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2025 (6) TMI 693 - AT - CustomsViolation of provisions of Regulations 5 10(1)(m) of SCMTR 2018 and Sections 34 39 40 41 of the Customs Act 1962 - suspension of operations under Regulation 11 of SCMTR 2018 - impugned goods covered under two shipping bills for which the LEO copy of shipping bill was not submitted - confiscation - penalty. HELD THAT - On perusal of Notification No.38/2018-Customs (N.T.) dated 11.05.2018 vide which the Sea Cargo Manifest and Transhipment Regulations (SCMTR) 2018 were notified by the Government it transpires that SCMTR intends to bring about transparency predictability of movement advance collection of information for expeditious clearance of vessels in import/export of goods. The said SCMTR 2018 supersedes the earlier regulations viz. Import Manifest (Vessels) Regulations 1971 and Export Manifest (Vessels) Regulation 1976. The new Regulations stipulate for advance notice by authorized carriers for goods arriving in or being exported out of India through gateway seaports and further movement between Customs stations. They stipulate the obligations roles and responsibilities for the various stakeholders involved in movement of imported/export goods. All the requirements for declaration of details including the alleged requirements under Regulation 5 ibid in the case of appellants in respect of JNCH Nhava Sheva port would be operational only when the entire SCMTR 2018 was made fully operations for the specific port of import/export. It is an undisputed fact that the impugned two S/Bs concerning the present case are both dated 07.01.2022 for which the SCMTR 2008 does not apply on that date as the said regulations was made operational for JNCH Nhava Sheva port after the expiry of transitional provisions upto 30.11.2024 i.e. w.e.f. from 01.12.2024. Therefore we are of the considered view that the impugned order holding that the Regulations 5 and 10(1)(m) ibid have been violated by the appellants does not stand the scrutiny of law. From plain reading of Section 41 ibid that the requirement of submission of Export General Manifest (EGM) before the departure of the vessel is primary responsibility of the person in-charge of the vessel or his agent as may be specified through notification issued by the Central Government. Therefore the shipping lines NVOCC or shipping agent or such other authorised persons alone are responsible for filing the EGM within the prescribed time. The facts of the case also indicate that it is not the case of Revenue that the EGM for vessel MV Thorsky in respect of its voyage out of India on 09.01.2022 has not been filed. Therefore there is no case of violation of Section 41 ibid in the present case. On perusal of the legal provisions of Section 113 ibid it transpires that essential ingredients of sub-section (d) (f) (g) such as attempt to export contrary to any prohibition; loading of goods in violation of Section 33 34; loading of export goods in a vessel without obtaining permission of proper office of customs is not present in this case. No evidence for any allegation has been made to this effect except that the LEO copy of S/Bs have not been given before the sailing of the vessel. Therefore the alleged violation of sub-sections (d) (f) (g) to Section 113 ibid does not stand the legal scrutiny. Consequently imposition of penalty under Section 114(iii) ibid also does not sustain. Conclusion - There are no merits in the impugned order passed by the learned Commissioner of Customs (General) JNCH Nhava Sheva in suspension of the operation of the appellants; for confiscation of export goods and consequent imposition of redemption fine and for imposition of penalties inasmuch as there is no violation of regulations 5 10(1)(m) of SCMTR 2018 and legal provisions under Sections 34 39 40 41 113(d) 113(f) 113(g) ibid and the findings in the impugned order is contrary to the facts on record. The impugned order is set aside - appeal allowed in favour of the appellants.
The core legal questions considered by the Tribunal in this appeal are as follows:
(i) Whether the appellants violated Regulations 5 and 10(1)(m) of the Sea Cargo Manifest and Transhipment Regulations, 2018 (SCMTR), and Sections 34, 39, 40, and 41 of the Customs Act, 1962; (ii) Whether, consequent to the above, the appellants are liable for suspension of their operations under Regulation 11 of SCMTR, 2018; (iii) Whether the export goods covered under the two shipping bills (S/Bs), for which the Let Export Order (LEO) copy was not submitted before vessel departure, are liable for confiscation under sub-sections (d), (f), and (g) of Section 113 of the Customs Act, 1962, and whether the appellants are liable for penalties under Section 114(iii) of the Customs Act and Regulation 13 of SCMTR, 2018. Issue-wise Detailed Analysis: 1. Alleged Violation of SCMTR, 2018 (Regulations 5 and 10(1)(m)) and Sections 34, 39, 40, 41 of the Customs Act, 1962 The SCMTR, 2018, notified in 2018 and intended to replace earlier Import and Export Manifest Regulations, imposes obligations on authorised sea carriers to electronically deliver departure manifests and abide by customs laws. Regulation 5 mandates delivery of departure manifests before vessel departure, and Regulation 10(1)(m) requires authorised carriers to comply with all applicable laws and regulations. Regulation 11 provides for suspension of operations for failure to comply. However, the implementation of SCMTR, 2018, has been phased and subject to transitional provisions under Regulation 15, with extensions granted by the Central Board of Indirect Taxes and Customs (CBIC) due to stakeholder unpreparedness and the COVID-19 pandemic. Notifications and circulars from CBIC extended transitional provisions for various ports, including JNCH Nhava Sheva, where the present case arose, up to 30.11.2024 and further to 31.05.2025, expressly advising customs officers not to impose penalties during this interim period. The appellants contended they are not 'Authorised Sea Carriers' responsible for filing