TMI Blog2022 (3) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... in the names of other importers but it has, knowingly filed Bills of Entry to facilitate this process. Evidently, it is not true as in the statement on 3.4.2017, Shri Vikas Gupta not only indicated that it was aware of the SCN being issued to Anil Aggarwal but also that it was issued for undervaluation. Further, he also explained what followed- that Anil changed the suppliers and also started importing in the name of other firms. Therefore, the appellant s defence that it knew nothing about the SCN issued by DRI to Anil is not supported by the facts. The second line of defence of the appellant was that since the Department knew that the SCN was issued, it had no liability to inform the department - HELD THAT:- It is true that the department need not be told that the SCN was issued. However, what is important is that Anil continued to import in the name of other firms by changing the suppliers also with the full knowledge of the appellant and the appellant continued to clear the goods in these benami transactions which, is nothing but collusion in the benami imports. The third line of defence of the appellant is that as Customs Broker, it earns its bread from trade faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant knowingly, actively, facilitated benami imports and hence is accountable for its actions. Penalty - HELD THAT:- In view of the limitation under section 18 of CBLR, 2013, the penalty of ₹ 50,000/- must be set aside while upholding the revocation of the licence and forfeiture of its security deposit. Learned counsel is correct in his submissions that under Regulation 18 of CBLR, 2013, there can be either revocation and forfeiture of security deposit OR imposition of penalty of up to Rupees fifty thousand. However, we do not agree with his submission that revocation of the appellant s licence must be set aside considering the gravity of the case and also considering that it built its business in a manner that if it fulfils its obligations of reporting violations by its clients to the Customs authorities it will lose its business and, therefore, instead, facilitates such clients. Therefore, we find that in view of the limitation under section 18 of CBLR, 2013, the penalty of ₹ 50,000/- must be set aside while upholding the revocation of the licence and forfeiture of its security deposit. Appeal allowed in part. - CUSTOMS APPEAL NO. 50934 OF 2021 - Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef, are that the appellant had a Customs Broker s licence valid up to 14.11.2027. Officers of Directorate of Revenue Intelligence [ DRI ] received intelligence that certain importers were undervaluing iron screws/self drilling screws/chipboard screws and power tools. Acting upon the intelligence, DRI conducted various searches at the premises of the importers and investigated the matter. One of such importers was Shri Anil Aggarwal, Model Town-I, New Delhi who imported iron screws/self drilling screws/power tools from China and Taiwan in the names of various firms registered in the name of his family members and other persons and had resorted to large under- valuation. DRI officers conducted searches at the residence, office and godown of Shri Anil Aggarwal on 28.03.2017 and gathered evidence of the actual value of the imported goods and detained the imported goods at various places and also recovered large amount of cash. Investigation showed Shri Anil Aggarwal [ Anil ] along with his son Shri Abhimanyu Aggarwal [ Abhimanyu ] had been importing the aforesaid goods from China and Taiwan in the name of M/s International Fasteners, M/s Krishna Overseas and M/s Popular Metal Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Anil who was his regular client. Further imports were also made in the name of Popular by Anil and the appellant had processed those documents as well. During the period December 2014 to February 2015, four consignments of powertools were imported from M/s Jiangsu Dongcheng M E Tools Co. Ltd. by Anil in the name of M/s K.D. Enterprises and M/s S.S. Enterprises and the appellant got the clearances. The actual beneficiary in these imports was Shri Anil Aggarwal only. 5. Another statement was recorded on 3.4.2017 and which Shri Vikas Gupta, partner of the appellant stated that Anil is the importer of powertools, etc. and that he (Vikas Gupta) was aware that a case of undervaluation in import of Patta brand screws in the name of M/s Ramsarup Aggarwal and Sons was booked by DRI in 2015 and thereafter Anil stopped importing screws from M/s Patta International and M/s Boson International and started importing from two new suppliers M/s Kingpoint Enterprises and M/s Target Hardware and in the name of M/s Krishna Overseas, M/s International Fasteners and M/s Popular Metal Industries. Krishna Overseas is owned by Abhimanyu, International Fasteners is owned by Anil and Popular is own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of M/s K.D. Enterprises and one consignment of powertools in the name of M/s S.S. Enterprises. Shri Madan Gopal, proprietor of Popular has, in his statement dated 28.3.2017, indicated that he has no information about the imports in the name of Popular and that he did not know Shri Vikas Gupta of M/s Falcon India. Thus, the appellant had cleared the goods in the name of M/s Popular Metal Industries, M/s K.D. Enterprises