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TMI Blog2023 (11) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... c intelligence was developed by Directorate of Revenue Intelligence (DRI), Mumbai Zonal Unit (MZU), Mumbai regarding under-valuation of goods in import of furniture, lighting fixtures, wood treatment chemicals, resins, varnishes, lacquers etc., by two persons through mis-use of various Import-Export Codes (IECs) by taking these on lease/rent from the IEC holders illegally for the purpose of duty evasion. The said intelligence developed by DRI indicated that Shri Purav Mehta, Partner of M/s Shreeji Trading Co. & M/s Shreeji Lighting LLP and Shri Pratik Mehta, Partner of M/s Clear and Opaque were involved in under valuation of imported goods by using dummy IEC importers to avoid duty evasion and by operating behind the scene, they were supplying all documents such as invoices of overseas supplier, packing list, bill of lading and obtaining the goods through their own transport/logistics company with the assistance of Shri Lalit Mange, Director of appellants CB. The total duty evasion by this modus operandi was estimated by DRI to be around Rs.11 crore. A preliminary offence report of DRI, MZU was received by the Principal Commissioner (General), Mumbai on 13.06.2011 vide DRI's Letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or forfeiture of entire amount of security deposit. Feeling aggrieved with the impugned order, the appellants have preferred this appeal before the Tribunal. 3.1. Learned Advocate for the appellants contends that each of the allegations of violation Regulations 11(a), 11(d), 11(e), 11(m) and 11(n) of CBLR, 2013 have been countered by them. In respect of Regulation 11(a), learned Advocate stated that the appellants had obtained the required authorization from the IEC holders for the purpose of clearance of goods and these along with all documents for import were received through S/Shri Purav Mehta and Pratik Mehta, since it is these two persons who had introduced these IEC holders to the appellants; payment for various services provided by the appellants were received through banking channels and these were also submitted to Customs during investigation. Thus, learned Advocate pleaded that the appellants have not violated the provisions of Regulation 11(a) ibid. In support of the same they relied on the decision of the Hon'ble High Court of Kerala in R.Mohandas Vs. Commissioner of Customs, Cochin 2016 (336) E.L.T. 399 (Ker.). In respect of Regulation 11(d), 11(e) ibid, they claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir submission on merits, they stated that on the ground of non-adherence with the time limits, the impugned order is liable to be set aside. In support of the same they relied on the judgement of the Hon'ble Supreme Court in Baidynath Ayurved bhavan Ltd. Vs. Collector of Central Excise, Allahabad 2004 (165) E.L.T. 494 (S.C). In view of the above, they requested that impugned order be set aside and consequential relief be granted to them. 4. Learned Authorised Representative (AR) reiterated the findings made by the Principal Commissioner of Customs (General) in the impugned order and submitted that each of the violation under sub-regulations (a), (d), (e), (m) and (n) of Regulation 11 ibid, has been examined in detail by the Principal Commissioner. The appellants CB got all the documents for import from S/Shri Purav Mehta and Pratik Mehta who are neither IEC holders nor importers or their representative; they never verified the authenticity of KYC documents; had they cross checked or had they conducted verification at their level, then they could have easily made out that the IEC holders are not the actual importer of the goods. Rather, the appellants were helping the proxy import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, the Tribunal in its order dated 08.07.2015 had granted liberty to the Customs Authority to continue inquiry proceedings as envisaged under CBLR, 2013. Thus, we are of the considered view that sufficient and reasonable opportunity was given to the appellants before passing an order, in respect of charges framed against them and there is no infirmity of the impugned order in not following the principles of natural justice in this regard. 6.2 We find that the Regulation 11 of CBLR, 2013, provide for the obligations that a Customs Broker is expected to be fulfilled during their transaction with Customs in connection with import and export of goods. These are as follows: "Regulation 11. Obligations of Customs Broker: - A Customs Broker shall - (a) obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be; ... (d) advise his client to comply with the provisions of the Act and in case of non-compliance, shall bring the matter to the notice of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enced from the statement dated 18.03.2013 given by Shri Lalit Mange, Director of appellants CB that the documents relating to imported goods in respect of M/s Niti Traders and M/s Reds & Blues have been sent by S/Shri Purav Mehta and Pratik Mehta and that the imported goods were directly sent to them instead of being handed over to the IEC holders; that he had also admitted that he knew the fact that Shri Purav Mehta is the actual owner and importer of goods imported in the name of M/s Niti Traders, while Shri Pratik Mehta is the real owner and importer of the goods imported in the name of M/s Reds & Blues. However, as per the DRI report, searches were carried out at the premises of M/s Shreeji Trading Co., M/s Clear & Opaque and residential premises of S/Shri Purav Mehta and Pratik Mehta which had led to the recovery of incriminating documents such as parallel set of invoices and telegraphic transfer of remittances, indicating undervaluation of imported goods. Further, in the various B/Es filed by the appellants on behalf of various importers, the proper description of the imported goods and its value has been indicated as per the documents given to them by the importers. It is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter identified by DRI. It is also on record that the values declared by the importer were further loaded for enhancing the assessable value for the purpose of customs duty. For eg., In B/E No. 9170404 dated 03.01.2013 for import of 38 items of