Custom, Excise & Service Tax Tribunal
Santon Shipping Services vs Commissioner Of Customs (Gen) on 8 December, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.C/635/10 (Arising out of Order-in-Original No.CAO No.48/2010/CAC/CC(G)/SLM/CHA(Admin) dated 09/06/2010 passed by Commissioner of Customs (General), Mumbai) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Santon Shipping Services Appellant Vs. Commissioner of Customs (Gen), Respondent Mumbai Appearance: Shri.N.D. George, Advocate for appellant Shri.Navneet, Addl. Comm. (AR), for respondent CORAM: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 08/12/2011 Date of Decision : /01/2012 ORDER NO Per: P. R. Chandrasekharan
1. This appeal is directed against the order-in-original No.48/2010/CAC/CC(G)/SLM/CHA (Admin) dated 09/06/2010 passed by the Commissioner of Customs (General), New Customs House, Mumbai. Vide the impugned order, the Ld. Commissioner revoked the CHA licence No.11/231 issued to the appellant, M/s.Santon Shipping Services, Mumbai.
2. The facts arising for consideration in this case are as follows:-
2.1 A show-cause notice dated 31/07/2008 was issued to Santon Shipping Services alleging involvement in the fraudulent export by M/s.Shradha Exim Pvt. Ltd., (SSEPL in short) under DEPB and DEEC schemes. The exporter SSEPL procured pharmaceutical goods viz., Amoxycillin Trihydrate and Cefadroxil from M/s.Surya Pharmaceutical Ltd., (SPL in short) for third party exports against SPLs DEEC licences. The said goods instead of gong to Nhava Sheva Port for export were diverted to local market. At the same time, they had purchased soap stone powder and substituted the same in the place of pharmaceutical goods by mis-declaring the description under the cover of 14 DEEC shipping bills declaring the FOB value of Rs..1,52,60,075/- as against actual (total) market value of soap stone powder of Rs.14,459/-.
2.2 Similarly, in another case of mis-declared export goods covered by 66 shipping bills under claim for DEPB and fraudulent acquisition of 47 DEPB licences having total duty credit of Rs.1,32,31,753/- and the subsequent sale in the local market to various buyers/importers by SSEPL, the CHA involved was the appellant, M/s.Snton Shipping Services.
2.3 Statement of Shri.V.P. Nair, CHA representative of Santon Shipping Services was recorded under Section 108 of the Customs Act on 19/06/2007 where he admitted that the export goods involved in this transaction wherein brought in by a person named Pandit and he did not know the person. The documents relating to the exports were given to him by one Shri Krishna Kumar, Director of Airose Shipping Pvt Ltd., Mumbai and he had not interacted directly with anyone other than Shri Krishna Kumar from the exporters side. On receipt of the export goods and the related documents, he used to get the goods carted and obtain examination order from the customs. Upon receipt of orders, the export goods were normally examined by visual method, the samples drawn by the Customs was delivered to the customs laboratory for analysis. The test report signed by the Chemical Examiner of Customs Lab, Nhava Sheva stated that the export goods declared was Amoxycillin Trihydrate. However, the test report issued by the Central Drug Testing Laboratory showed the goods to be cheap talc powder. He also stated that the test report dated 23/11/2005 of Deputy Chief Chemist, JNCH, Nhava Sheva, purportedly pertaining to export goods covered under shipping bill No.3836025 dated 11/11/2005 is incorrect and the samples drawn during the examination on 17/11/2005 had been substituted by someone at some level with samples of Amoxycillin Trihydrate and the said report dated 23/11/2005 was based on such samples and he had no idea about how the obvious substitution of sample had taken place.
2.3 Similarly, in respect of export made under DEPB scheme the export goods had been stuffed and exported to Singapore in container No.PMLU 2038951 covered by 14 bills of lading issued by M/s.Vini Container Lines Pvt. Ltd., Mumbai and in container No.FSCO-7693713 covered by 24 bills of lading issued by M/s.Seasky Cargo & Travels Pvt Ltd., and he did not deal either with M/s.Vini Container Lines Pvt. Ltd., or M/s.Seasky Cargo & Travels Pvt Ltd., in relation to the above exports.
