Custom, Excise & Service Tax Tribunal
Friends Syndicate Clearing Pvt Ltd vs Commissioner Of Customs-Mumbai - ... on 7 June, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Customs Appeal No. 85460 of 2022
(Arising out of Order-in-Original No. 111-CAC-PCC-G-SJ-CBS-ADJ dated
08.12.2021 passed by the Principal Commissioner of Customs (General),
Mumbai-I)
M/s. Friends Syndicate Clearing Pvt. Ltd. Appellant
208, Sahar Cargo Estate, Near Bombay Cambridge
School, J.B. Nagar, Andheri (E), Mumbai 400 099.
Vs.
Commissioner of Customs (G), Mumbai Respondent
New Custom House, Ballard Estate, Mumbai 400 001.
Appearance:
Shri Arun Jain, Advocate, for the Appellant Shri Ramesh Kumar, Assistant Commissioner, Authorised Representative for the Respondent CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Date of Hearing: 07.06.2022 Date of Decision: 07.06.2022 FINAL ORDER NO. A/85540/2022 PER: SANJIV SRIVASTAVA This appeal is directed against order in original CAO No 111/CAC/PCC(G)/SJ/CBS dated 08.12.2021 of the Principal Commissioner of Customs (General), New Custom House Mumbai. By the impugned order, the Principal Commissioner has held as follows:
"ORDER
1. I Principal Commissioner Customs (General), in exercise of the power conferred upon me under Regulation 17 (7) of CBLR. 2018, pass the following order:
(i) I hereby impose a penalty of Rs 50,000 (Rupees Fifty Thousand only) on M/s Friend Syndicate Clearing said export Pvt Ltd. (CB No. 11/435) [PAN AABCP0413G] under Regulation 18 of the CBLR, 2018.
2 C/85460/2022
(ii) I hereby order forfeiture of entire amount of security deposit furnished by the CB, under Regulation 14 of the CBLR,2018.
(iii) The CB License No 11/435 is ordered to be revoked under Regulation 14 of CBLR, 2018.
(iv) I hereby order that the CB surrender the original License as well as all the 'F', 'G' & 'H' cards issued there under immediately.
2. This order is passed without prejudice to any other action which may be taken against the Customs Broker under the Customs Act, 1962, or any other act for the time being in force in the Union of India."
2.1 A case of substitution of the export consignment at the Chennai Port, by the Red Sanders was undertaken for investigation by the Directorate General of Revenue Intelligence. During the investigation it was revealed that the shipping bills for the export of the said consignments were filed by the appellant/ employee of the Appellant as Custom Broker.
2.2 After making necessary enquiries, Commissioner Customs Chennai -VIII, vide his order dated 22.03.2019 prohibited the appellant from undertaking activities at Chennai Port. The text of order is reproduced below:
"ORDER
12. In view of the discussions above and in exercise of the powers conferred under provisions of Regulation 15 of the Customs Broker Licensing Regulations, 2018, I prohibit the Customs Broker M/s Friend Syndicate Clearing Pvt Ltd. (CB No. 11/435) [PAN AABCP0413G] from working in any section of the Customs Commissionerate and Customs Stations under the jurisdiction of Chennai Customs Zone, with immediate effect. However all the documents already filed prior to this order will be allowed to be completed.
13. This order is passed without prejudice to any other action that may be taken against the Customs Broker and their employee/ representatives etc., under the provisions of the Customs Act, 1962, or any other Act/ Law for the time being in force in the Union of India.
3 C/85460/2022
14. However, an opportunity of Personal Hearing is granted to the Customs Broker M/s Friends Syndicate Clearing Pvt Ltd. on 03.04.2019 at 11.30 AM before the undersigned at 5th Floor, Custom House, No 60, Rajaji Salai, Chennai - 600001."
2.3 Commissioner Customs (General) Mumbai, vide his order No 93/2018-19 dated 29.03.2019 suspended the license of the Appellant as per the following order:
09. I, Commissioner of Customs (General) in exercise of the powers conferred upon me under provisions of Regulation 16 (1) of the CBLR, 2018, hereby suspend the license of M/s Friend Syndicate Clearing Pvt Ltd. (CB License No 11/435 [PAN AABCP0413G) with immediate effect, being fully satisfied that the Custom broker has prima facie not fulfilled their obligations as laid down under regulation 10(a), 10 (d), 10 (n) and 13 (12) of CBLR, 2018. However all the documents filed prior to this order would be allowed to be completed.
10. However, I offer the Customs Broker M/s Friends Syndicate Clearing Pvt Ltd. (CB License No 11/435 [PAN AABCP0413G) an opportunity of Personal Hearing on 04.04.2019 at 16 Hours (4 PM). Any written representation against this order should reach the undersigned before the date of hearing.
11. M/s Friends Syndicate Clearing Pvt Ltd., (CB License No 11/435 [PAN AABCP0413G) is directed to surrender all the original Custom Passes issued to their employee/ partner/ director/ Proprietor immediately.
12 This order is being issued without prejudice to any other action that may be taken against the CB or any other person(s)/ firm(s) etc., under the provisions of the Customs Act, 1962, or any Rules/ Regulation framed thereunder or any other law for the time being in force."
2.4 Commissioner Customs (General) Mumbai vide his order No 20/2019-20 dated 26.06.2019 modified the above order as follows:
"ORDER
13. I, Commissioner of Customs (Gen) in exercise of the powers conferred under provisions of Regulation 16 (2) of the Customs Broker Licensing Regulations, 2018, hereby order that 4 C/85460/2022 the suspension of CB License No 11/435 [PAN AABCP0413G] held by M/s Friends Syndicate Clearing Pvt Ltd., ordered vide Order No 93/2018-19 dated 29.03.2019, will continue to remain in force at Chennai Customs Commissionerate while the suspension at other Customs Commissionerates/ Stations where the CB is authorized to operate is hereby revoked with immediate effect, pending enquiry under Regulation 17 of CBLR, 2018.
14. This order is being issued without prejudice to any other action that may be taken against the CB or any other person(s)/ firm(s) etc., under the provisions of the Customs Act, 1962, or any Rules/ Regulation framed thereunder or any other law for the time being in force."
2.5 A show cause notice dated 08.07.2019 was issued to appellant proposing to revoke the license, forfeit the security deposit and for imposition of penalty, alleging as follows:
"05. Further, from the facts of the case and the statement of Shri Udhyarajan, it appears that they carried out Customs Broker work and allowed the use of their Customs broker licence in utter disregard to the Customs Broker Licensing Regulations in as much as they had facilitated the export clearance and without even meeting the IEC holder or knowing him and without verifying the antecedents or functioning of the same; that they are functioning without even knowing the obligation to be fulfilled by them under CBLR; that they had facilitated export of consignment in the IEC of M/s. Ever Stone Minerals, which does not belong to one Shri. Abdullah, the person who had handled the IEC; that they thereby violated the trust placed by the department under Customs Broker Licensing Regulations, 2013and therefore they are liable for action under CBLR, 2013.
