Custom, Excise & Service Tax Tribunal
Bajaj Enterprises vs Mumbai on 21 March, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: C/86109/2014
[Arising out of Order-in-Original No: 01/2014/CAC/CC(G)/PKA-CBS dated 02/01/2014 passed by the Commissioner of Customs (General), 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 the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Bajaj Enterprises
Appellant
versus
Commissioner of Customs (General)
Mumbai
Respondent
Appearance:
Shri Anil Balani, Advocate for the appellant Shri M.K. Mall, Asstt. Commissioner (AR) for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 21/03/2016 Date of decision: 20/09/2016 ORDER NO: ____________________________ Per: C J Mathew:
This appeal lies against order-in-original no: 01/2014/CAC/CC(G)/PKA-CBS dated 2nd January 2014 of Commissioner of Customs (General), Mumbai revoking the licence no. 11/948 issued to M/s Bajaj Enterprises under the erstwhile Customs House Agents Licencing Regulations, 1984.
2. Action was initiated under regulation 22 of the said Regulations following investigation into alleged offences in connection with the import of fabrics by M/s Nova Scotia Overseas. Seventeen cartons of fabrics declared as polyester woven dyed fabrics/viscose polyester blended fabrics were landed in India by Shri Ramesh Jain and Shri Rishab Jain using the Import Export Code (IEC) of M/s Nova Scotia Overseas belonging to one Shri Jaiprakash Saad. The test report of the third consignment declared as viscose polyester blended fabric was used to clear subsequent cartons. The said goods, however, were allegedly fabrics subject to duty of ` 40 per sq. meter and ` 95 per kg instead of the assessed rate of 10% on undervalued declaration, leading to evasion of duties of Customs of ` 1.20 crores. Investigations led to one Shri Amit S Momayya, an ex-employee of M/s Bajaj Enterprises and owner of M/s Mahakali Impex, who had used the licence of the appellant to process the imports in return for a recompense of ` 4,000/- for a twenty foot container and ` 6000/- for a forty foot container.
3. Licence of M/s Bajaj Enterprises was suspended vide order no. 05/2010 dated 10th June 2010 and confirmed after post-decisional hearing. Inquiry under regulation 22 of the Regulation was ordered on 14th June 2013. The inquiry report established that the four articles of charges stood proved, viz.
a) violation of regulation12 by transferring of licence;
b) violated regulation 13 by not obtaining authorization from client;
c) violated regulation 13 by failing to transact business personally or through approved employee and instead used Shri Amit S Momayya;
d) violated regulation 13 by failing to advice his client to comply with Customs Act, 1962 and failed to report the non-compliance thereof.
4. After receiving the contentions of the custom house agent against the findings in the inquiry and consequent upon personal hearing on 18th December 2013, relying on the statements of the two partners of M/s Bajaj Enterprises and Shri Amit S Momayya, the Commissioner of Customs (General) found that the licence had been illegally transferred. The authority letter submitted by M/s Bajaj Enterprises was not acceptable to the Commissioner of Customs as it lacked acknowledgement by customs authorities.
5. Though the bills of entry were signed by Shri Yogesh Bajaj and notwithstanding the claim that Shri Amit S Momayya was an employee, the impugned order, relying on a cancellation request for G card received on 2nd December 2008 and issue of G card to Shri Momayya through M/s D V Shipping the misuse of licence was held to have been established. It was also held that the obligation of an agent did not end with mere signing of bills of entry but also extended to clearance work which having been undertaken by Shri Momayya established the failure to handle it personally or through authorized employee. That they did not advice the client regarding compliance was held to be established from the statements confirming that the actual importer was not known to M/s Bajaj Enterprises.
6. The licencing authority also recorded that appellant had been proceeded against on two other cases. In the impugned order, the licence was revoked and security deposit forfeited under regulation 20 and 22 of Customs House Agents Licence Regulation 2004. M/s. Bajaj Enterprises being aggrieved, by revocation and forfeiture, is before us.
7. Pleading that the licence has not been in operation for a long time, Learned Counsel for appellant relied upon the decision of the Honble High Court of Delhi in Ashiana Cargo Services v. Commissioner of Customs (I&G) [2014 (302) ELT 161 (Del.)]. Therein a difference of opinion arose whether a penalty should be commensurate with offence or if violation of regulation was sufficient to justify recourse to the extreme penalty of revocation. On reference to third Member, the revocation was held to be valid. On appeal, the Honble High Court deciding that the minority view was the proper course to be followed, observed:
11. Viewing these cases, in the background of the proportionality doctrine, it becomes clear that the presence of an aggravating factor is important to justify the penalty of revocation. While matters of discipline lie with the Commissioner, whose best judgment should not second-guessed, any administrative order must demonstrate an CUS.A.A.24/2012 Page 11 ordering of priorities, or an appreciation of the aggravating (or mitigating) circumstances. In this case, the Commissioner and the CESTAT (majority) hold that "there is no finding nor any allegation to the effect that the appellant was aware of the misuse if the said G cards", but do not give adequate, if any weight, to this crucial factor. There is no finding of any mala fide on the part of the appellant, such that the trust operating between a CHA and the Customs Authorities (as a matter of law, and of fact) can be said to have been violated, or be irretrievably lost for the future operation of the license. In effect, thus, the proportionality doctrine has escaped the analysis.