2.4 Statement of Shri Bose J Fernando, partner of M/s.Santon Shipping Services was recorded on 29/07/2008 wherein he admitted, interalia, that the export clearance was brought to him by Shri v.P. Nair and Shri Nair had introduced him to one Shri Krishna Kumar Pillai of M/s.Airose Shipping Pvt Ltd., and he had not met any person of the said exporter nor had he ever visited their office nor had he any negotiated any clearance charges/modalities with SSEPL. When Shri Nair approached him with said proposal, he had reached an understanding with him for allowing usage of his licence for fixed charges irrespective of the nature and value of consignment. As per the understanding, Shri Nair was required to look after all clearances related work while he was required to get the signature of authorised person in the documents against payment of a sum and, accordingly he had obtained customs pass in the name of Shri V.P. Nair declaring him as an employee since 2004. He has not paid any salary to Nair and Shri Nair had exclusively and independently was handling all the work related to the exports on behalf of SSEPL. He further admitted that he had received a total amount of Rs.10,200/- from Shri Krishna Kumar towards 38 shipping bills filed using his identity and name.
2.5 Statement of Shri Krishna Kumar of Airose Shipping Pvt Ltd. was recorded on 23/05/2008 wherein he interalia admitted tht he had undertaken export clearance work of SSEPL through ShriV.P. Nair of Santon Shipping Services and he had collected the export documents from one Shri Rajasekhar Pillai of SSEPLs office and thereafter, the documents were handed over to Shri V.P. Nair for further processing and export. He had no idea as to from where these export goods originated. The vehicles used for transportation were all local vehicles.
2.6 An inquiry was initiated against the CHA M/s.Santon Shipping Services vide notice dated 26/03/2009 and five articles of charge regarding violation of Regulations 12, 13 (a), 13 (b), 13 (d) and 13 (n) of CHALR, 2004 was framed against the CHA. The charges against CHA were as follows:
2.7 The CHA transferred his licence to one Shri V.P. Nair for monitory consideration and made Shri V.P. Nair as an employee and also gave him a customs pass on behalf of the CHA firm. Shri V.P. Nair exclusively looked after the work of SSEPL and no other work was undertaken by him. Thus, the CHA allowed Shri V.P. Nair to use his CHA licence on regular basis. Second charge is that as per Regulation 13 (a) of the CHALR, 2004, a Customs House Agent is required to obtain an authorization from each of the companies/firms or individuals by whom he is for the time being employed as CHA and produce such authorization whenever required by the Deputy/Assistant Commissioner of Customs. The CHA in the instant case never met the exporter nor visited the exporters office nor did he obtain any authorization from the exporter, thereby violating the provisions of Regulation 13 (a) of the said Regulation 2004. The third charge is that the CHALR, 2004 violated the Rule 13 (b) of the said Regulation 2004 inasmuch as he obtained a custom pass in the name of Shri V.P. Nair, who was not his employee and this fact was hidden from the department thereby illegally obtaining a customs pass in the name of Shri V.P. Nair. The 4th and 5th charges relate to violation of Regulations 13 (d) and 13 (n) of the CHALR, 2004 inasmuch as the CHA failed to advise his client of the provisions of Customs Act and did not discharge his duties as Customs House Agent with utmost speed and efficiency and without avoidable delay.
2.8 An inquiry was conducted in accordance with provisions of CHALR, 2004 and the inquiry officer held that the CHA has violated the provisions of Regulations 12, 13 (a) and 13 (b) of the CHALR 2004. After completion of inquiry and presentation of the reports, the case was adjudicated by the Commissioner of Customs, who based on the inquiry officers report held that the CHA had violated the regulations 12, 13 (a) and 13 (b) of the CHALR 2004 and accordingly revoked the CHA licence of Santon Shipping Services. Hence, the appellants are before us.
3. As regards the first charge, the Ld. Advocate for the appellant submits that Shri V.P. Nair was an employee of the CHA firm and when the employees of CHA use the licence for clearance of goods, it cannot be said that the licence was sold/sub-let by CHA in violation of Regulation of 12 of the CHALR, 2004.
3.1 As regards the allegation of non-obtaining the authorization from the exporter, the Ld. Advocate submits that though they had not obtained authorization, the documents have been in the name of the exporter and from these documents it is evident that the impugned exports had taken place in the name of the exporter. He further submits that the impugned goods were received for export under ARE-1 procedure, which indicates that the goods have been exported by a manufacturer exporter and, therefore, there is no reason for him to suspect that the goods should be other than what has been declared.
3.2 With respect to the 3rd charge that though Shri V.P.Nair was not an employee, the CHA obtained a customs pass in his name, the Ld. Advocate submits that Shri Nair was an employee since 2004 and from the attendance register it can be seen that Shri Nair has marked his attendance and from the salary register, Shri Nair is shown as an employee and salary has been disbursed in cash. Therefore, the charge is not substantiated.