06. From the foregoing, it is apparent that M/s. Friends Syndicate Clearing Pvt Ltd., had colluded with Shri. S. Venkatesan & V. Karthikeyan of M/s. VKR Impex and the proxy exporter and failed to discharge the obligations of a Customs Broker, as envisaged under CBLR, 2013 (Now CBLR 2018). For their various acts of omission and commission, seized goods were liable for confiscation. M/s. Friends Syndicate Clearing Pvt 5 C/85460/2022 Ltd., had also been asked separately to show cause as to why penalty should not be imposed on them in terms of Section 114 and 114AA of the Customs Act, 1962.
07. Furthermore, the Hon'ble Supreme Court in the case of Commissioner of Customs Vs. K.M. Ganatra & Co. Civil appeal no. 2940 of 2008, decided on 14.01.2016, has postulated that, "The CHA occupies a very important position in the Custom House. The Customs procedure is 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 interest of both the importers and the Customs. A lot of trust is kept in CHA by the importer / exporters as well as by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed. Regulation 14 of CHA Licensing Regulations lists out obligations by CHA. Any contravention of such obligation even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulation...."
08. in view of the facts stated above, it appears that the Custom Broker M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) did not exercise due diligence in discharging their obligations as mandated its duties as mandated under Regulations 10(a), 10(d), 10(n) & 13(12) of CBLR, 2018 and for wilful/ intentional violation the license of M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) was liable for revocation under Regulation 14 of CBLR, 2018. Therefore, action was taken and the Customs Broker License held by M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) was suspended vide order No 93/2018-19 dated 29.03.2019 under the provisions of regulation 16 (1) of CBLR, 2018. Thereafter Personal Hearing to the CB was given and suspension of M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) was revoked except 6 C/85460/2022 Chennai by the competent authority vide order No 20/2019-20 dated 20.06.2019 under Regulation 16 (2) of the CBLR, 2018."
2.6 Thereafter enquiry was conducted against the appellant and the Inquiry Officer vide his report dated 21.05.2021 concluded as follows:
Sr Charges against the CB Findings No 1 Violation of Regulation 10 (a) of the CBLR, Not 2018 Proved 2 Violation of Regulation 10 (d) of the CBLR, Not 2018 Proved 3 Violation of Regulation 10 (n) of the CBLR, Not 2018 Proved 4 Violation of Regulation 13 (12) of the CBLR, Not 2018 Proved
2.7 Principal Commissioner of Customs (General) did not agree with the inquiry report and adjudicated the show cause notice, as per the impugned order referred in para 1, above.
2.8 Aggrieved by the impugned order, appellants approached Hon'ble High Court of Bombay by way of Writ Petition (L) No 657 of 2022. The said writ petition was disposed of by the High Court as per the order dated 21st February 2022 stating as follows:
"After arguing the matter for some time, learned counsel for the petitioner on instruction seeks liberty to withdraw this petition with liberty to file appropriate proceedings before CESTAT. Learned counsel for the petitioner states that the appeal would be filed within one week from today. Statement is accepted.
2. If the petitioner files and appeal before the CESTAT within one week from today, the CESTAT is requested to dispose of the said appeal expeditiously and shall make an endeavor to dispose of the said appeal within six months from the date of petitioner filing an appeal. The petitioner shall not seek any unnecessary adjournment in the said appeal to be filed.
3. It is made clear that all contentions of the parties on merits of the impugned order are kept open. This Court has not expressed any view thereon.
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4. Writ petition is disposed of as withdrawn with liberty to file appeal. There shall be no order as to costs."
2.9 Thereafter appellants have filed this appeal along with the application for early hearing. The early hearing application has been allowed vide Miscellaneous Order No M/ 85211/2022 dated 15.03.2022.
3.1 We have heard Shri Arun Jain, Advocate for the Appellant and Shri Ramesh Kumar, Assistant Commissioner (Authorized Representative) for the revenue.
3.2 Arguing for the appellant learned counsel submits that:
Undisputedly appellant had received proper authorization from the exporter (M/s. Ever Stone Minerals) on its Letter head bearing original rubber stamp. They also received KYC documents of exporter, authenticity of which has not been disputed by the department.
The genuineness of IEC, GSTIN and that of the exporter is not in dispute. The exporter has also presented himself for statement recording before DRI-CZU. Thus, it is not the case of exporter or IEC being bogus or fictitious. The container was stuffed and sealed in the presence of the officer assigned and the employee of the Appellant. The employee of the Appellant also took photograph of the container which was also submitted as evidence to DRI- CZU. There is a specific finding that Quartz Lumps have been substituted with red sanders logs enroute to the port after stuffing. It is submitted that, pursuant to the stuffing of the container, the Custom Broker has no further obligation towards the goods and the goods no longer remain in control of the Custom Broker.
Thus, they have not violated Regulation 10(a), 10(d), 10(n) and 13(12) of the CBLR, 2018.
There is no requirement under CBLR, 2018, to physically verify the existence of the exporter as have been held in following decisions:
o HIM Logistics Pvt. Ltd. [2016 (338) ELT 725 (Tri. - Del.)] affirmed by the Hon'ble Delhi High Court [2017 (348) E.L.T. 625 (Del.)];
8 C/85460/2022 o APS Freight & Travels Pvt. Ltd. [2016 (344) ELT 602 (Tri. - Del.)];
o Poonia & Brothers [2019 (370) ELT 1074 (Tri. - Del.)];
o KVS Cargo [2019 (365) E.L.T. 392 (Del.)];
o Shiva Khurana [2019 (367) E.L.T. 550 (Del.)]; o Kunal Travels (Cargo) [2017 (354) E.L.T. 447 (Del.)].
In any event the gravity of allegation levelled against the Appellant does not warrant revocation of Appellant's Customs Broker License. The principles of equity demand parity between quantum of punishment imposed and the alleged lapse. The quantum of punishment cannot be disproportionate to the alleged misconduct. They rely upon the following decisions:
o Ajay Clearing Enterprise [2016 (336) E.L.T. 33 (Bom.)] o Interport Impex P. Ltd. [2017 (346) E.L.T. 223 (Bom.)] o Alankar Shipping & Clearing P. Ltd. [2019 (367) E.L.T. 553 (Bom.)] The proceedings under Regulation 17 of the CBLR, 2018, for revocation of the Appellant's Customs Broker License are grossly time barred. Right from the issuance of show cause notice for initiation of proceedings for revocation of license, submission of inquiry report by the Inquiry Officer and till the passing of the impugned order revoking the license of the Appellant, there is delay at almost all the stages. It is settled law that proceedings under Regulation 17 of the CBLR, 2018, are to be completed in time bound manner. The proceedings which should have been completed within 9 months took more than 2 years and 9 months to complete.
No penalty can be imposed upon the Appellant under Regulation 18 of the CBLR, 2018 and their security deposit should not have been forfeited.
3.3 Learned authorized representative while reiterating the finding recorded in the impugned order submits that due to lack 9 C/85460/2022 of negligence on the part of appellant in not undertaking the proper verification of the exporter/ IEC Holder, the act of substitution and smuggling of red sanders could have been given effect to. Since appellant has failed to perform the duties and obligations cast on him as per the CBLR, 2018 the impugned order revoking the license of the Custom Broker, forfeiture of security deposit and penalty needs to be upheld.