and M/s S.S. Enterprises without authorization from the holders of these IECs and thereby failed to comply with Regulation 10(a) of CBLR, 2018 read with (erstwhile Regulation 18(a) of CBLR, 2013) b) As per Regulation 10 (d) of CBLR 2018 (read with erstwhile Regulation 11(d) of CBLR, 2013), the Customs broker shall advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be . Instead of advising the clients to comply with the act and rules, the appellant had, in connivance with Anil facilitated customs clearance of the imported goods with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... role of spy. If the appellant spies for the Department, nobody would come for transactions to the appellant for business. (e) No allegation is made that the appellant has profitted by under valuation or is the party to the transaction. It had only earned its agency charges. (f) Reliance was placed on the order of the Tribunal in the case of Skytrain Services Vs. Commissioner of Customs (Airport General), New Delhi [ 2019 (369) ELT 1739 (Tri.-Del.) ] to assert that the CHA is not an inspector to weigh the genuineness of the transaction; (g) Reliance was placed on the case of M/s KVS Cargo Vs. Commissioner of Customs (General), NCH, New Delhi [ 2019 (365) ELT 392 (Del.) ] to assert that the CHA is not expected to know whether the owner was real or benami. (h) Reliance was placed on Kunal Travels (Cargo) Vs. Commissioner of Customs (I G), IGI Airport, New Delhi [ 2017 (354) ELT 447 (Del.) ] to assert that CHA is not an inspector to weigh the genuineness of the transaction. (i) There is no allegation that the appellant has not obtained the KYC documents or that they were not genuine and the only allegation is that instead of obtaining the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Anil and not directly from the importing firms. In fact, despite knowing that Anil was using IEC of these dummy firms with intent of duty evasion by undervaluing the goods, the appellant had, in collusion with Anil, allowed that to continue and also facilitated such clearances. (iii) Shri Vikas Gupta, Partner of the Appellant firm admitted above facts in his voluntary statement dated 03.04.2017 tendered under Section 108 of the Customs Act 1962. He also admitted in his voluntary statement dated 15.02.2019 that whereabouts of the importers of M/s K. D. Enterprises and S. S. Enterprises were not known, and that Anil had contacted the IEC holders of these two firms and obtained consent to use their IEC for monetary consideration. Shri Gupta admitted his connivance with Anil for the impugned imports. (iv) Appellant has violated provisions of Regulation 10(a), 10 (d), 10(e) and 10(n)of the CBLR, 2018 read with Regulation 11(a), 11 (d), 11e) and 11(n)of the CBLR, 2013 respectively as discussed in Para 47.1.1 to 47.4.2 (refer Pages 50-53 of the Appeal Paper Book) of the Impugned Order. (v) Regulation 14 of the CBLR, 2018 read with Regulation 18 of the CBLR, 2013 env ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) of CBLR 2018 (read with erstwhile Regulation 11(n) of CBLR, 2013)? e) Can the revocation of licence of the appellant under Regulation 14(b) CBLR 2018 (read with Regulation 18(b) of erstwhile CBLR 2013) be sustained? f) Can the forfeiture of the whole amount of security deposit of ₹ 1,10,000/- of the appellant under Regulation 14(b)of CBLR 2018 (read with Regulation 18(b) of the CBLR 2013) be sustained? g) Can the imposition of penalty of ₹ 50,000/- on the appellant under Regulation 18(1) read with Regulation 14(b) of CBLR 2018 (read with erstwhile Regulation 22 read with 18(b) of CBLR 2013) be sustained? 12. The facts of the case are not in dispute. The appellant is a Customs Broker and has been dealing with the imports by Anil and Abhimanyu. They were importing the goods on the IEC issued in the name of the firm M/s. Ram Sarup Agarwal and sons (Shri Ram Sarup Agarwal is the father of Anil ). A case of under-valuation was booked by the DRI and an SCN was issued to them in 2015. Thereafter, they started importing goods in the name of other firms which were not owned by them. They also changed the overseas suppliers. The goods continued to be cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the attention of the department when it was fully aware that after the case was booked by DRI, Anil continued to import goods in the same manner by changing the suppliers and in the names of other importers but it has, knowingly filed Bills of Entry to facilitate this process. 14. The appellant s defence is that it was not a party to the SCN issued by the DRI and so knew nothing about it. Evidently, it is not true as in the statement on 3.4.2017, Shri Vikas Gupta not only indicated that it was aware of the SCN being issued to Anil Aggarwal but also that it was issued for undervaluation. Further, he also explained what followed- that Anil changed the suppliers and also started importing in the name of other firms. Therefore, the appellant s defence that it knew nothing about the SCN issued by DRI to Anil is not supported by the facts. 