3.3 The Ld. Advocate also relies on the following judicial pronouncements in support of his contentions;
i) Sainath Clearing Agency Vs. Commissioner of Customs (G), Mumbai
ii) Commissioner of Customs (General) Vs. S.S. Clearing & Forwarding Agency Pvt Ltd.,
iii) H.B. Cargo Services Vs. Commissioner of Customs, Hyderabad
iv) P.P. Dutta Vs. Commissioner of Customs, New Delhi
v) Varun Forwards Vs. Commissioner of Customs, Mumbai
vi) A.N. Bhat Vs. Collector of Customs
vii) Order No.CAO No.175/2009/CAC/CC/(G)/ SLM/CHA (Admn) dated 18/12/2009 in the case of M/s.Fast Forward (CHA No.11/879)
4. The Ld. AR appearing for the Revenue on the other hand strongly contends that in the statement recorded by the investigating agency, Shri Bose J Fernando, partner of the CHA firm had clearly admitted that Shri Nair was engaged for handing export works relating to SSEPL without payment of any salary and Shri Nair attended only the work related to SSEPL and he was shown as an employee only for the purpose of getting the Customs pass for undertaking the work. The subsequent production of attendance register and salary register are fabricated documents and no reliance can be placed on the same as rightly observed by the adjudicating authority. Therefore, he submits that the allegation that he has transferred the licence to another person Shri Nair is substantiated and the violation of Regulation 12 is established.
4.1 The Ld. AR further submits that it is on record that the appellant did not know the exporter nor did he obtain any authorization from him. Therefore, violation of Regulation 13 (a) is also clearly established. Inasmuch as Shri Nair is not an employee of the appellant, the CHA could not have utilized his services by getting a customs pass in his name and, therefore, violation of Regulation 13 (b) is also established.
4.2 The AR relies on the judgement of the honble Andhra Pradesh High Court in the case of Commissioner of Customs, Hydrabad-II Vs. H.B. Cargo Services, reported in 2011 (268) ELT 448 (A.P) and the decision of the honble High Court of Delhi in the case of Jasjeet Singh Marwaha Vs. UOI, reported in 2009 (239) ELT 407 (Del) in support of his contention.
5. We have carefully considered the rival submission.
6. The first question to be decided is whether Shri V.P.Nair is an employee of the CHA or not. As per the statement of Shri Bose J Fernando, the partner of the CHA firm recorded under 108 of the Customs Act, it is seen that the clearance work was brought him by Shri Nair for undertaking the export work of SSEPL and when Shri Nair approached with the said proposal, he had reached understanding with him for allowing usage of his licence for fixed charges and that the consideration was irrespective of nature and value of the consignment. Shri V.P. Nair, though had been shown to have been an employee of Santon Shipping Services since 2004, he had not paid any salary to Shri Nair and Shri Nair was exclusively and independently handling all the work relating to the said exporter only and he was not attending to the work of any other exporter/importer. From the above, it is clear that the relationship between the CHA and Shri Nair is not that normally exists between an employer and employee, if Shri Nair was an employee, there was no need for reaching an understanding with him for undertaking the work of SSEPL for a fixed charge. Normally CHA undertakes the work on consignment basis and the charges are also collected on that basis. Further, if Shri Nair was an employee, he should have been paid salary which has not been done in this case. Further, if Shri V.P. Nair was an employee, he would have been asked to handle all the work and not work pertaining to one exporter alone. From this admission, it is absolutely clear that Shri Nair was not an employee of the CHA firm, but allowed to act as an employee for a specific work. Salary register and the attendance register subsequently produced before the customs authorities indicate that Shri Nair had not signed in the attendance register and the attendance was marked by putting a tick mark. It is also seen that in the register indicating the attendance of the employees for four years, the entries appears to have been made in one hand and none of the employees was found to be absent during the period of four years. From the details mentioned above, it is clear that the attendance register is a fabricated one and cannot be relied upon for coming into the conclusion that Shri Nair was a paid employee. These documents were not submitted before the investigating authorities but were produced before the inquiry officer after the investigation which itself shows that the entire evidence has been cooked up. Therefore, the Commissioners finding that the CHA allowed his licence to be utilised by a third party in violation of Regulation 12 of the CHALR 2004 stands clearly established and cannot be faulted. As regards the second allegation that the CHA did not obtain the authorization from the exporter, this is an admitted position. Both Shri Nair as well as Shri Fernando have clearly admitted that they did not know anybody from the exporters firm and the business was given to them by Shri Krishna Kumar of Airose Shipping Pvt. Ltd., Mumbai. Therefore, violation of Regulation 13 (a) of CHALR 2004 is also established. Inasmuch as Shri Nair was not an employee, the CHA could not have availed his services for undertaking the customs work. In the instant case the CHA fraudulently obtained a customs pass in Shri Nairs name by declaring him as an employee. Therefore, he has clearly contravened the provisions of Regulation 13 (b) of CHALR 2004.
