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2015 (6) TMI 743 - CESTAT CHENNAI

2015 (6) TMI 743 - CESTAT CHENNAI - TMI - Penalty upon CHA and CFS u/s 114 - smuggling of red sanders - Misdeclaration of goods - Confiscation of goods - Held that:- Xharges levelled against the CHA is that he has failed to discharge the functions as a CHA and no other evidences have been brought out by the adjudicating authority to establish the role of the appellant in the attempt of smuggling of red sanders. By respectfully following the Hon ble High Court s decision (2015 (1) TMI 1032 - MADR .....

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nd equally responsible for safety and security of the cargo transshipped from CFS to the gateway port. It is one of the main conditions of appointing the appellant as custodian CFS which is evident as per the bond executed by the appellant before Customs.

It is established beyond doubt that the sealed containers were tampered in transit and the goods were replaced with Red Sanders before the container reached the gateway port. Their contention that they are not responsible for change .....

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a CFS only with a faith that Custodian will perform his duties diligently and in a dedicated manner. Prior to the concept of CFS entire operations of cargo clearance were done only at the port itself which is handled by Port Trust Authority appointed under Port Trust Act. - The role of CFS as custodian of cargo cannot be equated with the role of Custom House Agent and the CFS obligations and roles are entirely different from the role of CHA.

For physical loss, no mens rea is required .....

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(5) TMI 191 - SUPREME COURT OF INDIA] followed - Decided partly in favour of appellants. - Appeal No. C/12/2009 & C/26/2009 - FINAL ORDER No.40627-40628/2015 - Dated:- 15-6-2015 - Hon ble Shri R. Periasami, Technical Member ,J. For the Appellant Shri S. Murugappan, Advocate For the Respondent : Ms. Indira Sisupal, AC (AR) ORDER Both the appeals are arising out of a common order-in-original and the same are taken up for hearing for disposal. 2. The appeals are filed against imposition of penalty .....

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e Stones". On inspection of the container, it was noticed that rivet points in the lock handle of the container were tampered with red sanders were seized under mahazar 13807. On detailed investigation and statement recorded from various persons including the appellants T.V. Shanmugam (appellant), P. Bhaskaran, Clearing Clerk of M/s.Sankari Seasky Cargo, Chennai, K.Chandrsekaran, J.Lakshminarayanan, V.Sivasankar, Proprietor of M/s.Win Exports and Shri K. Shanmugam and Shri R.Chitty Raja. De .....

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for absolute confiscation of red sander logs and imposed penalty on R.Chitty Raja, K. Shanmugam, R. Bhaskaran. He also imposed penalty of ₹ 5 lakhs on T.V. Shanmugam, (1st appellant herein), proprietor of M/s.TVS Shanmugam, the CHA and ₹ 5 lakhs on M/s.Sanco Trans Ltd. (2nd appellant) under Section 114 of Customs Act. Aggrieved by the order, only these two appellants have filed appeals. There is no record of any appeals filed by other notices. 4. Heard both sides. 5. Ld. Advocate ap .....

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HA has abetted in any way in smuggling of Red Sanders. The adjudicating authority brought out the facts that the replacement of declared cargo with Red Sanders taken place in transit after the container was sealed by Customs officer enroute to port. He further submits that in the impugned order while imposing penalty under Section 114, no findings were recorded that the CHA had played positive role or he acted guilty with any person in smuggling of red sanders. The only mistake he committed was .....

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ts) Vs Sahaya Edin Prabhu Patriot Freight Logistics Systems reported in 2015 (1) TMI 1032 (Mad.) where, in an identical case of smuggling of red sanders, the Hon'ble High Court has upheld the Tribunal's order dt. 2.11.2007 and set aside the penalty under Section 114 and dismissed the Revenue's appeal. Since the issue is identical, he pleaded for appropriate orders. 6. In respect of the second appellant, M/s.Sanco Trans Ltd.,CFS Chennai, the Ld. Advocate refers to para 35.5 of the ord .....