12. Learned Senior Standing Counsel for the Customs has stressed that the infraction in this case is not a routine matter, but rather, illegal smuggling of narcotics by the G card users. However, given the factual finding that the CHA was not aware of the misuse of the G cards (and thus, also unaware of the contents being smuggled), no additional blame can be heaped upon the CHA on that count alone. Rather, the only proved infraction on record is of the issuance of G cards to non-employees, as opposed to the active facilitation of any infraction, or any other violation of the CHA Regulations, whether gross or otherwise. Neither have any such allegations been raised as to the past conduct of the appellant, from the time the license was granted in January, 1996. Equally, it is important to note that the appellant has - as of today - been unable to work the license for 8 years, and thus been penalized in this manner. This is not to say that CUS.A.A.24/2012 Page 12 the trust operating between the Customs Authorities and the CHA is to be taken lightly, or that violations of the CHA Regulations should not be dealt with sternly. A penalty must be imposed. At the same time, the penalty must - as in any ordered system - be proportional to the violation. Just as the law abhors impunity for infractions, it cautions against a disproportionate penalty. Neither extreme is to be encouraged. In this case, in view of the absence of any mens rea, the violation concerns the provision of G cards to two individuals and that alone. A penalty of revocation of license for this contravention of the CHA Regulations unjustly restricts the appellant's ability to engage in the business of the CHA for his entire lifetime. As importantly, it skews the proportionality doctrine, substantially lowering the bar for revocation as a permissible penalty, especially given the dire civil consequences that follow. On the other hand, the minority Opinion of the CESTAT, delivered by the Judicial Member, correctly appreciates the balance of relevant factors, i.e. knowledge/mens rea, gravity of the infraction, the stringency of the penalty of revocation, the fact that the appellant has already been unable to work his license for a period of 6 years (now 8 years), and accordingly sets aside the order of the Commissioner dated 24.01.2005.
13. In light of the above discussion, the majority Opinion of the CESTAT is hereby set aside. The Minority Opinion of the Judicial Member, Ms. Archana Wadhwa, is restored, and the revocation of CUS.A.A.24/2012 Page 13 the license of the appellant is quashed. There shall be no order as to costs.
8. Reliance was also placed on the decision of the Tribunal in K M Ganatra & Co. v. Commissioner of Customs (G), Mumbai [2007 (219) ELT 316 (Tri.-Mumbai)], LMS Transport Co. v. Commissioner of Customs (General), Mumbai [2014 (299) ELT 368 (Tri.-Mumbai)] and KS Sawant & Co. v. Commissioner of Customs (General), Mumbai [2012 (284) ELT 363 (Tri.Mumbai)].
9. Learned Counsel also drew our attention to the application dated 24th October 2011 for issue of G card to Shri Amit S Momayya by M/s Intercoast Shipping Services which was re-constituted as a private limited company M/s D V Shipping Pvt Ltd only on 23rd January 2012 to establish that Shri Momayyas employment with a firm other than the appellant was a later development.
10. The order of the Settlement Commission on the application of M/s Nova Scotia Overseas and Shri Ramesh Jain was also produced to demonstrate that the former was the importer and had issued a proper authority letter to the appellant.
11. Learned Authorised Representative reiterates that the statutory procedure had been complied with and that the penalty imposed is just and proper.
12. Customs House Agent (or Customs Brokers as they are now designated) are professionals licenced under the Customs Act, 1962 to render assistance to importers and exporter who would otherwise have to recruit specialized staff at the location of gateway ports which may be at a distance from their normal place of operation. They are, therefore, required to be proficient in the customs operation and procedure and to ensure that importer/exporter posses appropriate bona fides and act in conformity with the Customs Act, 1962. Naturally, they are not expected to conspire with those attempting to violate the law of the land. Such as do that abet would be subject to the penal provisions of the Customs Act, 1962 that are invoked against the offending importer/exporter. To ensure that the licenced agents do pursue their task diligently, the Regulation require them to obtain authorisation, advice their clients and personally handle the consignments. Thus, in the normal course of activities, they are not devoid of the responsibility to carry out certain essential antecedent verifications before undertaking work for the client.
13. It is clear that the said consignments cleared through appellant, as agent, were violative of the declaratory provisions under the Customs Act, 1962. There is, however, no evidence on record to show that appellant was aware of the intent or modus adopted by the customer. Nor is there any allegation that appellant had contributed in deceiving the customs authorities.
14. The need to advice a client would arise only if the agent was aware of any intent to misdeclare. We note that there is no evidence or finding that the appellant was aware of such an intent on the part of the client. There was, therefore, be no reason for the appellant to believe that the client was in need to advice the client to desert from their proposed action. As to subletting, we find that the impugned order has merely proceeded on the concatenation of the request for withdrawal of G certificate and the fact of employment elsewhere subsequently as evidence that such individual was not an employee when the bills were filed. The time-line, as seen from the application for G certificate furnished by the Learned Counsel for appellant, would evidence otherwise. It appears that Shri Momayya has not been established to be a former employee of the appellant-agent. Consequently the charge of sub-letting/transfer, as well as failure to handle the consignment through an authorised employee or personally, fails.
15. It is also seen from the records that an authority letter was indeed obtained from the ostensible importer and its existence has been acknowledged as such by the Settlement Commission. The Regulations do not require that each and every authorisation should be acknowledged by a customs officer. As long as authority letter is in possession of the agent, compliance with the Regulation cannot be disputed. It must also be noted that no evidence has been brought on record to demonstrate that the acts of commission and omission on the part of the importer is attributable to the appellant.
16. In the various decisions cited before us, the emphasis on the gravity of offence would appear to require the competent authority to examine the degree to which inaction or an act on the part of the agent did contribute to the contravention of Customs Act, 1962 or led to concealment of such during the process of clearance of cargo. We feel that the inquiry report and the impugned order are woefully deficient in the aspect.
17. For the above reasons, we set aside the impugned order and restore the licence of the appellant.
(Pronounced in Court on 20/09/2016) (M V Ravindran) Member (Judicial) (C J Mathew) Member (Technical) */as 9 11