6.1 As regards the reliance placed by the Advocate for the appellant in the case of Sainath Clearing Agency, in that case it was held that the CHA cannot be held liable for anything done or omitted by the employee beyond the purview of CHAs obligations under CHALR 2004 and they cannot be made vicariously liable on the basis of principal of such relationship by application of Section 147 of the Customs Act, 1962. In the instant case, the facts are completely different and distinguishable. Firstly, Shri Nair was not an employee and he was mis-declared as an employee and the CHA reached an understanding in undertaking export clearance work for a consideration by allowing Shri Nair to use the CHA licence. Therefore, the ratio of the said judgement has no application in whatsoever in the facts of the present case.
6.2 As regards the case law in respect of S.S. clearing and Forwarding Agencies Pvt Ltd., in that case the issue related to whether the CHA could be held responsible for getting for authorization on behalf of his client and the custom officer was bound to check the authorization in favour of the CHA before allowing to act as a CHA for importer and since there was a contribution of default on part of both, CHA alone cannot be blamed and punished. In the case under consideration, the CHA did not know the exporter at all; neither did he obtain the documents from the exporter or his authorised representative. He received the export documents from a third party who was not connected with the exports. Therefore, the ratio of the said judgement does not apply to the facts of the present case.
6.3 In the H.B. Cargo Services case relied upon by the appellant, the export containers were stuffed and sealed at the factory gate under the supervision of the excise officers and the detection of fraud was made on the basis of specific intelligence and, therefore, it was held that the CHA could not be held responsible for the fraud. But this is not the issue before us. There is no allegation that the CHA colluded with the exporter in committing the fraud. The allegation in the instant case relates to violation of the provisions of CHALR 2004. In any case, this decision of the Tribunal was set aside by the honble Andhra Pradesh High Court in the same came on an appeal filed by the department. In the case of P.P. Dutta relied upon by the Advocate it was held that mere discrepancy in obtaining authorization from the client is not sufficient to revoke licence and forfeit security. In the case under consideration the charge is not mere non obtaining of the authorization, the charge is one of the subletting the licence for use by a third party for a consideration. Therefore, the ratio of the said judgement does not apply to the facts of the case.
6.4 On the other hand, we find that in the case of H.B. Cargo services, the honble Andhra Pradesh High Court held that issuance of signed blank shipping bills amount to negligence and by dong so for a consideration, it was an act of corruption and, therefore, the CHA was liable to maximum penalty of revocation of licence. The court further held that the quantum of consideration received for the misconduct is irrelevant. In the instant case the CHA sublet his licence for a consideration in gross violation of Regulation 12 of CHALR 2004 and this is an act of corruption. The honble High Court further held that in the Customs area, the Commissioner of Customs is responsible for the happenings, the discipline to be maintained there and he is best placed to understand the importance of CHA and if he takes a decision necessary for that purpose, the Tribunal should not ordinarily interfere on the basis of its own notions of difficulties likely to be faced by CHA or their employees, and not be swayed by considerations of misplaced sympathy. Again in the Jasjeet Singh Marwaha case cited supra it was held that statements recorded under 108 of the Customs Act can be relied upon for proceedings under the CHALR, 2004 if the same is voluntary and truthful and not as a result of threat or inducement. Therefore, the Ld. Adjudicating authority has rightly relied upon the statement of Shri Bose J Fernando while coming to his conclusion that he has acted in gross violation of the provisions of CHALR, 2004. It is also relevant to note that in the Customs Act proceedings in the same case, the CHA has been found to be guilty of the offences punishable under the provisions of Customs Act and has been imposed with a penalty of Rs.5 lakhs under the provisions of Section 112 (b) of the Customs Act. The adjudicating authority has come to the conclusion that the fraud in this case has been committed in so many consignments over a long period of time and the same could not have happened without the connivance of the CHA. This finding also supports the Commissioners findings under the CHALR, 2004 about the involvement of CHA.
7. Taking into all the facts and circumstances of the case as discussed above we are of the view that the decision of the Ld. Commissioner to revoke the CHA licence is justified and, therefore, we do not find any need to interfere with the said order. The appeal is accordingly dismissed.
(Pronounced in Court on) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 2