It is also to be noted that the authorisation etc. were produced before the authorities at the time of clearance of goods and was accepted and goods were cleared, would mean that main appellant could not have contravened the provisions of Regulations 13(a) of CHALR 2004.
15. Regulations 13(d) of CHALR 2004 The finding of Adjudicating Authority on this are as under:-
21 (ii). I find that the CHA was interacting with Zeeshan Khan for clearance of goods imported in the name of M/s. Apex Enterprises, Riya Enterprises and FK International even when he was aware that the Proprietors of these IECs were different individuals. This implies that the CHA was aware of the misuse of IEC by Zeeshan Anwar and yet chose to deal with Zeeshan Anwar Khan for the clearance of several consignments over a period of a few months. Any person of ordinary prudence will know that when dummy IECs are being misused7 by a third party then such misuse is usually for effecting imports in contravention of the rules and I or to evade Customs duty. A genuine importer who does not intend to evade the Law does not need to effect imports by using IECs of others. Under the circumstances, the fact that a CHA who is admittedly in business for over 15 years, should have properly scrutinized the import documents or exercise necessary caution and met and adviced the IEC holders. However the CHA did not bother to interact with the IEC holders and also did not think it fit to inform Customs during this entire period when the impugned imports took place. This is a clear evidence of the CHA's failure to adhere to the stipulations of Regulation 13(d) of CHALR, 2004. On this count also the findings of Adjudicating Authority are mis directed as it is on record that there was no specific allegation of non-compliance of the provisions of the Act i.e. Customs Act, 1962. The main appellant had taken care to enquire about the genuineness of the consignment etc. and then only took up the clearances. We find that Adjudicating Authority has not recorded any specific violations except that CHA was aware that these was misuse of IEC we fail to understand how these findings can be arrived against CHA, as it is on record that all these information was alleged after the goods were cleared; and in examination and cross examination nothing is brought on record that CHA was aware of misdeclaration. The findings recorded by Adjudicating Authority in this case is based on surmises and assumptions as is evident from the findings recorded and reproduced hereinabove.
16. Regulations 13(e) of CHALR 2004 The finding of Adjudicating Authority on this are as under:-
22(ii).My discussions above have already laid made it clear that the CHA was aware that Shri Zeeshan was not the IEC holder and yet chose to deal only with him for the clearance of goods in the names of different IECs without even scant scrutiny of the import documents. It is seen that the Shops & Establishment Certificate of MIs Riya Enterprises is for cutlery items and that of M/s Apex Enterprises is for artificial jewellery whereas both the Proprietary concerns were importing glass sheets. This itself should have alerted the CHA to exercise caution and ensure that the IEC holders are informed about the provisions of the law relating to imports. The copy of authorization letter dt. 16.04.11 of M/s Apex Enterprises and declaration form for Invoice No. 120221-3 seized from the CHAs premises shows that these are not signed by the importer as the signatures do not tally with the signature on the KYC forms. This also should have served as a wake-up call for the CHA to be alert and interact with and inform the IEC holders of the requirements under the CHALR, 2004.
By the above findings the Adjudicating Authority has negated the findings of the inquiry officer that charge for contravention of Regulation 13(e) is not proved. It is to be seen that the CHA went by documents of imported consignment, and the power of attorney given to Zeeshan Anwar. It is also undisputed that IEC numbers were genuine as is verified by the CHA in KYC norms maintained. On this point, we find that inquiry officer was correct in coming to a conclusion that the contravention of this Regulation 13(e) was beyond the scope of and not supported by any evidence, as even the findings of Adjudicating Authority are assumptions and presumptions, as he expects the CHA to get alerted by the shop and establishment Act licences. In our view, these findings do not instill any confidence in us that there was any contravention by CHA as regards this regulation.
17. Regulations 13(n) of CHALR 2004 On this point we again find that Adjudicating Authority has in his finding at para 23(i) to 23(iv) brought on record that main appellant has not discharged his duties as a CHA with utmost speed and efficiency and without avoidable delay in respect of the consignment that were cleared. It seems that purpose of this regulation is no understood by the lower authorities in its true sense. To our mind this Regulation expects the CHA to assist the customs authorities for clearance of the goods, and cannot be held against the appellant for not coming for recording of the statements. In our view, on this point also the Adjudicating Authority has misdirected the findings.
18. Regulations 13(o) of CHALR 2004 On this point, the Adjudicating Authority has held against the appellant as under:
24(vii) Regulation 13(o) of CHALR, 2004 lays a very onerous responsibility on the CHA to verify the antecedents, identity and functioning of their client at the declared address by using reliable, independent, authentic document, data or information. In the present instance when the CHA was aware that he was not dealing with the IEC holder, it was incumbent on the CHA to confirm the identity and functioning of the client at the declared address even if it meant making a personal visit to confirm the authenticity. This particularly so in view of the fact that the letters addressed to one of the IEC holders have been returned indicating that the address is fictitious. The CHA has miserably failed in this regard as notwithstanding all their claims, the fact remains that the IECs were complete dummies who had nothing to do with the import and the imports were fraudulently effected by Shri Zeeshan Anwar Khan. It can be noticed the Regulation mandates the CHA to verify antecedent, correction of IEC identity of client and functioning of his client at the declared address. It is on record that appellant CHA has verified the same by filling up of the KYC form, verifying the details of IEC from the DGFT website, MSEDCL electricity bill is in the name of IEC holder, ration card, pan card, licence issued under shop and establishment Act, 1948 and above all authentication of bank account by the bank. We find that CHA has verified these documents in respect of all the three IEC holders. In our considered view nothing more can be expected out of a CHA to verify the antecedents of a client coming to him with a business proposal for clearance of imported consignment. In our view the Adjudicating Authority has misconceived the purpose of this Regulation.
19. In view of the foregoing, we find that there is no violation of CHALR is established against the appellant, nor there is any finding that appellant had advised importers to undervalue the goods. Accordingly, both the impugned orders are set aside, and ld. Commissioner of Customs (Gen), Mumbai is directed to restore the CHA licence forthwith within a period of four weeks from receipt of the copy of this order. He will also restore the forfeited security deposit.
(Pronounced in Court on ...........................) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) //SR 2 C/86266/14