furniture by M/s Niti Traders, the value had been enhanced by 520%. It is only on the basis of DRI, MZU investigation that the whole case of S/Shri Purav Mehta and Pratik Mehta, misusing the IECs and fabricating parallel invoices for under valuation of imported goods were brought to the fore. We find that these facts clearly brings out the role of S/Shri Purav Mehta and Pratik Mehta who were the master mind behind the violations under the Customs Act, 1962 along with the IEC holders/importers and other connected persons involved in the case, including the appellants Customs Broker. The action taken under CBLR, 2013 against the appellants CB is a follow up/ further action taken consequent to the customs offence case made out by DRI, MZU, and thus the present proceedings are only for the violations under the specific sub-regulations under CBLR, 2013. It is not the case of the Revenue that the description of the imported goods or classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf:......" "Rule 11. Declaration by the importer . - (1) The importer or his agent shall furnish - (a) a declaration disclosing full and accurate details relating to the value of imported goods; and (b) any other statement, information or document including an invoice of the manufacturer or producer of the imported goods where the goods are imported from or through a person other than the manufacturer or producer, as considered necessary by the proper officer for determination of the value of imported goods under these rules. (2) Nothing contained in these rules shall be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds: Provided that in applying the values used for comparison, due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of rule 10 and cost incurred by the seller in sales in which he and the buyer are not related; (c) substitute values shall not be established under the provisions of clause (b) of this sub-rule. (4) if the value cannot be determined under the provisions of sub-rule (1), the value shall be determined by proceeding sequentially through rule 4 to 9." 8.2. From the above, we find that the appellants CB has declared the value of imported goods as given in the commercial invoices, which is the transaction value. Further, submitting the declaration form (GATT valuation declaration) in terms of Rule 11 above, is primarily the responsibility of the importer and in case of proper authorization being given by them, then by the agent of the importer. In the present case, it is not in dispute that there was any such mis-declaration in the GATT value declaration form or in the value particulars declared in the bill of entry as compared to the commercial invoice. Further, any exercise in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, in the impugned order with respect to Regulation 11(e) ibid, is not sustainable. 10.1. In the inquiry proceedings, as the appellants had involved in import of goods which were under valued on the basis of fabricated and manipulated invoices and the declaration with respect to values in the B/Es being incorrect leading to short payment of duty on account of undervaluation, it was concluded by the Principal Commissioner of Customs (General) that such omission and commission of such action by the appellants is indicative of rank inefficiency in the discharge of their duties as Customs Broker and therefore they have violated Regulation 11(m) ibid. 10.2. From the plain reading of the requirements under Regulation 11(m) ibid, it is clear that there should be some grounds of inefficiency or unavoidable delay in clearance of the imported goods. We find neither, is there is any such claim of undue delay nor any demonstration of inefficiency in clearance of goods by the appellants. Thus, we do not find any merits on the grounds and the conclusion arrived on this point by the Principal Commissioner of Customs (General) in the impugned order. Thus, the conclusion that the appellants ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent, authentic documents, data or information. In this regard, a detailed guideline on the list of documents to be verified and obtained from the client/customer is enclosed in the Annexure. It would also be obligatory for the client/customer to furnish to the CHA, a photograph of himself/herself in the case of an individual and those of the authorised signatory in respect of other forms of organizations such as company/trusts etc., and any two of the listed documents in the annexure. No Form of organisation Features to be verified Documents to be obtained 1 Individual (i) Legal name and any other names used (ii) Present and Permanent address, in full, complete and correct. (i) Passport (ii) PAN card (iii) Voter's Identity card (iv) Driving licence (v) Bank account statement (vi) Ration card Note : Any two of the documents listed above, which provides client/customer information to the satisfaction of the CHA will suffice." We find that the above CBIC circular clearly explains the provision of CBLR/CHA Regulations which require the Customs Brokers to verify the antecedents, correctness of Import Export Court (IEC) Number, identity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation 10(n) of the Licensing Regulations." 11.4. Further, we also find that the Hon'ble High Court of Delhi has held in the case of Kunal Travels (Cargo) Vs. Principal Commissioner of Customs (I&G), IGI Airport, New Delhi reported in 2017 (354) E.L.T. 447 (Del.), the appellants CB is not an officer of Customs who would have an expertise to identify over valuation or under valuation of goods. The relevant portion of the said judgement is extracted below: "The CHA is not an inspector to weigh the genuineness of the transaction. It is a processing agent of documents with respect to clearance of goods through customs house and in that process only such authorized personnel of the CHA can enter the customs house area....... It would be far too onerous to expect the CHA to inquire into and verify the genuineness of the IE Code given to it by a client for each import/export transaction. When such code is mentioned, there is a presumption that an appropriate background check in this regard i.e. KYC etc. would have been done by the customs authorities." 