Export General Manifests (EGMs) but act as agents of Non-Vessel Operating Common Carriers (NVOCCs). The Tribunal noted that the SCMTR provisions, particularly Regulations 5 and 10(1)(m), were not operational at the relevant time (January 2022) for JNCH port, as transitional provisions were still in effect. Consequently, the Tribunal held that the appellants could not be penalised for alleged violations of these regulations at that time. Regarding Sections 34 and 39 of the Customs Act, which require export goods to be loaded under customs supervision and only after 'entry-outwards' permission is granted, the Tribunal found no dispute that the vessel had obtained entry outwards and loading was supervised by customs officers. Hence, no violation of these provisions occurred. Section 40 requires the person-in-charge of the conveyance not to permit loading without a duly passed shipping bill or bill of export. The Tribunal clarified that the responsibility to provide the LEO copy to the person-in-charge rests with the exporter, not the shipping agent, and that the appellants could not be held liable for non-submission of the LEO copy before vessel departure. Section 41 mandates the filing of the departure/export manifest by the person-in-charge of the vessel or any other person specified by the Central Government. The Tribunal observed that the Revenue did not allege non-filing of the EGM for the vessel and that the appellants were not responsible for this filing. Therefore, no violation of Section 41 was established. Further, the Tribunal examined the customs EDI system's error messages generated due to the LEO date being later than the sailing date, which was the factual basis for the investigation. It was noted that the appellants had taken steps to rectify the error by filing a request for correction, evidencing no willful or negligent violation. 2. Suspension of Operations and Imposition of Penalties under SCMTR, 2018 Regulation 11 of SCMTR empowers the Commissioner of Customs to suspend or revoke registration of authorised carriers for failure to comply with the regulations. However, given the transitional status of SCMTR at the relevant time and CBIC's instructions to avoid penal actions during the interim period, the Tribunal found the suspension order and penalties imposed under Regulation 11 and Regulation 13 unsustainable. 3. Confiscation of Export Goods and Penalties under Sections 113 and 114 of the Customs Act, 1962 Section 113(d), (f), and (g) provide for confiscation of goods attempted to be exported contrary to prohibitions, loaded in contravention of customs provisions, or loaded without proper permission. Section 114(iii) provides for penalties corresponding to such violations. The Tribunal observed that the essential ingredients for confiscation under these provisions were absent. The vessel had obtained entry outwards, loading was supervised by customs officers, and there was no evidence of prohibited export or loading without permission. The only issue was the non-submission of the LEO copy before vessel sailing, which the Tribunal held did not amount to contravention warranting confiscation or penalties. 4. Treatment of Competing Arguments The appellants argued that they were not the authorised carriers responsible for filing EGMs and that SCMTR was not yet operational at the port on the relevant date. They relied on CBIC notifications and circulars extending transitional provisions and directing non-imposition of penalties during the interim period. They also cited precedent holding that shipping agents acting as NVOCC agents are not liable for violations related to filing export manifests. The Revenue relied on the findings in the impugned order, asserting violations of SCMTR and Customs Act provisions. However, the Tribunal found that the Revenue's case did not establish the requisite violations, especially given the transitional status of SCMTR and the procedural safeguards and instructions issued by CBIC. Conclusions The Tribunal concluded that: - The appellants did not violate Regulations 5 and 10(1)(m) of SCMTR, 2018, as the regulations were not operational for JNCH port on the relevant date; - The appellants did not violate Sections 34, 39, 40, and 41 of the Customs Act, 1962, as loading was supervised, entry outwards was granted, and responsibility for LEO submission rests with the exporter; - There was no basis for suspension of operations or imposition of penalties under SCMTR, 2018; - The export goods were not liable for confiscation under Section 113(d), (f), and (g), and penalties under Section 114(iii) were not sustainable; - The impugned order was contrary to the facts and law and was set aside. Significant Holdings and Core Principles Established: The Tribunal emphasized the following principles: "...the impugned order holding that the Regulations 5 and 10(1)(m) ibid have been violated by the appellants does not stand the scrutiny of law." "...the appellants cannot be held liable for any failure with respect to compliance with the requirement of Section 40 ibid." "...the essential ingredients of sub-section (d), (f), (g) such as attempt to export contrary to any prohibition; loading of goods in violation of Section 33, 34; loading of export goods in a vessel without obtaining permission of proper officer of customs is not present in this case." "...the impugned order invoking the provisions of such SCMTR, which is yet to be implemented on the relevant date... for imposition of suspension of the operation of the appellants and imposition of penalties... does not stand for legal scrutiny." "...there is no violation of regulations 5, 10(1)(m) of SCMTR, 2018 and legal provisions under Sections 34, 39, 40, 41, 113(d), 113(f), 113(g) ibid, and the findings in the impugned order is contrary to the facts on record." Accordingly, the Tribunal allowed the appeal, set aside the impugned order dated 06.09.2024, and held that the appellants were not liable for suspension, confiscation, or penalties as imposed.
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