4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments.
4.2 While considering the charges made against the appellant, inquiry officer has observed as follows:
"17. As regards to the allegation of violation of Regulation 10(a) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 10(a) of the CBLR, 2018 in the instant case. I have gone through entire documents relevant to the case and I find that is not indicated and brought any evidence in support of the said charge. During the personal hearing and through written submission also, the Customs Broker contested that the department have failed to indicate any specific instance where the Customs Broker have effected the clearance of the goods without an authorization from their clients. It has also been submitted by the Customs broker that during the statements they have produced a copy of the authorization, which will establish that there was no substance in the allegation of not obtaining the authorization. In the Statement of Shri K, Udhayarajan, Business Development Manager of CB Company, FSCPL Liner Company, RR Shipping recorded under section 108 of Customs Act, 1962 on 23.08.2018 by DRI, CZU, It was inter alia stated that they had obtained the KYC documents of the exporter Ms. Ever Stone Minerals Chennai and forwarder Ms. VKR Impex from Shri S. Venkatesan and however they did not verify any of them'. Vide Order No. 20/2019-20 dated 20.06.2020 passed by the Commissioner of Customs (G). New Customs House, Mumbai, para 12.2. Also I find that no material has been brought on record regarding the involvement of the CB or their directors/employees at the Customs Commissionerate/ Stations other than Chennai"
10 C/85460/2022 Therefore, the charge of violation of Regulation 10(a) is not conclusively proved'.
18.1 As regards to the allegation of violation of Regulation 10(d) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 10(d) of the CBLR in the instant case. The authorized employees of the CB have handled the clearance work and there is no evidence to the contrary. I have gone through entire documents relevant to the case and I find that the documents of clearance were presented by the Customs Broker in the name of their own firm and. there nothing on record that the Customs Broker has failed advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof.
18.2 Irely upon the case law In case of Sarosh Nagarwala Vs. Commissioner of Customs (Export), Nhava Sheva reported in 2017 (358) E.L.T. 542 (Td. - Mumbai), wherein the Hon'ble CESTAT observed that:
"The role of a 'customs house agent in relation to export commences with the filing of the shipping bill and is completed when the consignment is handed over to the agent of the carrier. In the absence of an allegation, or a finding, that the substitution occurred during this window, responsibility cannot be fastened on the agent."
18.3 in the instant case, the Customs Broker is not found to have been engaged in any unauthorized person to attend the Customs Clearance work. Vide Order No. 20/2019-20 dated 20.06.2020 passed by Commissioner of Customs(G), New Customs House, Mumbai, para 12.2 "Also I find that no material has been brought on record regarding the involvement of the CB or their directors/employees at the Customs Commissionerate/ Stations other than Chennat". Therefore, the charge of Violation of Regulation 10(d) is "not conclusively proved".
19.1 As regards to the allegation of violation of Regulation 10(n) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 10(n) of the CBLR, 2018 in the instant case. It was submitted by the Customs 11 C/85460/2022 broker that the correctness of the IEC number and Identity of the exporter are not in doubt or dispute; that the SCN under reference also does not make an averment that IEC was forged. The exporter (IEC holder) in fact presented himself during Investigation and his statement was also recorded as can be seen from the SCN F No. DRUCZUNIH/48/ENQ-1/Int-19/2018 dated 08.02.2019. The KYC documents were duly received by the Customs Broker and are on record. There is no discrepancy in IEC and address of the exporter. 19.2 t find that it was not disputed that KYC documents were not received by the Customs Broker. I find that no physical verification of the importer's/exporter's premises is mandated in the CBLR, 2018. In this regard, I rely upon the decision in the case of APS Freight & Travels Pvt. Ltd, V8, Commissioner of Customs (General). New Delhi, reported in 2016 (344) ELT 602 (Tr. -Del) wherein the Hon'ble Tribunal held that:
"4. We have heard both the sides and examined appeal records. The license of the appellant stands revoked only on the ground that they have failed in their obligation of verifying the identity of his client and their existence in the given address. The admitted facts of the case are that the importer's details as available in IEC, PAN Cards, Bank Account and electricity have been checked by the appellant No physical verification of importer's premises is mandated in the regulations nor it is a general requirement as per business practice. No violations have been noticed In respect of transactions with Customs with reference to consignment cleared through the appellants. As such the order of revocation of license, only on the ground that on later verification the importer was not found in the indicated premises, is not justifiable 19.3 I also rely upon the decision in the case of Poonla & Brothers Vs. Commissioner of Customs (Preventive), Jaipur, reported in 2019 (370) ELT 1074 (Tri. Del), wherein the Hon'ble Tribunal held that:
....................... The CHA is not supposed to verify the each and every aspect about the business of importer as the Inspector of Department or Investigating agency. From the submission made
12 C/85460/2022 by the ld. Advocate and fact on record, it is apparent that the appellant has taken due diligence while verifying the KYC of the appellant based on the record submitted by him. We also find that the KYC is required to be done on the basis of following guidelines prescribed by the Central Board of Excise & Customs which are as under:
S. Form of Features to be Documents to be obtained No. organisation verified
1. Individual (i) Legal name (i) Passport and any other (ii) PAN card names used
(iii) Voter's Identity card
(ii) Present and
(iv) Driving licence Permanent address, in full, (v) Bank account statement complete and (vi) Ration card correct.
Note : Any two of the documents listed above, which provides client/customer information to the satisfaction of the CHA will suffice
2. Company (i) Name of the (i) Certificate of incorporation company
(ii) principal place (ii) Memorandum of Association of business (iii) Articles of Association
(iii) mailing (iv) Power of Attorney granted to address of the its managers, officers or company employees to transact
(iv) telephone, fax business on its behalf. number, e-mail (v) Copy of PAN allotment letter address.
(vi) Copy of telephone bill
3. Partnership (i) Legal name (i) Registration certificate, if firm (ii) Permanent registered address, in full, (ii) Partnership deed complete and (iii) Power of Attorney granted to 13 C/85460/2022 correct. a partner or an employee of
(iii) Name of all the firm to transact business partners and on its behalf their (iv) Any officially valid document addresses, in identifying the partners and full complete the person holding the Power and correct. of Attorney and their
(iv) telephone, fax addresses.
number, e-mail (v) Telephone bill in the name of address of the firm/partners.
firm and partners
4. Trusts, (i) Name of (i) Certificate of Registration, if Foundations trustees, registered.
settlers, (ii) Power of Attorney granted to
beneficiaries transact business on its behalf
and signatories
(iii) Any officially valid document
(ii) Name and to identify the trustees,
address of the settlers, beneficiaries and
founder, the those holding the Power of
managers, Attorney, founders/ Managers,
Directors and Directors and their addresses
the
(iv) Resolution of the managing
beneficiaries,
body of the
in full,
foundation/association
complete and
correct. (v) Telephone bill.
(iii) Telephone and
fax number, e-
mail address of
the trust,
founder and
trustees.
These guidelines nowhere prescribes that CHA, before taking the job of Customs Clearance is required to be physically verify the existence of Importer. If the required documents as prescribed 14 C/85460/2022 above is made available to CHA job for KYC norms, Is fulfilled. The appellant has fulfilled these requirements as is apparent from the case record".
