Custom, Excise & Service Tax Tribunal
Innovative Cargo Services vs Commissioner, Customs (Exports)-New ... on 21 February, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. - IV
Customs Appeal No. 50002 of 2020 [DB]
[Arising out of Order-in-Appeal No. CC(A)/Customs/D-II/ICD/TKD/Exp/689/2019-
20 dated 31.10.2019 passed by the Commissioner of Customs (Appeals), New
Delhi]
M/s. Innovative Cargo Services ...Appellant
16-A, Pratap Nagar,
Mayur Vihar Phase-I,
Delhi - 110091
VERSUS
Commissioner of Customs (Exports),
New Delhi ...Respondent
Inland Container Depot, Tughlakabad, New Delhi - 110037 APPEARANCE:
Shri Sharad Srivastava and Ms. Gunjan Tanwar, Advocates for the Appellant Shri Rakesh Kumar, Authorized Representative for the Respondent CORAM:
HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) HON'BLE MRS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) DATE OF HEARING: 25.10.2024 DATE OF DECISION: 21.02.2025 FINAL ORDER No. 50343/2025 DR. RACHNA GUPTA The present appeal has been filed to assail the Order-in- Appeal No. 689/2019 dated 31.10.2019. The facts in brief relevant for the present adjudication are as follows:
1.1 The Directorate of Revenue Intelligence, Delhi Zonal Unit, received an information about one Shri Vinod Kumar Mulani to have been involved in siphoning off duty drawback from the exchequer by export of inferior quality of readymade garments at highly overvalued price using various bogus/front firms created using fake Permanent Account No. (PAN) or PAN Cards obtained on the basis 2 Customs Appeal No. 50002 of 2020 [DB] of fraudulently created residential proofs. Based on the said intelligence, the investigations were conducted. Shri Vinod Kumar Mulani despite several summons avoided his presence and cooperation to the investigating officers, however he surrendered on 06.09.2010 before the court of ACMM, New Delhi and prayed for the bail and he joined the investigation pursuant to the directions of the said court on 17.09.2010 wherein he disclosed the name of the bogus firms opened by him and the names of the persons in whose name those firms were got opened. He also named about various traders from whom he was purchasing the garments and that he also got opened the bank accounts in the names of those firms crated by him. The investigating team recorded the statements of various others who were named by Shri Vinod Kumar Mulani and conducted searches in several premises including the premises of the appellant. He disclosed that Shri Binod Kumar Singh, partner of M/s. Innovative Cargo Services, CHA, Who is the present appellant, had undertaken the customs clearance of his proprietary concern M/s. Simran Exports, M/s. Alpha Impex and M/s. Kenstar Overseas. 1.2 He also stated that said Shri Binod Kumar Singh had charged Rs.2000/- per lac for processing of drawbacks in these firms in addition to his other agency charges and that all the expenses related to export drawback clearance were paid by him to employee Shri Nazrul Khan. He also stated that all the export documents i.e. invoice, packing list etc. were prepared at the office premises of the CHA/appellant and CHA only used to provide them the details of the goods to be exported and packing details along with details of consignee. During further investigation, it was found that the fake 3 Customs Appeal No. 50002 of 2020 [DB] PAN cards were used for obtaining Importer Exporter Code (IEC) in the name of bogus firms which are used for the sole purpose of fraudulent availment of duty drawback and normally after exporting 10 to 12 consignments of cheap/inferior quality of readymade garments and siphoning off the duty drawback, such fimrs were abandoned. The investigation revealed that Shri Vinod Kumar Mulani in the names of fraudulent firms created by him had defrauded the government exchequer of more than Rs. 20.86 crores by claiming duty drawback on the inferior quality of readymade garments. It is coming apparent from the statement of the appellant, his G-Card Holder Shri Nazrul Hashan Khan that they were processing the export clearance for three of the firms namely Alpha Impex, M/s. Simran Exports and M/s. Kenstar overseas but they had never met their proprietor except that Shri Vinod Kumar Mulani only was the contact person for handing over the documents and for all related purposes.
