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M/s. Bhavani Shipping Services (I) Pvt. Ltd., M/s. Seaport Lines (I) Pvt. Ltd., M/s. SEC Serviced Ltd. Versus The Commissioner of Customs, Tuticorin

2018 (1) TMI 499 - CESTAT CHENNAI

Penalty u/s 114 (1) and Section 117 of the CA, 1962 - smuggling - red saner logs - prohibited goods - Held that: - the appellant has violated the provisions of Section 114 (1) of the Act as they omitted to take due care for transit of the declared cargo - taking note of the fact that there is no allegation of direct involvement of the appellants in the offence, the penalty of Rs. Two lakhs imposed is on the higher side and requires to be reduced - the penalty imposed on M/s. SEC Services Ltd., r .....

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Lines (India) Pvt. Ltd. - In Scope Amra Logistics (I) Pvt. Ltd. Vs. CCE [2015 (6) TMI 652 - CESTAT MUMBAI] it was held that in view of the role of the companies, the lapse is only confined to the non compliance of KYC and not involvement in the smuggling of Red Sanders. In view of this facts, I am of the view that the quantum of penalty on the Appellant companies are very higher side and the Appellant companies deserve reduction in the penalty imposed under Section 114(i) - penalties imposed on .....

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(AR) for the Respondent ORDER The appellants are aggrieved by the penalties imposed under Section 114 (1) and Section 117 of the Customs Act, 1962. 2. The brief facts are that on 02.03.2015, on information received to the effect that red sander logs, a prohibited item for export out of India, had been stuffed inside a container for smuggling out of India, the officers of Special Intelligence and Investigation Branch (SIIB), Thoothukudi identified one container and intercepted the same. On invest .....

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sanders had left for Jebel Ali Port, UAE. The same was recalled and examined. The customs seal affixed was found in tact. On opening the container it was found that the same was stuffed with red sander logs valued at ₹ 1.81 Crores. The shipping bill dated 21.02.2015 was filed by M/s. Sam Impex, Coimbatore, through their customs broker M/s. Pierce Leslie Agencies Ltd., Tuticorin, for export of cotton tufted floor mats, UAE. Statements were obtained by SIIB and as a result of investigation S .....

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missioner (Appeals) upheld the same. The appellants are thus before the Tribunal. 3.1 On behalf of M/s. Bhavani Shipping Services (I) Pvt. Ltd., the Ld. Counsel Shri J. Janakiramman, submitted that they were only shipping liners who had provided the container. The department does not have a case that the appellant is directly involved in the offence. The allegation raised against them is that they failed to obtain the KYC details of the exporter and thus violated Regulations 6 (1) (k) of HCCAR, .....

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he KYC details of M/s. Seaport Liners. The authorities below have imposed penalty for the reason that the appellants had rented the container without verifying the KYC norms of the client. The client to the appellant being M/s. Seaport Lines, and the appellant having obtained the KYC details of M/s. Seaport Lines, there is no violation of any provisions of law on the part of the appellant. The penalty imposed as well as confiscation of the container is unjustified. He adverted to Section 113 and .....

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smuggled goods. He relied upon the following decisions:- 1. Freight connection India Pvt. Ltd. Vs. CC (Exp.) 2016 (333) ELT 375 (Tri.-Mum.) 2. Skyline Shipping & Logistics Vs. CC, Chen. 2010 (262) ELT 985 (Tri.-Chen.) 3.2 On behalf of M/s. Seaport Lines (I) Pvt. Ltd. and M/s. SEC services Ltd., the Ld. Counsel, Shri Derrick Sam appeared and argued the matter. In respect of M/s. SEC Services Ltd., the Ld. Counsel fairly concedes that in the appeal filed by them against the proceedings initiat .....

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ustoms Act. 3.3 In respect of M/s. Seaport Lines (I) Pvt. Ltd., he submitted that there is no allegation or finding that the appellants have played any positive role in the smuggling of red sanders. The only allegation is that they failed to obtain KYC details from the client. The appellant had booked the container on commission basis and therefore it was not possible to get the KYC details of the exporter directly. However, the appellants had verified the KYC details of the exporter from the tr .....

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ngs in the impugned order. As per Regulations 6 (1) k of HCCAR Rules 2009, it is mandatory to obtain the KYC details of the clients. M/s. SEC Services Ltd., being CFS gents are responsible for secure transit of goods from the customs area to any other customs area in accordance with the permission granted by the DC/AC. The appellant had out sourced the function of the transit of the container upto the Port to a customs broker without obtaining permission from the Commissioner as mandated in the .....

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ed that none of them had obtained the KYC details of the exporter. The failure to do so resulted in the commission of the offence. 5. Heard both sides. 6.1 The adjudicating authority has imposed penalty of Rs. Two lakhs under Section 114 (1) read with Section 117 on M/s. SEC Services Ltd., who is the CFS Agent. This Tribunal vide the above cited Final Order held that there is violation of Regulations of HCCAR 2009, on the part of this appellant as they had out sourced the function to transport t .....

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f the appellants in the offence, I am of the view that the penalty of Rs. Two lakhs imposed is on the higher side and requires to be reduced. I therefore reduce the penalty imposed on M/s. SEC Services Ltd., to ₹ 50,000/- 6.2. The adjudicating authority has imposed a penalty of Rs. One lakh on M/s. Bhavani Shipping Services (I) Pvt. Ltd., and M/s. Seaport Lines. The allegation is that they did not obtain KYC details of the client. The Regulations require to obtain KYC of the client. M/s. B .....

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ith the exporter. The Tribunal in similar set of facts have discussed in detail the scope for imposing penalty. In Scope Amra Logistics (I) Pvt. Ltd. Vs. CCE 2015 (324) ELT 724, the Tribunal has observed as under:- 5. In view of the facts of the present case, it is clear that the appellants, were not involved in the smuggling of Red Sanders for the reason that the containers were stuffed and sealed with Corrugated Boxes at ICD, Waluj under the physical supervision of the Customs officers, therea .....

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with the KYC norms of the person Shri Rohit Mahadik who placed order for container. The said public notice clearly instructs the container lines, shipping line, freight forwarders, agents, sub-agents, etc., to follow the Know Your Customer (KYC) norms of the exporter/person seeking the container for stuffing of export cargo. The sole objective of the circular is to avoid smuggling of prohibited goods, especially Red Sanders. Therefore, by not following the KYC norms by the appellants, they made .....

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employees are not warranted. As regard penalties on the appellant companies, I find that in view of the role of the companies, the lapse is only confined to the non-compliance of KYC and not involvement in the smuggling of Red Sanders. In view of this facts, I am of the view that the quantum of penalty on the appellant companies are very higher side and the appellant companies deserve reduction in the penalty imposed under Section 114(i). As regard the judgments relied upon by the ld. Counsel, I .....

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e Revenue is based on assumption and presumption as neither the main accused nor the exporter/owners of the goods have been found and brought to adjudication and in the absence of examination of the main exporter, and further in absence of the purported prohibited goods not found and or confiscated, I hold that no case is made out for imposition of penalty against the appellant. Accordingly, the impugned order to extent imposition of penalty on the present appellant is set aside. Thus, the appea .....

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