19.4 I also rely upon the decision in the case of HIM Logistics Pvt. Ltd. Vs. Commissioner of Customs, New Delhi, reported in 2016 (338) ELT 726 (Tr. Del). wherein the Hon'ble Tribunal held that:
7............ There is no stipulation or legal requirement to physically verify the business premises or residential promises of the importer and also to have a personal meeting with the importer before taking up the work for any Importer'.
The aforesaid decision of the Hon'ble Tribunal was affirmed in the Hon'ble High Court of Delhi, reported in 2017 (348) ELT 626 (Del.) 19.5 I find that records do not allege that the IEC code has been obtained fraudulently or that the exporter on record did not exist. Further, reliance is placed upon the aforesaid case laws that there is no stipulation or legal requirement to physically verify the business premises or residential premises of the importer and also to have a personal meeting with the importer before taking up the work for any importer. Accordingly, the charges under Regulation 10{n) thus stands 'not proved' against the Customs Brokers 20.1 As regards to the allegation of violation of Regulation 13(12) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 13(12) of the CBLR in the Instant case...
20.2 The matter was adjudicated by the Joint Commissioner of Customs Chennai IV, Chennal vide F.No. Adjn/DRVEDC/02/2019- CH-N dated 24.01.2020. Vide the said order Penalty of Rs. 10,00,000/- was imposed on Sh. K Udhayarajan U/S 114 and Rs.5,00,000/- U/S 114AA of the Customs Act, 1962. There la no penalty/ fine Imposed on Customs Broker M/s, Friends Syndicate Clearing Pvt. Lid, in the above said order, 15 C/85460/2022 20.3 I rely upon the decision in the case of Natvar Parkh & Co. Pvt Ltd. Vs. Commissioner of Customs, Chennai, reported in 2012 (281) ELT 116 (Tri. Chennai), wherein the Hon'ble CESTAT observed that:
"18. After hearing both sides / find that there is nothing to indicate that the appellant has acted malafide In any manner. It is usual in international trade these days for logistics companies to act as agents of the importers and exporters and engage CHAs on their behalf."
20.4 Thus, from the facts available in the instant case, the role of Customs Broker Ms. Friends syndicate clearing Pvt. Ltd. In exercising such supervision as may be necessary to ensure proper conduct of his employees in the transaction of business and he shall be held responsible for all acts or omissions of his employees during their employment is not clear in the Show Cause Notice.
20.5 l upon the decision in the case of HIM Logistics Pvt. Ltd. Vs. Commissioner of Customs, New Delhi, reported in 2016 (338) ELT 726 (Tr. Del), wherein the Hon'ble Tribunal held that:
7............. There is no stipulation or legal requirement to physically verify the business premises or residential premises of the importer and also to have a personal meeting with the importer before taking up the work for any importer".
The aforesaid decision of the Hon'ble Tribunal was affirmed in the Hon'ble High Court of Delhi, reported in 2017 (348) ELT 625 (Del.) 20.6 I find that the documents were received by the employee of the Customs Broker. Relying upon the aforesaid case law there is no stipulation or legal requirement to physically verify the business premises or residential premises of the importer and also to have a personal meeting with the importer/exporter before taking up the work for any importer. Hence the benefit of doubt may be given to Ms. Friends syndicate clearing Pvt. Ltd. Therefore, the charge of violation of Regulation 13(12) is 'not 16 C/85460/2022 conclusively proved" against the Customs Broker M& Friends syndicate clearing Pvt. Ltd.
21. Conclusion :
21.1 I have taken the cognizance of the case laws relied by the Customs Broker. 21.2 There is no evidence brought on record in the Investigations pointing out that the Customs Broker or their staff had in any way abetted the offence in attempting to Illegally export Rod Sander Wood logs.
21.3 I rely upon the decision in the case of commissioner of Customs, Mumbai Vs. M. Vasi reported in 2003 (151) E.L.T. 312 (TH. - Mumbai), wherein the Hon'ble Tribunal held that:
20. S/Shri Lambat, Mutta and Pandey were alleged to have aided and abetted the acting of the two partners. Abetment presupposes knowledge of the proposed offence and also presupposes benefit to be derived by the abetters therefrom.
Even if the action of backdating of the agreement is improper (and perhaps illegal), there is nothing in the evidence to indicate that these three persons were aware that the backdated document was a cover up for an offence under the Customs Act, 1962. In the absence of conscious knowledge, penalty on charge of aiding and abetting would not sustain".
21.4 Further, I rely upon the decision in the case of N.T. Rama Rao & Co. Vs. Commissioner of Customs, Chennai-Vill reported in 2020 (371) E.L.T. 789 (Tri - Chennai), wherein the Hon'ble Tribunal held that:
5. Heard both sides and perused the records of the case. On going through the records of the case, it is clear that the customs broker has filed a shipping bill for the purported export of natural slate stone on behalf of M/s. Amrita Export. The same has been permitted to be stuffed Into the container, after due examination by the Preventive Officer posted in the CFS, a onetime bottle seal has also been affixed. The allegations against the appellants appear to be based on the statements of personnel of the Customs Broker, Sh S, Muthukrishnan in charge of Customs Broker in his statement dated 28-8-2017 and Shri 17 C/85460/2022 N.V.S. Prasad, General Manager of the Customs Broker in his statement dated 1-9-2017 have accepted that they have never met the exporter and have not verified the KYC details and genuineness of the EC holder and failed to notice the difference in the name of the exporter. We find that there is certain force in the argument of the appellant that the non-verification of KYC documents per se has not resulted in the committal of any grave offence because of the fact that the goods declared in the said shipping bill were correct as per declaration; the same goods were allowed to be suited into the container by the Preventive Officer and the container was sealed. Admittedly, the offence has taken place after stuffing of the container and sealing of the same that is beyond the involvement of the customs broker.
However, the only issue on which the appellant appear to have erred and were not in a position to identity Shri Rajesh Kumar who was projecting himself as the person-in-charge of the exporter. Their knowledge, if any, could have helped the administration in naming the person who has arranged for the transportation and took away the container. Understandably, the verification of KYC norms would not have stopped occurrence of the offence going by the facts of this case.
I find that facts and circumstance of the aforesaid case law viz. N.T. Rama Rao & Co. Vs. Commissioner of Customs, Chennai-Vil are similar to the instant case.
21.5 The CB in their written submission stated that the stuffing was carried out in the presence of the staff Shri. Vignesh of the CB and examined by the officers of Customs and thereafter sealing of the container were done.
21.6 Further, finding of the Commissioner of Customs (G), Mumbai vide Order No.20/2019-20 dated 20.06.2019, while revoking the suspension order dated 93/2018 19 dated 29.03.2019 are taken into cognizance in as much as *12.................. Having perused the DRI'S SCN dated 08.02.2019, I observe that the declared goods viz. Quartz Lumps in Jumbo bags, appear to have been stuffed in five 20 ft. containers at the VW-CFS, and that the same have been 18 C/85460/2022 substituted with red sanders logs in the container bearing no. MRTU2004392, en-route to the port after stuffing, at an unknown location, by the members of the smuggling gang; that the remaining four containers had reached the port directly without any substitution.......