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r was allowed to be transported to the gateway port for export. They are only a custodian of goods which are brought by the importer or exporter or their agents and they have not played any positive role in the smuggling of red sanders nor they have colluded with anybody in the act of smuggling. Without establishing mens rea no penalty can be imposed on the appellant under Section 114. He relied on the above Hon'ble Madras High Court order dt. 8.1.2015 and pleaded to set aside the order. In .....

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555 (Tri.-Chennai). 7. On the other hand, LD. A.R on behalf of Revenue reiterated the findings of the Commissioner. She refers to para-(5) of the OIO where entire modus operandi has been unearthed in the smuggling of Red Sanders by using exporter's name. The shipping bill was filed fraudulently by using the name of M/s.Win Exports the CHA had authenticated all the documents. The entire operation of filing shipping bills, booking space at CFS, processing the documents, transportation have be .....

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ing of the documents in the fictitious name of exporter with ulterior motive of smuggling of red sanders and adjudicating authority has rightly imposed the penalty under Section 114. He relied on following case laws :- 1) Maheshwari Rocks (I) Pvt. Ltd. Vs CC Chennai 2010 (262) ELT 574 (Tri.-Chennai) 2) CC (Export) Chennai Vs Bansal Industries 2007 (207) ELT 346 (Mad.) 3) P. Bhaskar Naidu Vs CC Chennai 2013 (298) ELT 248 (Tri.-Chennai) 4) Pine Chemical Suppliers Vs Collector of Customs 1993 (67) .....

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urt order related to imposition of penalty on the importer where no mens rea is required. Same is not applicable to the present case. 9. I have heard both sides and examined the records and case laws. 10. The issue in both appeals relates to imposition of penalty both appellants under Section 114 of the Customs Act. The adjudicating authority has imposed a penalty of ₹ 5 lakhs each on the first appellant M/s.T.V.Shanmugam, Proprietor of T.V.Shanmugam, CHA and second appellant M/s.Sanco Tra .....

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llants. 11. RECORD OF FINDINGS & CONCLUSION :- Appeal No.C/12/2009 filed by Shri T.V. Shanmugam In respect of this appellant, the adjudicating authority held that appellant being a CHA he has signed the shipping documents for third party without verifying the genuineness who was not authorized by the exporter to handle the documents. He has not seen the exporter. Instead he has signed shipping documents produced by P.Bhaskaran, a clearing clerk of M/s.Sankari Seasky Cargo. The appellant s ma .....

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red cargo i.e. Natural Slate Stones is concerned. The adjudicating authority has clearly discussed the modus operandi and held that persons who masterminded the entire operation are Shri Chitti Raja and K.Shanmugam in connivance with Bhaskaran. As seen from the impugned order at para 34.1 & 34.2, the only allegation made against appellant was that the CHA signed the shipping documents for the third party CHA. The adjudicating authority also relied CHALR Regulations 2004 for the conduct of th .....

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Freight Logistics Systems reported in 2015 (1) TMI 1032 = 2015-TIOL-212-HC-MAD-CUS on an identical issue of smuggling of red sanders case, upheld this Tribunal s order setting aside penalty on CHA and the Revenue's appeal was rejected. The relevant paragraphs 4 to 7 are reproduced as under:- "4. The main plea of the learned Standing Counsel appearing for the department is that the first respondent, while acting as Customs House Agent, has not verified the authenticity of the documents a .....

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umar for monetary considerations, which paved the way for unauthorized persons access to the customs clearing formalities and enabled unscrupulous persons in facilitating the smuggling of prohibited goods." 6. With regard to the above said finding of the Original Authority, the Tribunal, in the order under challenge, held as under: "4. I find that apart from a vague allegation in para 51 of the impugned order (supra) that the appellant had failed to discharge his functions as a CHA, in .....

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t sustainable. Accordingly, the appeal filed by Shri I.Sahaya Edin Prabhu is allowed." 7. The Tribunal has rendered a categoric finding that there is no finding of a positive role of the first respondent in the attempt to smuggle out red sander wooden logs. Even in the order of the Original Authority, it is held that the custom house agent has not discharged his duty in the normal course of his service. As rightly observed by the Tribunal, for failure to discharge functions as a Custom Hous .....