15. The second line of defence of the appellant was that since the Department knew that the SCN was issued, it had no liability to inform the department. It is true that the department need not be told that the SCN was issued. However, what is important is that Anil continued to import in the name of other firms by changing the suppliers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. The appellant submitted that the CHA is not an inspector to weigh the genuineness of the transaction and relied on the case law of Skytrain Services. We agree. However, in this case, the appellant has knowingly facilitated benami imports and was also fully aware that Anil has been importing in the name of other firms after the DRI booked the case and has not brought it to the notice of the Department. So, it is not a case of the appellant verifying the genuineness of the transaction but is one of facilitating fraudulent transactions and therein lies the difference. Para 12.4 of the Skytrain Services which the appellant relied upon reads as follows: 12.4 It becomes clear from the above provisions and the decision of the Hon ble Apex Court that CHA is not supposed to be a formal agent either of Custom House or of the importer. But the utmost due diligence in ascertaining the correctness of the information related to clearance of cargo is the CHA s duty. He not only is supposed to advise the importer/exporter about the relevant provisions of law and the mandate of true compliance thereof but is also responsible to inform the Department if any violation of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot rely on Kunal Travels to claim that it has a right to knowingly file benami Bills of Entry. 22. The next submission of the appellant is that it had obtained the KYC documents of M/s. Popular Metal Industries and the documents are genuine and it was not required to personally contact the importer. It had done so through Shri Anil Aggarwal. It relies on Perfect Cargo Agency and Trade Wings. We are afraid that these decisions will not come to the aid of the appellant since the appellant knew that the imports were not being made by the IEC holder and that Anil was importing in the name of many firms after a case of undervaluation was booked by DRI against him. Not personally visiting the premises of the importer or contacting him is one thing and knowingly filing Bills of Entry in the name of an IEC holder without his knowledge so as to facilitate another person to import goods benami is another thing. One is a question of how much diligence is the Customs Broker required to exercise and the other is a case of the Customs Broker knowingly facilitating benami transactions. 23. The appellant has also submitted that Customs Brokers Licensing Regulations 2013 shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot do so and submits that it cannot spy for the department. If it cannot fulfill its obligations under the law, it is not entitled to the Customs Brokers licence. Thus, we find that the appellant had violated Regulation 10(d) of CBLR 2018 (read with Regulation 11(d) of CBLR 2013). 26. Regulation 10 (e) of CBLR 2018 (read with erstwhile Regulation 11(e) of CBLR, 2013) requires the Customs Broker to exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage . In this case, there is nothing to show that the appellant had provided any false or incorrect information to its client. Therefore, we find that Regulation 10(e) of CBLR 2018 read with Regulation 11(e) of CBLR 2013 has not been violated in this case. 27. Regulation 10 (n) of CBLR 2018 (read with erstwhile Regulation 11(n) of CBLR, 2013) requires the Customs Broker to verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN),identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Tribunal in Millenium Cargo as follows which decision was upheld by Delhi High Court. 7. The documents filed by CHA are treated with a certain degree of trust by the Customs and such trust was completely violated in the present case. Filing of bill of entry filed in the name of a non-existent importer is a grave offence on the part of CHA and it becomes graver when it turns out that CHA did not make minimum efforts to verify the genuineness of the importer and its address. Such acts of omission and commission on the part of CHA can potentially have even more serious financial/security consequences and therefore such a CHA hardly deserves any leniency. We find that in the case of CC (General) v. Worldwide Cargo Movers - 2010 (253) E.L.T. 190 (Bom.), the Bombay High Court apart from upholding the principle of liability of the CHA for the act of its employees went on to observe as under : 27. We have noted what the Tribunal has observed in the impugned order. In our view, the finding given by the Enquiring Officer and thereafter the order passed by the appellant in original are fully justified on the facts of the case. The authorities relied upon by Mr. Kan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CHA or his employees. The decision is best to be left to the disciplinary authority save in exceptional cases where it is shockingly disproportionate or mala fide. That is not the case here. (emphasis added). The ratios contained in the above reproduced paras (especially in Para 28 thereof) is squarely applicable to the present case. Andhra Pradesh High Court in the case of H.B. Cargo Services [2011 (268) E.L.T. 448 (A.P.)] in Para 16 has also held as under : While great emphasis is placed by Shri C. Kodandaram, learned Senior Counsel appearing on behalf of the respondent, on the previous unblemished record of the CHA, it must be borne in mind that a single act of corruption is sufficient to award the maximum penalty which under the CHALR, is of revocation of the license ( State of Punjab v. Ex-Constable Ram Singh - (1992) A-SCC-54. (emphasis added) 29. In the case of Jasjeet Singh Marwaha, Delhi High Court has held that the CHA can be held responsible for violation of the Customs Act also and not only for violation of CHALR. Relevant paragraph of the judgment is as follows: 6.3 The provisions referred to hereinabove make it clear that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isciplinary authority save in exceptional cases where it is shockingly disproportionate or mala fide . That is not the case here . (emphasis supplied) 31. The judgment of Worldwide Cargo was followed by the Andhra Pradesh High Court in H. B. Cargo Services. The relevant paragraphs of this judgment are as follows. 