12.2......Further, I find that no substance has been brought to light regarding the direct involvement of CB in smuggling of Red Sanders................. Also, find that no material has been brought on record regarding the involvement of the CB or their directors/employees at Customs Commissionerates Stations other than Chennai............"
21:7 The documentation, carting, stuffing, examinations, sealing are carried out in the presence of authorized representative of the CB and Customs Officers. The transportation of CFS stuffed & sealed containers from CFS to the port, is the sole responsibility of the CFS. I have perused the copy of the said Shipping Bill as submitted by the Customs Broker, bearing No. 6605230 dated 01.08.2018 and endorsement of the P.O. Viking CFS, wherein details of the said five containers and packages/crtns., sealed with Customs OTL No. and Liner Seal number duly endorsed by the Customs Officer after stuffing and examination is over. It is evident that no irregularity has taken place during the material period i.e. stuffing, examination and upto sealing, which was held in the premises of Viking CFS.
21.8 In view of the fact that the substitution of stuffed goods by the contraband was done after the goods in containers were removed from the warehouse, the role of the CB in attempted illegal contraband export cannot be established. Neither any of the involved persons have attributed anything about the involvement of the CB. Thus, the CB has not violated the Regulations of the CBLR, 2018 in this regard."
4.3 Rejecting the above referred inquiry report Principal Commissioner has in the impugned order, recorded as follows:
"6. I now examine the charges in the SCN sequentially. It has been alleged that CB did not exercise due diligence in 19 C/85460/2022 discharging their obligation as required under Regulation 10(a), 10(d), 10(n) and 13(12) of the CBLR, 2018.
7. In the statement of Shri R. Panneerselvam, Proprietor of M/s. Ever Stone Minerals, Chennai recorded on 16.08.2018 under Section 108 of the Customs Act, 1962 he admitted that he had obtained the IEC Code 0414049471 on 04.03.2015 in the name of M/s. Ever Stone Minerals, Chennai and all business and other transactions of the said company was looked after by him only and by using the said IEC, he had exported "Quartz Lumps Grit upto April, 2018and thereafter he had not cleared any consignment by using this IEC since he had started another partnership company in the name of M/s. Ever Stone Minerals LLP. Further I find that Shri R. Paneerselvam in his statement recorded on 16.08.2018 also stated that he did not even know the CHA, M/s. Friends Syndicate Clearing said export Pvt. Ltd. Chennai, (FSCPL in short), who had cleared the consignment and the foreign buyer M/s. Shanghai Tanyi Industry Co. Ltd. China of the said consignment. So far, he had not done any business transaction with the said CHA and the foreign buyer. Further added that he had not cleared their export consignments through VW-CFS, as they used to export the cargo only through M/s. ICBC CFS, M/s. Hind Terminal CFS and M/s. SICAL CF$. They admitted that the subject Shipping Bill no. 6605230 dated 01.08.2018 was not filed by them and the subject consignment was also not related to them. They disowned the said consignment and the contraband detained under the said mahazar.
7.1 Further, in the statement of Shri N.M. Abdullah recorded on 12/13.09.2018 he had admitted that the red sanders logs seized were arranged by him for smuggling out of India through M/s. Ever Stone Minerals, that he had done the red sanders smuggling as per the instructions and the supervision of one- Shri Meeran. Also Shri K. Udhayarajan (Business development manager of the CB firm) admitted in his statement dated 23.08.2018 that they did not know the actual exporter M/s. Ever Stone Minerals, Chennai and they received all the documents from Shri' S. Venkatesan, forwarder M/s. VKR Impex.The 20 C/85460/2022 investigation revealed that the CB accepted the documents from a person who was not an employee of the exporter and CB never tried to find out the genuineness and antecedents of the exporters. The CB had no interaction with the exporter IEC holder. Despite enough experience in Customs Broking, it is strange that this did not arouse suspicion in mind of CB especially when CB was not in touch with their clients by any means. Thus it is evident that Customs Broker was deliberately not dealing with the exporter and he obtained authorization without proper verification of KYC documents in order to run their business. The whole purpose of obtaining authorization has been defeated i.e. to ensure that the CB has interacted with the genuine exporter and is aware of the goods to be cleared on behalf of the client. The CB has filed the Shipping Bill without proper verification of the authorization letter from the exporter as mandated under Regulation 10(a) of the CBLR, 2018. Hence, I hold that the CB failed to fulfill the obligation of Regulation 10(a) of CBLR, 2018.
8. It has been alleged that CB had not advised his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in case of non-compliance, did not bring the matter to the notice of DC/AC against the Regulation 10(d) of CBLR 2018.
9. It is noticed that Shri K. Udhayarajan (Business development manager of the CB) in his statement recorded on 23.08.2018 under Section 108 of the Customs Act, 1962 admitted that the firm failed to verify the genuineness of the exporter and the documents submitted by them as they were knowingly done the mistake for want of business to run their company. He also admitted that he did not know the regulations of CBLR, 2013 (Now CBLR, 2018)and after seeing the Regulation 11 "obligation of Customs Broker under CBLR, 2013 (Now CBLR, 2018), he came to know the seriousness of the issue. This clearly shows that they were functioning without knowing the obligations to be fulfilled by them under CBLR, 2013 (Now CBLR, 2018).
9.1 In his statement Shri R. Paneerselvam (Proprietor of M/s. Ever Stone Minerals) recorded on 16.08.2018 under Section 108 21 C/85460/2022 of the Customs Act, 1962 admitted that he did not even know the CHA, M/s. Friends Syndicate Clearing Pvt. Ltd. Chennai, who had cleared the subject export consignment and the foreign buyer M/s. Shanghai Tanyi Industry Co. China of the said consignment. It is an undisputed fact that there was no interaction between the Customs Broker and the IEC holder of the importing firm viz. (i) M/s Ever Stone Minerals for the Customs Broker to give proper advice. In view of the discussion above, I am of the considered opinion that the Customs Broker has failed to advise his client (Exporter). Thus, the CH has intentionally violated the Regulation 10(d) of CBLR, 2018:
10. In respect of Regulation 11 (n) of the CBLR, 2013, it has been alleged that the CB did not 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.
10.1 Shri K, Udhayarajan in his statement recorded on 23.08.2018 under Section 108 of the Customs Act, 1962 admitted that they had received the subject business reference, IEC copy and other documents for export from Shri S. Venkatesan Forwarder of M/s. VKR Impex. During the course of investigation, when he contacted Shri R. Paneerselvam, the actual proprietor of IEC of M/s. Ever Stone, Minerals, Chennai, had refused to accept any relations with the subject export consignment and the persons Shri, Murugan of M/s. Marvels Exports. Shri K. Udhayarajan also admitted that they did not verify the KYC of the exporter as mandated by the CBLR, 2013 (Now CBLR, 2018) and they had blindly trusted the forwarder Shri S. Venkatesan for want of runs business. They also accepted that if they had verified the genuineness of the forwarder, they would not have taken this business reference from him and could have avoided this kind of smuggling of red sanders and admitted their mistake. The CB conveniently made no efforts to know if the exporter was genuine or not and instead consciously turned a blind eye to all discrepancies as they were a part of the syndicate. As a Customs Broker, while accepting the documents from the third person, they did not take due care to 22 C/85460/2022 verify the client, their business functioning, antecedents, genuineness of business, the export details and its correctness etc., using any independent, reliable and authentic means: There is no denying the fact that the CB M/s. Friends Syndicate Clearing Pvt. Ltd. (CB No. 11/435) had not been diligent in undertaking the KYC of the background of exporter and accepted documents from a person with no legal relation to their client.