1.3 In view of the said outcome of the investigation department formed an opinion that M/s. Innovative Cargo Services, the appellant, had not discharged their duties as CHA with due diligence as prescribed under Custom House Agents Licensing Regulations, 2004. Resultantly, the Show Cause Notice No. 28/2015 dated 14.05.2015 was served not only on Shri Vinod Kumar Mulani and proprietors of the firms named above but also on the appellant for committing such acts/omissions which have rendered the impugned goods liable for confiscation under Section 113 of the Customs Act, 1962. The appellant was proposed liable to pay penalty under Section 114(i) and (iii) of the Customs Act, 1962. The said 4 Customs Appeal No. 50002 of 2020 [DB] proposal was confirmed vis-à-vis all the noticees therein including the appellant. In addition, penalty of Rs.2,00,000/- was imposed on appellant in terms of Section 114(i) and (iii) and penalty of Rs.
3,00,000/- under Section 114AA of the Customs Act, 1962 was imposed vide Order-in-Original No. 35/2017 dated 23.02.2017. The appeal against the said order has been rejected vide the Order- in-Appeal No.689/2019-20 dated 31.10.2019. Being aggrieved the appellant is before this Tribunal.
2. We have heard Shri Sharad Srivastava and Ms. Gunjan Tanwar, learned Advocates for the appellant and Shri Rakesh kumar, learned Authorized Representative for the department.
3. Learned counsel for the appellant has submitted that the appellant was engaged in clearance of the export consignments of the exporters namely M/s. Alpha Impex and M/s. Ken Star Overseas. Shri Vinod Kumar Mulani had provided all the KYC documents and all the other requisite documents. It is submitted that though the investigation revealed that the exporter were non- existing and goods were over-invoiced so as to avail the excess amount of drawback but the appellant was not aware about the same. There is nothing on record to show that the appellant had any prior knowledge or was in any way in connivance with the said exporters or had abetted the impugned fraudulent exports. It is submitted that the appellant filed the shipping bills in good faith as they had earlier also cleared certain export consignments of one M/s. Simran Exports, proprietary concern of said Shri Vinod Kumar Mulani. In such circumstances, the penalty cannot be imposed 5 Customs Appeal No. 50002 of 2020 [DB] upon the CHA. Learned counsel has relied upon the following decisions:
(i) Commissioner of Customs Vs. VAZ Forwarding Ltd.
reported as 2011 (266) ELT 39 (Guj.)
(ii) D.S. Cargo Service Vs. Commissioner of Customs, New Delhi reported as 2009 (247) ELT 769 (Tri. - Del.)
(iii) Escorts Heart Institutes & Research Centre Vs. CC (Import & General), New Delhi reported as 2016 (336) ELT 185 (Tri.- Del.)
(iv) Apson Enterprises Vs. Commissioner of Customs (EP), ACC, Mumbai reported as 2017 (358) ELT 817 (Tri.-Mumbai) 3.1 Learned counsel further submitted that the appellant has wrongly alleged as an abettor. The meaning of abatement is to instigate, conspire or intentionally aiding in the commission of the offence amounts to the offence of abatement. The prior involvement is an essential ingredient to attract the charge of abetting. In the presence case, there is no such evidence produced by the department, hence, the appellant is wrongly alleged to be an abettor or the conspirer. The penalty has wrongly been imposed by the adjudicating authorities below.
3.2 It is further submitted that the appellant has not violated any provisions of CHA obligations. Reliance has been placed on the decision of Hon'ble High Court of Delhi in the case of Kunal Travel (Cargo) Vs. CC (I&G), IGI Airport, New Delhi reported as 2017 (354) ELT 447 (Del.) wherein it was held that the due diligence on part of CHA is about the information that he may give 6 Customs Appeal No. 50002 of 2020 [DB] to his clients and he is not necessarily to do a background check of either the client or of the consignment. The documents prepared or filed by the CHA are on the basis of instructions/documents received from its clients.
3.3 With respect to the antecedent verification, it is submitted that the appellant had obtained IECs, PAN cards, Driving License, Election Commission Cards and Bank letters. Those documents were found to be valid and existing. This was the compliance of CHA Regulations, 2004 on part of the appellant. Nothing beyond that is required from the CHA. Penalty for violation of regulation, due diligence in verification in documents has wrongly been imposed. There is otherwise nothing in the CHA Regulations, 2004 which require that CHA should meet exporter or importer physically before taking assignment of clearance. The appellant was otherwise duly authorized by the proprietors of the exporters for clearance of their consignments. There is no reason of imposition of penalty upon the appellant as has been imposed in the order under challenge. Accordingly, the order under challenge is prayed to be set aside and appeal is prayed to be allowed.
