2016 (9) TMI 272 - AT - Customs

Imposition of penalty - Section 114(iii) of Customs Act, 1962 CHA authorization drawback mis-decaration - Indian Woolens Floor Covering Carpet having drawback rate @ 13.30% of the FOB - Durries made of wool and jute having drawback rate @ 9.80% of the FOB Held that - CHALR has put obligations on the CHA to follow certain procedure laid down in the regulation, which was purposely made to avoid any fraud in the customs clearances. Appellant CHA was not having any fraudulent intention and he was also not supposed to know the content of consignment. But, appellant CHA failed to follow the procedure laid down in CHALR, and did not obtain authorization, for which he was punishable - appellant CHA not involved in the fraudulent availment of drawback by the exporting firm and deserve some leniency penalty amount reduced decided partly in favor of appellant.

Summary

Issues:
- Penalty imposed under Section 114(iii) of Customs Act, 1962 for aiding and abetting fraudulent claim of drawback.
- Whether the appellant CHA is responsible for mis-declaration by the exporter and non-observance of CHA regulations.

Analysis:
1. Issue 1 - Penalty under Section 114(iii) of Customs Act, 1962:
The appeal was filed against the penalty imposed on the appellant CHA under Section 114(iii) of the Customs Act, 1962. The penalty was upheld by the Commissioner(Appeals) based on the mis-declaration of goods in the shipping bill, leading to a fraudulent claim of drawback. The appellant CHA was accused of aiding and abetting in this fraudulent activity. The penalty was initially set at ?1 lac by the adjudicating authority.

2. Issue 2 - Responsibility of CHA for mis-declaration and non-observance of regulations:
The appellant's counsel argued that the appellant CHA should not be held responsible for the mis-declaration by the exporter, as the CHA generally acts based on documents and may not know the actual content of the packages. The counsel cited various judgments to support this argument. However, the Assistant Commissioner(A.R.) for the Revenue reiterated the findings of the impugned order.

3. Judgment:
After considering both sides' submissions and the facts of the case, the Member (Judicial) found that the appellant CHA was not directly involved in aiding and abetting the fraudulent claim of drawback. While the CHA is not expected to physically verify goods, they are obligated to follow certain procedures to prevent fraud in customs clearances. In this case, the CHA did not obtain authorization from the exporter firm and dealt with an unauthorized person for customs clearance. This non-observance of CHA regulations led to an attempt at fraudulent drawback claim by the exporting firm. The Member (Judicial) acknowledged that there was no established mens rea or malafide intention on the part of the CHA but held them guilty for violating regulations. The penalty was reduced from ?1 lac to ?30,000, considering that the CHA was not directly involved in the fraudulent activity.

4. Conclusion:
The appeal was partly allowed, and the penalty imposed on the appellant CHA was reduced from ?1 lac to ?30,000. The judgment was pronounced in court on 10/8/16 by Mr. Ramesh Nair, Member (Judicial) of the Appellate Tribunal CESTAT Mumbai.