Given the discussions in paras above, I have no doubt in holding that this was done with malafide intention. This clearly proves contravention of provisions of Regulation 10(n) of the CBLR, 2018.
11. In respect of Regulation 13(12) of CBLR, 2018, it has been alleged that the CB failed to exercise such supervision as may be necessary to ensure proper conduct of his employees in the transaction of business and he shall be held responsible for all acts or omissions of his employee during their employment..
11.1 Vide statement dated 23.08.2018, Shri K. Udhayarajan, Business Development Manager of the customs Broker M/s. Friends Syndicate Clearing Pvt. Ltd., Mumbai admitted that he did not know the regulations of CBLR, 2013 (Now CBLR, 2018) and admitted their mistake. Thus the CB has failed to supervise their employees working under Regulation 7(3) of CBLR, 2018 as is required under Regulation 13(12) of CBLR, 2018. From the above facts, it is evident that the CB has violated provisions of Regulation .13(12) of CBLR, 2018.
12. The CB had placed reliance on a catena of judgements but the judgements relied upon are not relevant to case at hand because, in the present case there exists a deliberate failure on part of the CB in not verifying the client's business functioning, his antecedents regarding business, genuineness of business, the export details and its correctness etc. using any independent, reliable and authentic means before taking up the custom clearance of export consignment.
13. For these clear faults of the CB noticed in violation of Regulations a disagreement memo dated 15.07.2021 was issued on the CB with valid reasons after going through the Inquiry 23 C/85460/2022 report. Further the CB had not made any serious attempt to verify the antecedents, correctness of actual 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 for want of business and failed the trust reposed in them by the Customs Department. Hence these above judgements and also the other judgements cited by the CB in their support are not applicable in the instant case in spirit and in rem."
4.4 From the above facts as stated in the inquiry report and in the impugned order, it is quite evident that the entire case made against the appellant is on account of their failure not to properly and completely verify the antecedents of the person/ client entrusting them with the paper and consignment for export. In view of the judgements relied upon by the Appellant and those referred in the inquiry report there was no need for physical visit to the premises and meeting with the client before taking the job. Principal Commissioner has relied upon the statement recorded during the course of investigation. These statements have not been corroborated. Even the statutory documents produced by the appellant for undertaking the KYC of the exporter (IEC Holder) have not been verified and found to fake etc. It is not even the case of revenue that these documents were not taken by the Appellant for undertaking KYC. The only allegation that has been made the ground for not complying/ discharging the obligations casted under CBLR, 2018 is that CB had not physically met and physically verified their premises. The CB was require to do the KYC on the basis of the documents prescribed. Undisputedly such KYC was done by the appellant, only what was not done was physical meeting and physical verification of the premises.
4.5 In case of Freight & Travels Pvt. Ltd. [2016 (344) ELT 602 (Tri Delhi)] tribunal has held as follows:
"4. We have heard both the sides and examined appeal records. The license of the appellant stands revoked only on the ground that they have failed in their obligation of verifying the identity of his client and their existence in the given address. The admitted facts of the case are that the importer's details as 24 C/85460/2022 available in IEC, PAN Cards, Bank Account and electricity have been checked by the appellant. No physical verification of importer's premises is mandated in the regulations nor it is a general requirement as per business practice. No violations have been noticed in respect of transactions with Customs with reference to consignment cleared through the appellants. As such the order of revocation of license, only on the ground that on later verification the importer was not found in the indicated premises, is not justifiable."
4.6 In case of HIM Logistics Pvt. Ltd. [2016 (338) ELT 725 (Tri Delhi)], following was observed:
7. We find that the main focus of allegation against the appellant which resulted in the revocation of licence is their failure to verify the presence of the importers in the given address. We have perused the provisions of Regulation 11 as well as the Board's Circular dated 8-4-2010. It is an admitted fact that the partnership firm involved in the import of the auto parts is an existing concern, duly registered having a deed for partnership and two existing partners. The IEC copy, PAN Card, telephone bill of the firm, Voter ID of the partners, copy of the partnership deed have been seen and verified by the appellant.
The allegation that the IEC was obtained by submitting forged documents has no effect on the appellant as they could only verify the correctness of the documents submitted before taking up of the work for any importer. There is no stipulation or legal requirement to physically verify the business premises or residential premises of the importer and also to have a personal meeting with the importer before taking up the work for any importer.
8. We also note that in the present case the contravention alleged against the importer is non-declaration of retail sale price on auto parts imported by them for assessment under Section 4A of the Central Excise Act, 1944 for CVD. We find that the bill of entry was filed by the appellant after the goods were detained by the officers of DRI. The said bill of entry was filed on first check basis for verification of the goods before assessment. In such a situation, we find that no mala fide or intentional violation of any provisions of the Customs Act can be alleged on the part 25 C/85460/2022 of the Customs broker. Regarding KYC norms and obligations under Regulation 11, we find that case as made out in the original order is neither convincing nor sustainable.
9. We find that the impugned order did not make out a sustainable case for revocation of licence. In the case of Setwin Shipping Agency v. CC (General), Mumbai - 2010 (250) E.L.T. 141 (Tri.-Mumbai), the Tribunal held that there is no requirement for the CHA to verify physically the premises of importer/exporter. The Tribunal also observed that it is a settled law that the punishment has to be commensurate and proportionate to the offence committed. In the present case, we notice that the punishment of revocation is not justifiable even if it is to be admitted that physical verification of the importer's premises could have avoided the filing of the bill of entry by the appellant. Even in such a situation, the violation in respect of the cargo viz. the non-declaration of the RSP on the auto parts, a debatable point of interpretation, cannot be held against the appellant to result in the revocation of their licence. Here, it is to be noted that the bill of entry was filed after the detention of the goods for inquiry by the DRI Officers and request for physical verification of the cargo before assessment has been made in the form of first check bill of entry. We find that the impugned order passed on dis-agreement with the inquiry report has not brought out clear sustainable ground for such extreme action of revocation of licence. Violation of CBLR, 2013 has not been brought out as all the points have been elaborately discussed in the inquiry report and no sustainable ground for differing with the same could be made out."
Upholding this order, Hon'ble Delhi High Court has as reported at [2017 (348) ELT 625 (Del) observed as follows:
"This appeal by the Revenue challenges an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) [2016 (338) E.L.T. 725 (Tri. - Del.)], whereby the adjudication and Appellate order revoking the respondent's Customs House Agent's (CHA) licence was set aside. The allegations levelled against the respondent were that as a customs' broker it had not fulfilled the obligations cast on it inasmuch as there was no proper verification of the particulars of the party which it sought to 26 C/85460/2022 represent. The Tribunal relied upon a previous ruling Setwin Shipping Agency v. CC (General), Mumbai - 2010 (250) E.L.T. 141 (Tribunal-Mumbai), and held that in the facts and circumstances of the case, the interpretation that the respondent was under an obligation to physically verify the particulars, was misplaced.