4. While rebutting these submissions, learned Departmental Representative has submitted that it is an admitted fact that the appellant did not meet the proprietors of the exporting firms M/s. Alpha Impex and M/s. Ken Star Overseas for whom the documents were filed by the appellant for the clearance of the export consignment of the firms. This admission reflected sufficient violation of CHALR, 2004 in as much as the appellant accepted the work and documents for customs clearance of export consignments 7 Customs Appeal No. 50002 of 2020 [DB] of these firms without meeting the proprietors thereof. It was gathered from the statements of all notice including the mastermind that entire fraud of siphoning off duty drawback from government accounts was done by overvaluing the inferior quality of readymade garments in three bogus/front firms which were created on paper using fake proofs of persons who were made scapegoats for some greed and the clearances were made by the appellant without being due diligent on the factum that the person handling these export clearances was the master who was not the actual IEC holder nor was authorized by the actual IEC holder to engage with the appellant for the said clearances. In fact they had knowledge that they were dealing with bogus firms. In fact the export was attempted by the fraudsters and the appellant facilitated them instead of bringing the fraudulent act to the knowledge of the Customs Authorities.
4.1 The appellant had admitted that he had no knowledge about the exporter M/s. Alpha Impex and M/s. Ken Star Overseas and that the delivery challans were signed by Shri Mulani though not an authorized representative of these firms. The above facts were also admitted by the G-card holder Shri Nazul Hassan khan in his statement dated 24.09.2014 recorded under Section 108 of the Customs Act, that Shri Mulani was owner of other two firms which prove beyond doubt that the G-card holder has not verified anything not even the names of IEC holders in other two firms. The mastermind, Shri Mulani in his statement dated 03.02.2015 had also admitted that he used to pay Rs.2000/ lac drawback amount for processing of drawbacks in his firms in addition to his other 8 Customs Appeal No. 50002 of 2020 [DB] agency charges and all payments were made in cash to the G-card holder of the appellant. The CHA's G-card holder has ignored the fact that an IEC holder cannot sublet his IEC to other persons for Export. The appellant was in connivance with the fraudsters. It is a fit case where the Customs Broker was found to be facilitating in his office the fraudster Shri Mulani who was gaining illegal drawback amount by manipulation of original invoice values and submitting the fabricated documents with the Customs authorities. That he had connived with the fraudsters for greed of easy money (Rs.2000/lac drawback amount Shri Mulani was receiving) as he was willfully violating the provisions of CBLR which he was supposed to adhere to as a Customs Broker while dealing with persons who were neither the exporters nor their employees when as a Customs Broker. The obligations as per CBLR 2013 force upon him to be due diligent, give proper advice to his client, transact business in a proper manner, inform any change in address etc., not withhold any information and report it to the Customs Authorities etc. which he has failed to abide by. Thus, the order of the Commissioner of Customs is proper and the appeal of the appellant needs to be dismissed. Learned Departmental Representative has relied upon the decision of Hon'ble Apex Court in the case of Commissioner of Customs Vs. K.M. Ganatra & Co. reported as 2016 (332) ELT 15 (SC) 4.2. Finally is submitted that the fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. In order to gain by another's loss is deception. As per Shri Vinod Kumar Mulani's own admission, the 9 Customs Appeal No. 50002 of 2020 [DB] appellant in the present case was getting extra benefit for conniving Shri Vinod Kumar Mulani in the impugned fraudulent exports. Learned Departmental Representative submitted that in light of these proven facts, there is no infirmity in the order under challenge. Accordingly, appeal is prayed to be dismissed.
5. Having heard both the sides and perusing the records, we observe and hold as follows:
5.1 The appellant herein is aggrieved of the imposition of penalty upon him in proceedings which were initiated against Shri Vinod Kumar Mulani who was found to have fraudulently availed ineligible drawback by resorting to overvaluation while exporting inferior quality garments. The impugned show cause notice has been issued under Customs Act impleading the appellant who is the Customs House Agent of the said importer alleging that the appellant did not discharge its duty as CHA with due diligence as prescribed under CHALR, 2004 in as much as the appellant accepted the work and documents for customs clearance of the export consignments on behalf of M/s. Alpha Impex and M/s. Ken Star Overseas without meeting the proprietor of the said firms (Shri Vinod Kumar Mulani was found to be the beneficial owner of these firms and was found to have created those firms in fake names).
We observe that there is no denial of the Revenue that appellant obtained all the requisite documents vis-à-vis the identity and the place of existence by verifying said KYC documents with the respective departments.
