Custom, Excise & Service Tax Tribunal
Total Clearance vs Commissioner Of Customs-Mumbai - ... on 13 July, 2023
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
CUSTOMS APPEAL NO: 86444 OF 2022
[Arising out of Order-in-Original No:17/CAC/PCC(G)/SJ/CBS Adj. dated 26th
May 2022 passed by the Principal Commissioner of Customs (General), Mumbai-
I.]
Total Clearance
602/B Wing, Shri Dutta Towers, Thalao Pali, Thane (W)
400 602. ... Appellant
versus
Principal Commissioner of Customs (General)
New Custom House, Ballard Estate, Mumbai 400 001. ...Respondent
APPEARANCE:
Shri K S Mishra, Advocate for the applicant appellant Shri D S Maan, Deputy Commissioner (AR) for the respondent CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE MR AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER NO: A / 86107/2023 DATE OF HEARING: 02/03/2023 DATE OF DECISION: 13/07/2023 PER: C J MATHEW Proceedings under Customs Brokers Licensing Regulations, 2018 were initiated against the appellant, M/s Total Clearance C/86444/2022 2 (customs broker licence no. 11/217) following crackdown by Directorate of Revenue Intelligence (DRI) on syndicated operation that enabled certain persons to avail ineligible drawback and refund of 'integrated goods and service tax (IGST)' in export of goods supported by fake purchase invoices to inflate the claims and involving misuse of 'importer-exporter code (IEC)' of 41 purported exporters. It was alleged that one Nilesh Gosavi, who was acquainted with Raj Bhanushali, proprietor of M/s Total Clearance, surfaced to admit having monetarily compensated the appellant herein for facilitating those exports. After suspension of the licence under regulation 16 of Customs Broker Licencing Regulations, 2018 on 29th July 2021 upon receipt of 'offence report', which was continued by order dated 21st October 2021 after 'post-decisional' hearing, show cause notice dated 21st October 2021, proposing revocation of customs broker licence, forfeiture of security deposit furnished and imposition of further penalty, was issued and inquiry authority appointed for the next stage of proceedings.
2. On completion of enquiry, the appellant was placed on notice of intention to accept the report and, after personal hearing, Principal Commissioner of Customs (General), Mumbai vide order1 revoked the licence, besides forfeiting the entire security deposit, under regulation 14 of Customs Brokers Licensing Regulations, 2018 and imposed a 1 th [order no.17/CAC/PCC(G)/SJ/CBS Adj. dated 26 May 2022] C/86444/2022 3 further penalty of ₹ 50,000/- under regulation 18 of Customs Brokers Licensing Regulations, 2018. The erasure of the appellant from the rolls of 'customs brokers' was actuated by the finding that the charge for breach of regulation 10(d), 10(n) and regulation 1(4) of Customs Brokers Licensing Regulations, 2018 had been breached even as the charge of violation of regulation 10(a), 10(c) and 10(m) of Customs Brokers Licensing Regulations, 2018 were dropped.
3. We find it surprising that despite the proceedings initiated for every possible detriment under the Regulations on the back of several charges of breach of obligation having been confirmed with three of the charges held as not proved, no allowance was made by the licencing authority for the dilution of the actual breach.. Be that as it may, and without going into the issue of proportionality of penalties, the finding that led to conviction that the licence should be revoked is taken up for evaluation.
4. Regulation 1(4) requires the issued licence to be held by the licencee and not to be sold or otherwise transferred. It is contended on behalf of the licensing authority that the customs broker admitted to having procured business through an intermediary and that the payments were received from the said person which the licensing authority found difficult to lend credence as procurement of business should have been reflected by a reverse flow of recompense to the C/86444/2022 4 intermediary. Furthermore, it is contended by Learned Authorised Representative that the appellant had admitted to not having handled the goods in the port area which, according to him, suffices to establish that the licence had been effectively transferred.