2. This Court notices that the CESTAT construed the provisions of Regulation 11 and the Board Circular of 8-4-2010 and found that the partnership firm involved in the import of consignment was an existing concern, duly registered under a partnership deed and two existing partners and that its IEC copy, PAN Card, telephone bill of the firm, Voter ID of the partners, copy of the partnership deed have been verified by the respondent."
4.7 In view of discussions as above we do not find any merits in any of the findings recorded by the Principal Commissioner, in respect of any of the charges framed against the appellant under regulation 10 (a), (d) & (n), 13 (12) whereas the findings recorded by the enquiry officer are more justifiable and logical. In the case of ACE Global Industries [2018 (364) ELT 841 (Tri Chennai)] tribunal observed as follows:
"6. We are unable to appreciate such a peremptory conclusion. The CBLR, 2013 lays down that stepwise procedures are to be followed before ordering any punishment to the Customs broker. True, the said regulations do contain provisions for revocation of the license and for forfeiture of full amount of security deposit, however these are maximum punishments which should be awarded only when the culpability of the Customs broker is established beyond doubt and such culpability is of very grave and extensive nature. In case of such fraudulent imports, for awarding such punishment, it has to be established without doubt that the Customs broker had colluded with the importer to enable the fraud to take place. No such culpability is forthcoming in respect of the appellant herein. On the other hand, the Inquiry Officer, appointed under CBLR, 2013, has opined that there is no substantive case to level charges violation of Regulation 11(a),
(b), (n), (e) & (k) of the CBLR, 2013. The Inquiry Officer has in fact clearly stated that he has not found anything substantial that can merit proposing revoking the license of the appellant or 27 C/85460/2022 imposing the penalty. The Inquiry Officer has categorically reported that at the most, appellant may be given a strict warning."
4.5 4.8 It is also not the case of revenue that appellant was in any way involved in abetting or colluding with the alleged fraudsters in the substitution of export consignments after their clearance from CFS. If the fact of not involvement with the act of smuggling the Red Sanders, is to be held in favour of the Appellants than in our view the punishments inflicted by the impugned order on the appellants are excessive and not proportionate to the violations committed if any. This is also to be viewed in light of the fact that the inquiry officer has in his report held that none of the alleged violations can be established against the appellant during the inquiry proceedings. In series of decisions referred below, just for failure to physically visit and verify the antecedents of the client, revocation of the licence of the CB broker has been held to be not justified.
4.9 Even if we hold that the appellant is guilty of the charges leveled against him then also can his license be revoked for that reason in the circumstances of this case. In case of KVS Cargo [2019 (365) ELT 392 (Tri Del.)] tribunal held:
7. The Directorate of Revenue Intelligence investigated the case of fraudulent import of food supplements, by certain unscrupulous elements, in contravention of FSSAI Act, 2006. The appellant had filed the relevant bills of entry. After enquiring into the activity undertaken by the appellant, the Enquiry Officer in his report exonerated the appellant against the charge of violation of regulation 11(a), (d), (e), (n) of the CBLR 2013. The main charges made against the appellant are regarding violation of the following regulations :
(i) Regulation 11(a) for failure to obtain proper authorization before filing the Bill of entry.
(ii) Regulation 11(d) for failure to advice the importer to comply with custom provisions.
(iii) Regulation 11(e) for failure to exercise due diligence to ascertain the correctness of information he imparts to his client.
28 C/85460/2022
(iv) Regulation 11(n) for failure to verify antecedent, correctness of IEC no. and identity of the client.
8. The investigations undertaken by DRI has established that the imports have been made making use of the IEC Code number of M/s. Unisys Enterprises. The partners of M/s. Unisys Enterprise have admitted that they were not the actual importers but the import was organized by Shri Amar Vachhar. For monitory considerations, the IEC code number was allowed to be utilised by M/s. Unisys Enterprise. It is further on record that Shri Amar Vachhar has been in touch with Shri Sameer Jha, proprietor of appellant firm.
9. Violation of Regulation 11(a) has been alleged against the appellant. The argument of the appellant is that there is no need for a personal meeting of the CB with the importer. However, we find that this is a case where IEC of the importer firm was being misused by a third person, Shri Amar Vachhar who was neither partner nor held any other official position in that firm. Both the partners of M/s. Unisys Enterprises have disclosed in their statements to DRI that they were not aware of the details of the imports and had never met Shri Sameer Jha, proprietor of CB. From this, it emerges that the appellant has failed to obtain the authorization from the actual importer and violation of Regulation 11(a) stands established.
10. Regarding Regulation 11(d), requiring the CB to advice their client to comply with the provisions of customs Act, it stands established that the appellant has not even met the actual importer and as such requesting of advising the client for compliance of various legal positions does not arise. In view of the above failure to observe Regulation 11(d) stands established.
11. Regulation 11(e) requires due diligence to ascertain the correctness of information which he imparts to client. In the facts of the present case, both the partners of M/s. Unisys Enterprise, have admitted that they were unaware of the actual imports made in their name. Further, the appellant also has admitted that they never met the owner of the firm. From this it appears that the appellant failed to exercise due diligence to 29 C/85460/2022 ascertain the correctness of information which he imparted to the client with reference to work related to clearance of cargo.
12. Regulation 11(n) requires the CB to verify the antecedents, correctness of IEC code no., identity of the client and its functioning at the declared address. In the present case, we find that the appellant has simply accepted the address appearing in the driving license of Shri Sachin Gulati, partner of M/s. Unisys Enterprise. The appellant failed to notice that the address in the IEC document is different. Had the appellant made any serious verification, he would have known that the IEC of the firm was being used by a third person, Shri Aman Vachhar. Consequently, we are of the view that violation of Regulation 11(n) stands established for failure to verify antecedents, correctness of IEC details.
13. As discussed above, we conclude that the appellant is guilty of violations of CBLR 2013. However, considering all the facts and circumstances, of the case, we are of the view that revoking the CB license is too grave a penalty to be imposed for the above violations. The ends of justice will be met by imposing a penalty of Rs. 50,000/- on the appellant, in addition to the forfeiture of the whole amount of security deposit.
4.10 Principal Commissioner has relied upon the following decisions in his order:
Rubal Logistics Pvt. Ltd. [2019 (368) E.L.T. 1006 (Tri. - Del.].
"6.1 These provisions require the Customs Broker to exercise due diligence to ascertain the correctness of any information and to advice the client accordingly. Though the CHA was accepted as having no mens rea of the noticed misdeclaration/under- valuation or mis-quantification but from his own statement acknowledging the negligence on his part to properly ensure the same, we are of the opinion that CH definitely has committed violation of the above mentioned Regulations. These Regulations caused a mandatory duty upon the CHA, who is an important link between the Customs Authorities and the importer/exporter. Any dereliction/lack of due diligence since has caused the Exchequer loss in terms of evasion of Customs Duty, the original 30 C/85460/2022 adjudicating authority has rightly imposed the penalty upon the appellant herein."