5.2 It is also observed that all the consignments were allowed to be exported after scrutiny of the documents which were filed along 10 Customs Appeal No. 50002 of 2020 [DB] with shipping bills. Even the physical examination of the goods was conducted without any objection been raised at the time of clearance of the export consignment neither with respect to the quality nor the value of the exported garments. There is also no denial to the fact that with respect to the impugned exports the appellant filed eight shipping bills on behalf of M/s. Kenstar Overseas and six shipping bills on behalf of M/s. Alpha Impex in the month of May-June 2009. However, it is almost after five years from the date of exports that the appellant was summoned by DRI Officers during the course of investigating the exports fraudulently done by various importers to avail the ineligible duty drawback benefits. Apparently and admittedly the impugned show cause notice was issued on 19.05.2015 i.e. six year after the impugned export consignments got cleared by the appellant. 5.3 We further observe that there is no express mentioned in the show cause notice that at the time of filing the shipping bills, the appellant was aware about exporting firms to be fictitious and that the goods to be overvalued. The appellant's contention since the stage of reply to the show cause notice is that all the documents received on behalf of the exporters were got duly verified from the website of respective departments including that of DGFT website. The exporting firms were found duly registered and existent at the given address. The Import Export Codes of these firms were also found to be genuine. Though it is the case of the department the none of the firms were found existing at the given address which amounts to be failure on part of the CHA. However, in the light of the said contention of the appellant and no evidence produced by 11 Customs Appeal No. 50002 of 2020 [DB] the department to prove that any of the documents (KYC) were fake or forged, it stands clear that the addresses were correct as per the documents issued by several government departments and were duly verified by the appellant through the respective websites. To our understanding this is the sufficient compliance of obligations under CHALR on part of the appellant and amounts to sufficient due diligence on its part. We draw our support from the decision of this Tribunal in the case of Nirmala Rishi Vs. Commissioner of Customs, New Delhi reported as 1999 (112) ELT 287, the decision in the case of Shaikh & Pandit Vs. CC (Prev.), Calcutta reported as 2001 (131) ELT 402, even the decision of the Larger Bench of the Tribunal in the case of J.G. Exports Vs. CC, New Delhi reported as 2000 (121) ELT 754 wherein it was held that there is no obligation on CHA under CHALR to check physically the credentials of the exporter. The prices of the goods and the other prices were entered in the export documents by CHA only in terms of the price stated in the invoices as well as based on the advice of the exporter. Hence contravention of regulations cannot be alleged against the appellant.
5.4 Further we do not find any denial of Shri Vinod Kumar Mulani, the beneficial owner of the exports, who is the alleged mastermind behind the fictitious firms fraudulently exporting the inferior quality of garments to receive ineligible duty drawback, that the appellant was authorized to clear the impugned export consignments. Shri Vinod Kumar Mulani in his several statements duly acknowledged that all requisite documents were provided to the appellant/CHA on behalf of both the exporting firms and CHA had filed the shipping 12 Customs Appeal No. 50002 of 2020 [DB] bills for the impugned export as per those documents. We draw our support from the decision of this Tribunal in the case of Baraskar Brothers Vs. Commissioner of Customs reported as 2013 (394) ELT 415. This Tribunal in a recent decision vide Final Order No. 50561/2022 dated 04.07.2022 in Customs Appeal No. 50997 of 2021 in the case of M/s. Mauli Worldwide Logistics Vs. Commissioner of Customs, New Delhi (Airport and General), has also held that the fact that appellant had carried out due diligence is consistent with the fact that the KYC documents were obtained by him as CHA and were submitted by him before the Commissioner. Same is the fact of the present case. Hence the decision is squarely applicable in the present case also. 5.5 The decision also elaborates that if IEC code issued by the DGFT is wrongly issued to non-existent businesses and entities, the CHA cannot be blamed for trusting IEC issued by the DGFT. Similar is the case of other documents such as PAN card (issued by Income Tax Department), Driving License (issued by the Transport Department), Voter ID (issued by the Election Commission) etc. If the verification reports are true and none of the exporters still existed at their premises, the irresistible conclusions is that all the officers of various departments have been either extremely careless or were operating under flawed systems which allowed documents to be issued to non-existing businesses. Bases on this decision the allegations against the appellant and the contention of the department that since the firms were found non-existing and fictitious, the CHA is liable to penalty, is not acceptable. 13
Customs Appeal No. 50002 of 2020 [DB] 5.6 Hon'ble Delhi High Court in the case of Kunal Travels reported as 2017 (3) TMI 1494 has held that the CHA is not an inspector to weigh the genuineness of the transaction. It is a processing agent of documents with respect of clearance of goods through customs house. It would be far too onerous to expect the CHA to inquire into and verify the genuineness of the IE code given to it by a client for each import/export transaction. When such code is mentioned, there is a presumption that an appropriate background check in this regard would have been done by the requisite authorities. Above all CHA need not to sit as an examiner or supervisor to such authorities issuing the documents to the importer/exporter as the case may be. Even the CHALR Regulations do not expect the CHA to physically examine the genuineness vis-à-vis the identity of his client and his existence at the address mentioned on the documents which are otherwise being verified by CHA as genuine. The onus of CHA therefore cannot be extended to verify that the officers issuing those documents/certify/registration whether or not have correctly issued the same.
