2017 (6) TMI 697 - AT - Customs

Revocation of CHA licence - forfeiture of security deposit - penalty - manufacturer/exporter was fraudulently misusing the DEPB benefit scheme by declaring export goods as OMEPRAZOLE - case of respondent is that he has not handed over the documents to unauthorized persons to conduct business at customs. The documents were taken away from their office and handed over to unauthorized persons with the help of one staff - Held that - The records reveal that the signed documents which were kept by the respondent for use in emergency while he was out of station was taken unauthorisedly by Muninathan and handed over to M/s. Shri Bhabha Shipping Services for his own gain. There is no evidence in the present case to show that the respondent / CHA had received any monetary gain. Apart from the allegation that he had kept signed shipping bills which was unauthorisedly taken away by the employee and misused by him. There is nothing brought out by the department implicating the CHA on the allegations raised in the SCN. Shri Muninathan himself has admitted that he has done such acts without the knowledge of the respondent and also in his absence. In such circumstance, respondent cannot be held to be liable for violation of Regulations under CHALR, 2004. The allegations concerning failure to comply with the obligation under Regulations of CHALR, 2004 cannot be visited with the consequence of revocation of license and imposition of penalty. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Allegations of misuse of DEPB benefit scheme by declaring export goods falsely.
2. Issuance of show cause notice to cancel license and forfeit security deposit.
3. Compliance with regulations under CHALR, 2004 by the Custom House Agent (CHA).
4. Appeal by the department against the dropping of proceedings by the Commissioner of Customs.

Detailed Analysis:
1. The case involved allegations of fraudulent misuse of the DEPB benefit scheme by declaring export goods as OMEPRAZOLE, while they actually contained ordinary starch powder. The respondent, a holder of a CHA license, was accused of filing shipping bills for the export of OMEPRAZOLE on behalf of the exporter M/s. Pearl Pharma, Hyderabad, without proper verification of the goods being exported.

2. A show cause notice was issued to the respondent, questioning the compliance with obligations under the CHALR, 2004, and proposing the cancellation of the license and forfeiture of the security deposit. The respondent defended by claiming that the unauthorized handling of documents was done by an employee without their knowledge, leading to immediate action upon discovery of the issue.

3. After adjudication, the Commissioner of Customs dropped the proceedings against the respondent on the grounds that the allegations were not sustained, except for a failure to exercise proper supervision over employees, which led to a violation of Regulation 19(b) of the CHALR, 2004. Despite upholding this charge, no penalty was imposed, considering the mitigating factors and the CHA's unblemished past record.

4. The department appealed the decision, arguing that the respondent had failed to comply with various regulations under the CHALR, 2004, and should be held responsible for the actions of their employee. The department contended that the respondent's lack of direct supervision over customs clearance activities and unauthorized handling of documents by employees constituted violations of the regulations.

5. The Tribunal upheld the Commissioner's decision, emphasizing that the respondent had taken necessary actions upon discovering the unauthorized actions of the employee, including lodging a complaint with the police and removing the employee from service. The Tribunal found no evidence implicating the CHA in the fraudulent activities and considered the steps taken by the respondent as indicative of innocence. The appeal by the department was dismissed, affirming the Commissioner's order.