2013 (9) TMI 65 - AT - Customs

Mis-use of IE code Confiscation of goods u/s 113(d) & (i) - Smuggling of sanders wood logs under the guise of machinery parts Held that - There was omission on the part as a result of which the container provided by them was misused for the smuggling of red sanders, which was a banned item for export - If somebody else misused their IEC code, the responsibility for the same cannot be passed on to the appellants relied upon PRAKASH FREIGHT MOVERS LTD. Versus COMMISSIONER OF CUS., CHENNAI (2009 (10) TMI 741 - CESTAT CHENNAI) - in the absence of any knowledge about the mis-use of IE code and lack of involvement in facilitating such mis-use, penalty cannot be imposed under section 114 - penalty on the appellant was not sustainable. Penalty on CHA - Penalty u/s 114(i) - Held that - There was no omission and commission on their part so as to attract the provisions of Section 114 (i) - the statute does not envisage monitoring of the import/export transactions on a daily basis and bringing any discrepancy to the notice of the Customs authorities - in the absence of any evidence establishing the involvement of the appellant in the smuggling of red sander wood logs it can be invoked only when any person, who in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation u/s 113 or abets the doing or omission of such an act - There was no such allegation against the appellant either in the show cause notice or in the order. - There was only an omission on their part in ascertaining the genuineness of the transaction and obtaining proper authorization. - Penalty reduced from Rs. 130 lakhs to 1 lakh. Penalty on freigh forwards - Held that - the negligence on their part is very evident. They undertook the transaction on the basis of e-mail received from Shri Manoj Vichare of M/s. Sara logistics. The did not verify whether M/s. Sara Logistics existed at all. Being a freight forwarder, they are expected to know the existence or otherwise of M/s. Sara Logistics, which is also in the same business. However, the fact is that M/s Sara Logistics did not exist at all. They were not vigilant about the probable misuse of the container and the seal provided by them by unscrupulous elements. - Penalty reduced from Rs. 130 lakhs to 1 lakh.

Summary

Issues Involved:
1. Involvement and liability of M/s. Marvelous Engineers Pvt. Ltd. in the smuggling of red sanders wood logs.
2. Responsibility and penalty on the Customs House Agent (CHA), Shri Sanjay Rana, and his employee, Shri P.B. Gupta.
3. Negligence and penalty on the freight forwarder, M/s. Sungrace Logistics Pvt. Ltd., and its Director, Shri. Dattatray B. Suryawanshi.

Issue-wise Detailed Analysis:

1. Involvement and liability of M/s. Marvelous Engineers Pvt. Ltd. in the smuggling of red sanders wood logs:
The investigation revealed that the IEC code of M/s. Marvelous Engineers Pvt. Ltd. was misused by Shri Manoj Vichare to file shipping bills for smuggling red sanders wood logs under the guise of machinery parts. The Managing Director of M/s. Marvelous Engineers Pvt. Ltd. denied any involvement or knowledge of the misuse. The Tribunal noted that the misuse was unknown to them until informed by the customs authorities. The Public Notice No. 10/2010 issued on 03/02/2010, which required exporters to report discrepancies, was not applicable to the transactions prior to its issuance. The Tribunal concluded that there was no omission or commission on the part of M/s. Marvelous Engineers Pvt. Ltd. that would attract the provisions of Section 114 of the Customs Act. Therefore, the penalty imposed on M/s. Marvelous Engineers Pvt. Ltd. was set aside as unsustainable in law.

2. Responsibility and penalty on the Customs House Agent (CHA), Shri Sanjay Rana, and his employee, Shri P.B. Gupta:
The CHA, Shri Sanjay Rana, and his employee, Shri P.B. Gupta, were found negligent in verifying the authenticity of the exporter and the transaction. They filed shipping bills based on documents provided by M/s. Sungrace Logistics without obtaining proper authorization from M/s. Marvelous Engineers Pvt. Ltd. The Tribunal emphasized the CHA's responsibility to ensure proper authorization and verify the genuineness of the transaction. Although the CHA firm did not have active involvement in the smuggling, their omission in verifying the transaction led to the imposition of a penalty. The Tribunal reduced the penalty on the CHA firm from Rs. 1.30 Crore to Rs. 1 lakh, considering the nature of the offence. The penalty on Shri P.B. Gupta was set aside as Shri Sanjay Rana had owned up the responsibility.

3. Negligence and penalty on the freight forwarder, M/s. Sungrace Logistics Pvt. Ltd., and its Director, Shri. Dattatray B. Suryawanshi:
M/s. Sungrace Logistics Pvt. Ltd. and its Director were found negligent in undertaking transactions based on e-mails from M/s. Sara Logistics without verifying their existence. They provided containers and seals to a non-existent firm, which facilitated the smuggling of red sanders. The Tribunal noted their omission in verifying the authenticity of M/s. Sara Logistics and the transactions. Although there was no evidence of their active involvement in the smuggling, their negligence warranted a penalty. The Tribunal reduced the penalty on M/s. Sungrace Logistics Pvt. Ltd. from Rs. 1.30 Crore to Rs. 1 lakh, considering the lack of deliberate involvement. The penalty on Shri. Dattatray B. Suryawanshi was set aside.

Conclusion:
The Tribunal set aside the penalties imposed on M/s. Marvelous Engineers Pvt. Ltd. as unsustainable. The penalty on the CHA, M/s. Sanjay Rana, was reduced to Rs. 1 lakh, and the penalty on Shri P.B. Gupta was set aside. The penalty on M/s. Sungrace Logistics Pvt. Ltd. was reduced to Rs. 1 lakh, and the penalty on Shri. Dattatray B. Suryawanshi was set aside. The appeals were disposed of in these terms, and the stay applications were also disposed of.