2022 (3) TMI 287 - AT - Customs

Levy of penalty on the appellants u/s 114 of the Customs Act 1962 - Customs Broker firm - smuggling - evidence to prove that the customs broker had actively abetted the exporter in the illegal export of red sanders or not - only allegation against the appellants herein is that they lent their digital user ID and password to M/s.Bro Logistics to file shipping bill for a monthly consideration - violation of principles of natural justice - HELD THAT - It has to be stated that on perusal of the order passed by the adjudicating authority it is seen that the adjudicating authority has taken the view that leasing the User ID and Password of a Customs Broker can be considered as violation under CBLR 2013 only. It is held that for such violation the Customs Broker cannot be held to have abetted in the attempt to smuggle red sanders. The decision in the case of K.V. PRABHAKARAN VERSUS COMMISSIONER OF CUSTOMS CHENNAI 2017 (10) TMI 1446 - MADRAS HIGH COURT has been relied by the Commissioner (Appeals) to arrive at the conclusion that the matter has to be remanded to the original authority for reconsidering the issue of imposing penalty under Section 114 of the Act ibid. A Custom Broker is supposed to safeguard the interests of both exporters and the Customs. It is not possible to manage the huge volume of transactions in each port without some trust on the Customs Broker by the officers of Customs. Any act facilitating an attempt for export of prohibited goods would fall under Section 114 of the Act ibid - appellants has relied upon the decision in the case of KAILASH BAHIRU JADHAV VERSUS COMMISSIONER OF CUSTOMS (EXPORT) 2019 (7) TMI 1061 - CESTAT MUMBAI to argue that the violation if any would fall only under CBLR 2013 and not under Section 114 of Customs Act 1962. The facts in the said case are that appellant therein had filed export documents and later revealed that there was overvaluation of goods which facilitated the exporter in claiming excess drawback. In para-6 of the said decision the Tribunal held that for all contraventions in every case the customs broker cannot be proceeded against under Section 114 of the Act merely because he acted as an agent - The facts in the above case reveal that the allegation therein was of filing export documents in which the goods were overvalued. Needless to say that value of the goods are entered in the shipping documents as provided by exporter and the Customs Broker / CHA would have minimal or negligible role to play in the valuation of goods. The facts of the said case being entirely different it is not applicable to the present situation wherein the allegation is lending of Customs Broker Digital ID and password to unauthorised person for monetary consideration. There are no merit in the appeals of the appellant - appeal dismissed.

Summary

Issues Involved:
1. Non-imposition of penalty under Section 114 of the Customs Act, 1962.
2. Role and responsibility of Customs Brokers in the smuggling attempt.
3. Applicability of Customs Broker Licensing Regulations (CBLR), 2013 versus Section 114 of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Non-imposition of penalty under Section 114 of the Customs Act, 1962:
The appeals were filed against the orders of the Commissioner (Appeals) who remanded the matter to reconsider the non-imposition of penalty on the appellants under Section 114 of the Customs Act, 1962. The original authority had refrained from imposing any penalty on the Customs Broker M/s.R.S.Arunachalam and its partner Smt. R.A. Vijayalakshmi, citing a lack of evidence proving active abetment in the illegal export of red sanders. However, the Commissioner (Appeals) set aside this decision, prompting the appellants to approach the Tribunal.

2. Role and responsibility of Customs Brokers in the smuggling attempt:
The Directorate of Revenue Intelligence (DRI) intercepted a consignment at Chennai Port, which was found to contain red sanders, a prohibited item for export. The shipping bill was filed by M/s.R.S.Arunachalam, a Customs Broker firm. Investigations revealed that the Customs Broker had lent their digital user ID and password to M/s.Bro Logistics for a monthly fee, allowing the latter to handle customs clearance. The Customs Broker admitted to signing blank annexures and handing them over to M/s.Bro Logistics without verifying the exporter’s details or the nature of the goods being exported. The adjudicating authority found that the Customs Broker had failed to discharge their duties under the Customs Broker Licensing Regulations, 2013 but did not find sufficient evidence of active abetment in the smuggling attempt.

3. Applicability of Customs Broker Licensing Regulations (CBLR), 2013 versus Section 114 of the Customs Act, 1962:
The adjudicating authority initially held that the violations committed by the Customs Broker fell under the CBLR, 2013 and did not warrant a penalty under Section 114 of the Customs Act, 1962. However, the Commissioner (Appeals) and the Tribunal, relying on the decision of the Hon’ble jurisdictional High Court in K.V. Prabhakaran Vs CC Chennai, held that misuse of a Customs Broker’s license to facilitate smuggling activities could attract penalties under Section 114 of the Customs Act, 1962. The Tribunal emphasized that any act facilitating an attempt to export prohibited goods would fall under Section 114, which includes abetment of such acts.

The Tribunal upheld the Commissioner (Appeals)’ decision to remand the matter, emphasizing that the Customs Broker’s actions—lending their digital ID and password for monetary consideration and failing to verify the exporter’s details—constituted a significant breach of trust and responsibility. The Tribunal dismissed the appeals, confirming that the Customs Broker and its partner were liable for penal action under Section 114 of the Customs Act, 1962, in addition to any action under the CBLR, 2013.

Conclusion:
The Tribunal concluded that the Customs Broker’s actions facilitated the smuggling attempt and warranted penalties under Section 114 of the Customs Act, 1962. The appeals were dismissed, and the orders of the Commissioner (Appeals) were upheld, remanding the matter for reconsideration of the imposition of penalties.