5. In terms of regulation 10(d) of Customs Brokers Licensing Regulations, 2018, 'customs broker' is required to advise clients to comply with the provisions of Act and, in the event of non- compliance, to bring such to the notice of the Deputy Commissioner of Customs. It was held that the appellant had not carried out the mandatory check of details of client as specified in regulation 10(d) of Customs Brokers Licensing Regulations, 2018 owing to which the impugned transactions had been enabled. According to Learned Authorised Representative, the customs broker had neither obtained the authorization of the actual owner at all nor of the purported exporter directly and had not advised either to comply with the provisions of Customs Act, 1962. According to the licensing authority, lack of any personal contact with the customer/beneficial owner having been admitted and, in these circumstances, it cannot but be inferred that the customs broker could not have interacted with them to advise them of their obligations. Reliance was placed by the Learned Counsel on the decision of the Tribunal in K S Sawant & Co v. Commissioner of Customs (General), Mumbai [2012 (284) ELT 363 (Tri.-Mumbai)] which held that C/86444/2022 5 '5.1 From the records, it is clear that the business in respect of the client M/s. Advanced Micronics Devices Ltd., was brought in by Shri Sunil Chitnis, who claims himself to be a sub-agent of the appellant CHA. The statements of Shri Badrinath and Shri Sunil Chitnis amply proves this fact. The question is, merely because the appellant procured the business through an intermediary who is not his employee, can it be said that he has sub-let or transferred the business to intermediary. The Tribunal in the case of Commissioner of Customs v. Chhaganlal Mohanlal & Co Ltd. [2006 (203) E.LT 435 (Tri. - Mum.)], held that if the Customs clearance has been done through intermediary and business was got through intermediary, the same is not barred by the provisions of CHALR, 2004 and it cannot be stated that the appellant has sub-let or transferred his licence. In the case of Krishan Kumar Sharma v. Commissioner of Customs, New Delhi reported in 2000 (122) ELT 581 (Tri.), this Tribunal held that the mere fact of bills raised on the intermediary cannot be held against the CHA firm to prove that the CHA licence was sub-let or transferred. Therefore, in the light of the judgments cited above, the charge of violation of Regulation 12 is not established. As regards the violation of Regulation 13(a), the adjudicating authority himself has observed that the "I have no doubt to say that the CHA might have obtained the authorisation but it is surely not from the importer. Therefore, the authorisation submitted is not a valid one". This finding is based on a presumption. Obtaining an authorisation from the importer does not mean that the same should be obtained directly; so long as the concerned import documents were signed by the importer, it amounts to authorisation by the importer and, therefore, it cannot be said that there has been a violation of Regulation 13(a). As regards the last charge, i.e. the appellant did not transact the business through his employee but through Shri Sunil Chitnis C/86444/2022 6 thereby violating the provisions of Regulation 13(b), there is some merit in the argument. Both Shri Sunil Chitnis and Shri Ashish Patekar, authorised signatory of the appellant CHA, has admitted that it was Shri Sunil Chitnis, who undertook the clearance work on behalf of the CHA. Mere signing of the documents does not prove that the clearances were undertaken by the appellant CHA and, therefore, there is some merit in the argument that Regulation 13(b) has been violated by employing Shri Sunil Chitnis for doing the clearance work of M/s. Advanced Micronics Devices Ltd. The question now is whether revocation of licence is warranted for such a violation. In our view, the punishment should be commensurate with the gravity of the offence. Revocation is an extreme step and a harsh punishment, which is not warranted for violation of Regulation 13(b). Accordingly, we are of the view that forfeiture of security tendered by the appellant CHA is sufficient punishment and revocation is not warranted. Accordingly, we set aside the order of the revocation and direct the Commissioner of Customs (General) to restore the CHA licence subject to the forfeiture of entire security amount tendered by the CHA.' and similar decisions in Commissioner of Customs, Mumbai v. Chhaganlal Mohanlal & Co [2006 (203) ELT 435 (Tri.-Mumbai)], in Krishan Kumar Sharma v. Commissioner of Customs, New Delhi [2000 (122) ELT 581 (Tribunal)] and in Jai Ambe Logistics v. Commissioner of Customs (General), NCH, Mumbai [2015 (327) ELT 730 (Tri.-Mumbai)].
6. Insofar as the allegation for breach of obligation under regulation 10(n) of Customs Brokers Licensing Regulations, 2018 is C/86444/2022 7 concerned, reliance was placed on the decision of the Tribunal in Anax Air Services Pvt Limited v. Commissioner of Customs (Airport & General), New Delhi2 disposing off appeal no. 50987 of 2021 against order3 of Commissioner of Customs (Airport & General), New Delhi.
'44. As far as the export incentives such as drawback are concerned, they are received on the basis of the shipping bills cleared by the Customs and the corresponding Export General Manifest (EGM) filed by the Master of the Vessel or his agent confirming that the container is loaded on to the ship. Regardless of whether the remittance is received (for which a time of one year is available) or not, the exporter gets drawback into his account immediately from the Government. 45. To sum up, the entire system of exports is based heavily on trust and facilitation and very less emphasis on due diligence which enhances trade facilitation but also makes it vulnerable to misuse by fraudsters. The IEC is issued by DGFT based only on an online application and a few easy to obtain documents. So, one cannot rule out the possibility of an IEC being issued without the person even operating its business from the address. The IEC forms the foundation for the entire system of controls and, in turn, is the basis for issue of various licences and scrips by the DGFT and is also the basis for Customs allowing exports. In view of the customs RMS letting 80% to 95% of the exports without either assessing the documents or examining the records, there is a very high probability of any fraudster successfully exporting the goods (or even empty containers) and claiming the export incentives and profiting from it. The export promotion 2 [final order no. 50002/2022 dated 3rd January 2022 3 [order-in-original no. 114/MK/Policy/2021 dated 15th June 2021 C/86444/2022 8 schemes are not treated as expenditure but are classified as 'Revenue Foregone' in the budget. The annual impact of these export promotion schemes is about Rs. 70,000 crores as can be seen from the table in the budget reproduced below:
xxxx
46. Thus, both the financial gain to an individual and the aggregate financial impact on the budget are large but the policy and schemes are not designed mainly to facilitate the good guys and genuine exporters and not to keep the crooks out. This balance is a matter of policy. Learned departmental representative was correct in stating that the officers work within their mandate which may not include physical verification of the premises of the exporters. Nevertheless, the burden of this very liberal, open, scheme and its potential misuse cannot be put at the doorstep of a Customs Broker.