15. While the punishment imposed on the CHA has to be commensurate with the gravity of the proved acts of misconduct as, on revocation of his license, the CHA would suffer, it must not be lost sight of that, though it is the right of a citizen to carry on his business or profession, it is subject to reasonable restrictions and conditions which, in the present case, are stipulated under the CHALR. [ Worldwide Cargo Movers - 2010 (253) E.L.T. 190]. As noted hereinabove, blank shipping bills were issued by the partner and authorized representative of the respondent-CHA for a consideration of ₹ 150/- per shipping bill. In cases involving corruption there cannot be any punishment lesser than the maximum i.e., revocation of the license. No other lesser punishment can be contemplated in such cases. [ State of T.N . v. K. Guruswamy - (1996) 7 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area, and the trust and confidence reposed on him by the customs department. In an appeal, preferred against an order imposing punishment under the CHALR, the CESTAT should not be swayed by considerations of misplaced sympathy. Interference with the punishment imposed would be justified only when it shocks the conscience of the CESTAT. No indulgence can be shown to persons indulging in acts of corruption. The punishment imposed on the respondent, by the Commissioner of Customs, of revocation of their license, when viewed in the light of the grave and serious acts of misconduct held established, is justified. The punishment imposed is not one which can be said to shock the conscience of courts/Tribunals. The order passed by the CESTAT on mere surmises and conjectures and their interference, with the punishment imposed by the Commissioner, on grounds of misplaced sympathy is in excess of their jurisdiction, and gives rise to a substantial question of law necessitating interference by this Court under Section 130 of the Customs Act. The order of CESTAT is, therefore, set aside, and the order of the Commissioner, revoking the license of the respondent CHA, is affirmed. The appeal is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... client and the Revenue. It is expected to advise the client to follow the laws and if the client is not complying, it is obligated under the Regulations to report to the Assistant Commissioner or Deputy Commissioner. Fulfilling such obligations is a necessary condition for the CB licence and it cannot be termed as spying for the department as argued by the appellant before us. It has also been argued that if it spies for the department, it will lose its business. It is evident from the facts of this case, that the appellant was not only aware of the benami Bills of Entry but has actually filed them with the full knowledge that they were benami and they were filed by Anil after a case has of undervaluation has been booked by DRI against him. It is afraid of losing business because it has built its business model on violators who, it does not want to upset by reporting to the department. Therefore, we find no reason to show any leniency towards the appellant. At any rate, once violation is noticed, it is not for the Tribunal to interfere with the punishment meted out by the disciplinary authority, viz., the Commissioner unless it shocks our conscience. In this case, it does not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facilitates such clients. Therefore, we find that in view of the limitation under section 18 of CBLR, 2013, the penalty of ₹ 50,000/- must be set aside while upholding the revocation of the licence and forfeiture of its security deposit. 36. In view of the above, we find that the revocation of licence of the appellant under Regulation 14(b) CBLR 2018 (read with Regulation 18(b) of erstwhile CBLR 2013), forfeiture of the whole amount of security deposit of ₹ 1,10,000/- of the appellant under Regulation 14(b)of CBLR 2018 (read with Regulation 18(b) of the CBLR 2013) calls for no interference. The penalty of ₹ 50,000/- imposed on the appellant under Regulation 18(1) read with Regulation 14(b) of CBLR 2018 (read with erstwhile Regulation 22 read with 18(b) of CBLR 2013) needs to be set aside in view of the limitation under Regulation 18 of CBLR, 2013. 37. The appeal is partly allowed and impugned order is modified to the extent that the penalty of ₹ 50,000/- imposed on the appellant under Regulation 18(1) read with Regulation 14(b) of CBLR 2018 (read with erstwhile Regulation 22 read with 18(b) of CBLR 2013 is set aside. Rest of the impugned order i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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