11.5. From the above, we also find that the above orders of the Tribunal and higher judicial forum are in support of our consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gulation, the Revenue enumerates the reasons and attributes them to an officer dealing with it and also accounts for every stage at which the delay occurs. Every endeavour should be made to adhere to the time schedule but in exceptional circumstances, which are beyond the control of the revenue if the time schedule is not adhered to, an accountability be fastened on the Revenue, to cite reasons why the time schedule was not adhered to, and then leave the decision to the adjudicating authority to examine whether the explanation offered is reasonable or reflects casual attitude on behalf of the Revenue. This is the only way how the Regulation can be made effective and worthy of its existence so as to safeguard the interest of the Customs house agent, who is in a position of the delinquent and faces an inquiry somehow similar to an inquiry in disciplinary proceedings on one hand and the revenue in the capacity of the administration on the other hand. 15. In view of the aforesaid discussion, the time limit contained in Regulation 20 cannot be construed to be mandatory and is held to be directory. As it is already observed above that though the time line framed in the Regulation need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the license. If the entire process of suspension proceedings is unduly delayed, then the very purpose of prescribing specific time limits in relation to conduct of inquiry proceedings is nullified and to such extent the actions of the authorities is not really sanctioned by law. We also find that the Customs broker has already suffered a lot, as they were out of his normal business for almost 5 years and 9 months from the date of the Impugned order. It is also noted that the livelihood of Customs broker and the employees is dependent upon the functioning of Customs broker's business. The punishment suffered by being out of Customs broker's business for long period of 7 years and 3 months in total is more than sufficient to mitigate the case of violations or contraventions of CBLR, 2013. 13.1. From the records of the case, we find that there is definitely delay in adjudication and that for the import transactions for which the offence was detected in 2011, the order of revocation of appellant's CB license has been passed on 27.02.2018. Revenue is unable to explain why there was such a long delay in taking action against appellants, when the information about under valuation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The conclusion of the Principal Commissioner of Customs (General) in respect of sub-regulation 11(a) ibid is on the basis of the statement dated 18.03.2013 given by Shri Lalit Mange, Director of appellants CB firm, wherein he has stated that they had obtained all the documents in respect of imports through S/Shri Purav Mehta and Pratik Mehta and has only dealt with them. Further, he was aware that these two were the real owners importing the goods using the IECs of respective IEC holders by taking the commercial entity for lease/ rent. Thus, on this basis the inquiry proceedings had held that the authorization is null and void, thereby violating the obligation under sub-regulation 11(a) ibid. It is also on record in the statement given during investigation by Shri Obaidur Rehman Shaikh, IEC holder of M/s Reds & Blues, where he had stated that he had let out his IEC to Shri Pratik Mehta, Partner of M/s Clear & Opaque, for monetary benefits; similarly, Shri Umesh Jayantilal Ghelani, IEC holder of M/s Niti Traders, had also given the statement that he had lent his IEC to Shri Purav Mehta, Partner of M/s Shreeji Trading Company, from June. 2012 for import of furniture for monetary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence is warranted for such a violation. In our view, the punishment should be commensurate with the gravity of the offence. Revocation is an extreme step and a harsh punishment, which is not warranted for violation of Regulation 13(b). Accordingly, we are of the view that forfeiture of security tendered by the appellant CHA is sufficient punishment and revocation is not warranted. Accordingly, we set aside the order of the revocation and direct the Principal Commissioner of Customs (General) to restore the CHA licence subject to the forfeiture of entire security amount tendered by the CHA." We also find that the Directorate General of Foreign Trade (DGFT), in its Policy Circular No.6 (RE-2013)/ 2009-2014 dated 16.09.2013 had clarified in the context of some of the importers/exporters who were effecting imports/exports by using IECs issued to others, which is a complete violation of the provisions of Foreign Trade Policy, by clarifying that use of IEC by the person other than IEC holder himself is a violation of Section 7 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR) and Rule 12 of Foreign Trade (Regulation) Rules, 1993. Accordingly, it was specifically stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A the punishment listed in the Regulations....." We approve the aforesaid observations of the CEGAT, West Zonal Bench, Mumbai and unhesitatingly hold that this misconduct has to be seriously viewed." 14.4 In view of the above discussions and on the basis of the judgement of the Hon'ble Supreme Court in the case of K.M.Ganatra (supra), we find that the appellants could have been proactive in fulfilling their obligation as Customs Broker for exercising due diligence, particularly when the import documents were obtained from the importers through an intermediary in ensuring that all documents relating to imports are genuine, the KYC documents given by the importer are also genuine and that these are not fake or fabricated. Thus, to this extent we find that the appellants CB are found to have not complied with the requirement of sub-regulation 11(a) and thus forfeiture of security deposit for failure in not being proactive for fulfilling of regulation 11(a) of CBLR, 2013 alone, is appropriate and justifiable. 15. In view of the foregoing discussions, we do not find any merits in the impugned order passed by the learned Principal Commissioner of Customs (General), Mumbai in revoki ..... X X X X Extracts X X X X X X X X Extracts X X X X
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