Just as the officer's responsibility ends with doing his part of the job (which may be issuing a registration without physical verification or allowing exports without assessing the documents or examining the goods), the Customs Broker's responsibility ends with fulfilling his responsibilities under Regulation 10 of the CBLR, 2018. In dispute in this case is CBLR 10(n) which, as we have discussed above, does not require any physical verification of the address of the exporter/importer and the appellant has fully met his obligations under Regulation 10(n).'
7. Likewise Hon'ble High Court of Delhi in Kunal Travels (Cargo) v. Commissioner of Customs (I &G), IGI Airport, New Delhi [ 2017 (354) ELT 447 (Del).] has held
11. The obligations of the CHA are stipulated in Regulation 13 of the CHALR-04 :
C/86444/2022 9 xxxxxx
14. Any act to defraud presupposes the intention to obtain something fraudulently. In the present case, the appellant (through its proprietor) has all along contended that the documents were filed unauthorizedly by a person incompetent to do so; it has not defended the action of Mr. Lalit Katoch; it claims ignorance and innocence of the contents of the consignment; it objects to the very filing of the two shipping bills by either Mr. Katoch or any person authorised on its behalf, hence there cannot be a presumption of its deliberate act/intention to defraud. There is no evidence of active facilitation of clearance of the consignment through customs by the appellant, hence, no mens rea can be inferred to defraud the government for obtaining duty drawback through a fraudulent transaction. Consequently, the appellant cannot be faulted or punished in the manner it has been.'
8. Reliance placed by the licensing authority on the decision of the Hon'ble High Court of Patna in Bhaskar Logistic Services Pvt Ltd v.
Union of India [2016 (340) ELT 17 (Pat.)] appears to relate to the facilitation of bill of entry for a person other than the actual importer. That is not the case in the present instance where the papers were duly verified and there is no allegation that the customer record of the transacting exporters was bogus. The facilitation of the alleged offence arose from the allegedly fictitious supply chain to the exporter which is beyond the normal remit of obligations devolving on customs brokers.
9. It has been alleged that it would have been impossible to C/86444/2022 10 countenance the claim of the customs broker to have complied with regulation 10(d) of Customs Brokers Licensing Regulations, 2018 which prescribes that the client shall be advised by the customs broker to comply with all the provisions of the Customs Act, 1962 and, in the event of breach, report such to the Deputy Commissioner of Customs. It appears that this allegation is established on the premise that the appellant had no contact with the exporter and, therefore, could not have rendered advice.
10. In similar disputes, we have had occasion to take note that some the obligations pertain to customs brokers and 'client' and that the Customs Brokers Licensing Regulations, 2018 has no definition. In these circumstances, we cannot accept the proposition that customs brokers are obliged to deal directly, and only, with exporters. Implicitly, there is recognition of intermediary as 'client' of the customs broker. It also appears that these proceedings have been initiated primarily on account of the entire scheme having been master-minded by one or more beneficial owners taking recourse to documentation made available by exporters on record. There was a time when Customs Act, 1962, in section 2(20), recognised exporters solely as inclusive of any owner or any person holding himself out to be exporter and only in relation to any goods between entry for export and actual export. Inevitably, this always did, and continues to, exclude any transactions which precedes the filing of shipping bills C/86444/2022 11 under section 50 of the Customs Act, 1962 and restricted to the owner or any person holding himself out to be an exporter. Subsequently, by amendment of 2017, the term encompassed 'beneficial owners' too. These definitions do not exist in isolation from sheer presence in section 2 of Customs Act, 1962 or for resorting to in particular eventualities but are intended to be elaboration of such expression occurring in any provision of the statute among which is section 50 of Customs Act, 1962 requiring any one of these to make entry thereof - whether it be actual owner, beneficial owner or purported exporter. As any of them is permitted to file the bill, the obligation of a customs broker does not extend to ascertainment of all of them.
11. Consequently, any person can be an exporter and any person may act on behalf of the exporter and, thereby, become a client of customs brokers. What we see here are several loose threads - loose threads that do not curtain off the threshold ingress but, at the same time, these loose threads have been twisted together to form a noose that does not hold. We find that, in circumstances set out above, we are unable to concur with the finding of the licensing authority that obligation under regulation 1(4), 10(d) and 10(n) of Customs Brokers Licensing Regulations, 2018 have been violated by the appellant.
12. The appellant had obtained, even if not directly, necessary documentation of the exporter on record and there is no evidence that C/86444/2022 12 the exporters did not exist at the given addresses. There is also no evidence that the 'client' had not been exhorted to abide by the Customs Act, 1962. The suspect transaction occurred before the goods were entered for export and the documents thereto pertain to transactions before the goods were entered for export. Accordingly, we find no merit in the impugned order which is set aside to allow the appeal.
(Order pronounced in the open court on 13/07/2023) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as