5.7 Hon'ble Apex court in the case of K.M. Ganatra & Co. (also being relied upon by the department), no doubt, has held that:
"CHA occupies a very important position in the Customs House. Since the Customs procedures are complicated, the importers have to deal with a multiplicity of agencies viz. carriers, custodians like BPT as well as the Customs. The importer would find it impossible to clear his goods through these agencies without wasting valuable energy and time. The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/exporters as well as 14 Customs Appeal No. 50002 of 2020 [DB] by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed. Regulation 14 of the CHA Licensing Regulations lists out obligations of the CHA. Any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulations.
5.8 But in light of the decisions above, the said responsibility of the CHA cannot be extended to such an acts for which he is otherwise not required. The decision in the case of Falcon India (Customs Broker) Vs. Commissioner of Customs (Airport & General) New Delhi in Customs Appeal No. 50934 of 2021 vide Final Order No. 50259/2022 dated 21.03.2022 is also not relevant for the present purpose. The facts in that case was that the CHA did inform the department with the understanding that it had no liability and the defence of CHA was that he earns its bread from trade facilitation and cannot act as a spy to the Department and if it spies for the department, it will lose its clients. None is the case with respect to the present appellant who immediately joined the investigation after being summoned and provided all KYC documents to the investigating officers as were obtained by him for the exporters.
5.9 We further observe that the department itself had issued Instructions vide Advisory No. 02/2024 dated 03.09.2024 vis-à-vis implicating customs brokers as co-noticees in cases involving interpretative disputes. Para 3 and 4 thereof reads as follows:
3. Principle Bench of CESTAT, New Delhi in its Study Report on the Final Orders has also highlighted that the offence report sent by the organization booking such offence case should clearly contain the role played by the Custom Broker in the offence case. The Custom Broker being a Co-noticee in the offence case 15 Customs Appeal No. 50002 of 2020 [DB] under Customs Act, 1962 has to be linked to the proceedings initiated against the Custom Broker under CBLR, 2018. In these offence cases, it is necessary to prove the element of 'abatement' of Custom Broker in the offence.
4. Accordingly, implicating Customs Brokers as co-noticee in a routine manner, in matters involving interpretation of statute, must be avoided unless the element of abetment of the Custom Brokers in the investigation is established by the investigating authority. Further, the element of abetment should be clearly elaborated in the Show Cause Notice issued for the offence case under the provisions of the Customs Act, 1962. Further, as regard the suspension of licenses of Customs Brokers, Instruction No. 24/2023 dated 18.07.2023 shall continue to be followed.
5.10 As already observed above there is no evidence produced by the department to prove the allegations of lack due diligence on part of the CHA nor of abatement in impugned illegal exports.
There is not even any evidence on record to prove that the appellant had derived any benefit out of alleged violation by the exporters or out of availment of ineligible drawback. Hence the oral testing of Shri Vinod Kumar Mulani about paying Rs.2000/lac of export clearance to the appellant stands uncorroborated. There is no corroboration to that effect despite the department had done a meticulous enquiry with the banks of the exporter firms but no single documentary evidence could have been produced showing any remittance to the appellant out of the amounts received by those firms in the name of duty drawbacks.
6. In the light of entire above discussion, we hold that the decisions relied upon by the department are not applicable to the set of circumstances in the present case. We also hold that in absence of any evidence to support the allegations of the show 16 Customs Appeal No. 50002 of 2020 [DB] cause notice against the appellant, the penalty against the appellant has wrongly been imposed. Resultantly, we hereby set aside the impugned order. Consequent thereto, the appeal stands allowed.
[Order pronounced in the open court on 21.02.2025] (DR. RACHNA GUPTA) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) HK