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ges levelled against the CHA is that he has failed to discharge the functions as a CHA and no other evidences have been brought out by the adjudicating authority to establish the role of the appellant in the attempt of smuggling of red sanders. By respectfully following the Hon ble High Court s decision (supra), I hold that penalty imposed on the appellant under Section 114 of the Customs Act is not sustainable. Impugned order in respect of this appellant is set aside. Accordingly, Appeal No.C/1 .....

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o the gateway port. I find that adjudicating authority dealt the issue in detail in paras 35.1 to 35.6 of impugned order and elaborately discussed the role of CFS as custodian and their obligations. For ease of convenience, para 35.3 of the impugned order is reproduced as under :- "35.3 The position that a custodian of a CFS is responsible for the sale transport of export goods from its premises to Gateway Port is, in fact, supported by M/s.Sanco Trans Limited's own letter No.CFS/325/07 .....

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of Customs, Chennai in this regard from Sanco CFS, Chennai directly to the Port of Chennai, by road. 4. If the custodian furnished documentary evidence to the satisfaction of the Commissioner of Customs. Chennai within one day from the date of dispatch of the settled containers containing export goods from Sanco CFS, Chennai to Port Chennai or within such extended time as the Commissioner of Customs, Chennai may allow that the export goods to be exported through sealed containers have reached th .....

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Trans Limited has undertaken the responsibility of safe transport of export containers from its premises to the Port. Hence, the defense put forward by Mk. Sanco Trans Limited that it is not responsible for the safe transport of the 'export good's merits rejection." 13. It is pertinent to state that the appellant was appointed by the Govt as a Container Freight Station (CFS) in terms of provisions of Customs Act read with public notice issued by the Customs. It is abundantly clear .....

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a 35.3 of the order it is evident that the appellant being CFS and custodian of cargo is responsible for security of cargo and safe transport of the export container from their premises to gateway port. It is established beyond doubt that the sealed containers were tampered in transit and the goods were replaced with Red Sanders before the container reached the gateway port. Their contention that they are not responsible for change of cargo after exit from CFS is not justified and not acceptable .....

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iligently and in a dedicated manner. Prior to the concept of CFS entire operations of cargo clearance were done only at the port itself which is handled by Port Trust Authority appointed under Port Trust Act. Therefore, it is evident from the above discussions that being custodian of the cargo as CFS, the appellant had failed from their primary responsibility entrusted with them for safe transport of the sealed container to the gateway port. Appellant s another contention that penalty cannot be .....

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distinguishable. In this regard, I rely on Hon ble Madras High Court s order in CC Vs Bansal Industries (supra) relied upon by Revenue wherein the Hon ble High Court allowed the Revenue s appeal by relying on Hon ble Supreme Court s decision in the case of Chairman, SEBI Vs Sri Ram Mutual Fund [2006 (5) SCC 361 held that for physical loss, no mens rea is required. The relevant paras 6 to 8 of the Hon'ble High Court's judgement are produced below :- "6. We have gone through the order .....

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deliberately quoting the order of the Tribunal in the following words : .... the Revenue has not shown that appellant had wilfully suppressed the facts and had mis-declared the goods with intention to evade duty and the fact that he had consciously committed the act of misdeclaration... 7.?It is oft-repeatedly held that mens rea is not an essential ingredient for contravention of the provisions of a civil law. The Apex Court recently in Chairman, SEBI v. Shriram Mutual Fund [(2006) 5 SCC 361] he .....

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he levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. 8. Applying the above ratio to the facts of the case, we find that though the Tribunal has recorded a finding of fact that it was the supplier who by mistake loaded tin sheets waste which were not ordered by the assessee, the Tribunal rendered its decision on the basis that the Revenue has not shown that the assessee had wilfully suppressed the facts and had misdeclar .....

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