HLPL Global Logistics Pvt. Ltd. [2019 (370) E.L.T. 501 (Tri. - De!.)} wherein it was held that -
"Under the circumstances, we are in agreement with the finding of the Ld. Adjudicating authority that CHA helps not properly verified the functioning of the client from at the declared address by using reliable independent and authenticate documents. This was a serious lapse on part of the CHA in verifying the KYC before taking up the Customs clearance of consignment of rough diamond imported by M/s. Neotex Exim Put. Ltd. The appellants, considering the nature of the imported goods i.e. rough diamond, would have exercised more vigilant approach before taking up the consignment for Customs clearance after verification of KYC norms of the importer, which has not been done in this case".
However we find that the said decision has not been rendered in a proceedings initiated under CBLR, but is under section 110(2) of the Customs Act, 1962 as observed by the tribunal in para 5 reproduced below:
"5. We have heard rival contentions and perused the case record. The issue before us is to decide as to whether the appellants has any role in the deliberate overvaluation of the imported goods by the importer and also whether they have failed to verify the KYC norm as per the CBLR, 2013. We find that the show cause notice has been issued under Section 110(2) of the Act and not under the Section 124 of the Customs Act. For the better appreciation of the fact, we hereby reproduce the provisions of Section 110 of the Act :
110. Seizure of goods, documents and things. - .....
Section 110(2) of the Act deals with extension of time period for issuance of show cause notice within prescribed period of six months of the seizure of the goods."
4.11 Thus we are of the opinion that enquiry officer has more reasonably concluded in the matter, and the appellant CB can at the most be held guilty for contravention of the Regulation 10
(n). Various High Courts have held that punishment for the 31 C/85460/2022 offences should be proportionate to the gravity of offence. In the present we do not find that appellant was in any way responsible for any act of misconduct but is vicariously responsible for the acts of their employees, hence the punishment of revocation of licence is much harsh and disproportionate to the offences committed.
4.12 Delhi High Court has in case of Falcon Air Cargo and Travels (P) Ltd [2002 (140) ELT 8 (DEL)] held as follows:
"13. By order dated 15-7-2000, licence was revoked. It is not clear how there could be revocation when the licence itself was not functional after 13-1-2000. Licence can be suspended or revoked on any of the grounds as mentioned in Regulation 21. It is, therefore, clear that if any of the grounds enumerated existed, two courses are open to the Commissioner. One is to suspend the licence and the other is to revoke it. Suspension would obviously mean that licence would be for a particular period inoperative. An order of revocation would mean that licence is totally inoperative in future, it loses its currency irretrievably. Obviously, suspension/revocation, as the case may be, has to be directed looking to the gravity of the situation in the background of facts. For minor infraction or infraction which are not of very serious nature order of suspension may suffice. On the contrary, when revocation is directed it has to be only in cases where infraction is of a very serious nature warranting exemplary action on the part of the authorities, otherwise two types of actions would not have been provided for. Primarily it is for the Commissioner/Tribunal to decide as to which of the actions would be appropriate but while choosing any of the two modes, the Commissioner/Tribunal has to consider all relevant aspects and has to draw a balance sheet of gravity of infraction and mitigating circumstances. The difference in approach for consideration of cases warranting revocation or suspension or non-renewal has to be borne in mind while dealing with individual cases. In a given case the authorities may be of the view that non-renewal of licence for a period of time would be sufficient. That would be in a somewhat similar position to that of suspension of licence though it may not be so in all cases. On the other hand, there may be cases where the authorities may 32 C/85460/2022 be of the view that licencee does not deserve a renewal either. Position would be different there. Though we have not dealt with the question of proportionality, it is to be noted that the authorities while dealing with the consequences of any action which may give rise to action for suspension, revocation or nonrenewal have to keep several aspects in mind. Primarily, the effect of the action vis-a-vis right to carry on trade or profession in the background of Article 19(l)(g) of the Constitution has to be noted. It has also to be borne in mind that the proportionality question is of great significance as action is under a fiscal statute and may ultimately lead to a civil death."
4.13 Delhi High Court has in case of Ashiana Cargo Services[2014 (302) ELT 161 (DEL)] held as follows:
"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 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-
33 C/85460/2022 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 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 mensrea, 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/mensrea, 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 24-1-2005."
4.14 Bombay High Court has in case of AS Vasan & Sons (Bombay)[2010 (249) ELT 492 (BOM)] held as follows:
"6. As regards the first ground in paragraph no. 13 of the order dated 20th May 2009, the respondent has observed that at the time of hearing, Mr. Unnikrishnan gave visiting cards (proposed for noting the persons or seeking entry) into the customs area for hearing of the petitioner firm showing that it was a Custom House Agent. The petitioner firm was thus representing that it possessed a CHA licence even after the CHA licence had expired 34 C/85460/2022 and not renewed. The explanation by Mr. Unnikrishnan that the visiting cards were printed two years ago when the CHA licence was still valid and he had simply used the same card without any intention of making any false representation was not accepted by respondent no. 2. In our opinion, the explanation offered by Mr. Unnikrishnan was a plausible explanation and there was no material on record, that for except giving of the visiting card to the respondent no. 2 himself at the time of hearing that the petitioner was using the visiting cards anywhere else and/or misrepresenting that they were still possessing CHA licence. In our view, giving of the visiting card to respondent no. 2 was even assuming if amounted to misconduct was too insignificant a thing warranting cancellation of the licence or its refusal of its renewal."
4.15 Madras High Court has in case of Transport Logistics [2016 (338) ELT 380 (Mad)] held as follows:
"13. In any event, for giving signed blank forms to third parties, the revocation of licence is harsh penalty and the punishment should commensurate for guilty of offence. Therefore, the order of the Commissioner of Customs revoking the CHA licence as confirmed by the CESTAT is set aside.
14. By this order, this Court only restore the CHA licence. However, forfeiture of the security deposit is concerned, there is a violation of CHA regulation by the appellant. Interest of justice would be met by restoring the CHA licence and confirming the order of forfeiture of security deposit."
4.16 We also take note of the following submissions made by the appellant which have not been disputed by the revenue authorities:
They have been performing as CB for nearly 40 years and have developed goodwill for their firm in trade. They have performed their functions throughout as Custom Brokers with utmost care and diligence, and their past record is evidence for their goodwill, integrity and efficiency in handling the customs related works. They have branches spread across the country and employ a large number of persons for supporting their business at 35 C/85460/2022 various ports in India. The order of revocation of their license will not only be harsh on them but will deprive all the persons employed by them from their livelihood.
4.17 In view of the above discussions we are inclined to modify the impugned order to extent of:
(i) Setting aside the order of revocation of the license of CB and forfeiture of the security deposit.
(ii) Reduce the penalty imposed on the CB from Rs 50,000/-
to Rs 10,000/-
5.1 Appeal is partly allowed as indicated in para 4.17 above.
(Order pronounced in the open court) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) tvu