2017 (12) TMI 104 - AT - Customs

Penalty on CFS - smuggling of prohibited goods - red sanders - outsource of function without the permission of the Commissioner of Customs, Tuticorin - Held that - the appellant who is a CFS Agent has to obtain written permission from the Commissioner of Customs to outsource any of the functions entrusted upon him. Undisputedly, the appellant has not obtained any such permission even though they have outsourced the responsibility of transport of the stuffed container from their CFS area to Tuticorin Port - Being the custodian of the goods, the appellant cannot wriggle out of the responsibility by saying that they had outsourced only to licenced Customs Broker and that it was not outsourced to any unknown person. The standing order is issued by the Commissioner basing on Regulations which are already in existence. Being a service provider, for export of goods, and the offence involved being smuggling of prohibited goods, the penalty is upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Violation of Regulations by the appellant in outsourcing transport operations.
2. Imposition of penalty by the original authority.
3. Applicability of standing order regarding smuggling incidents.

Analysis:
1. The case revolves around the appellant, an approved Customs Cargo Service Provider, who stuffed cotton tufted floor mats in a container for export. However, the container was later found to be tampered with red sanders, a prohibited item. The Customs alleged that the appellant violated Regulation 6(1)(k) of HCCAR, 2009 by outsourcing transport without permission, facilitating smuggling. A Show Cause Notice was issued, leading to a penalty of ?50,000 by the original authority. The appellant contended that they outsourced to a licensed Customs Broker, not an unknown party, thus complying with regulations. However, the Tribunal upheld the penalty, emphasizing the custodian's responsibility and the lack of permission from the Commissioner for outsourcing.

2. The appellant argued that there was no violation as the transport function was outsourced to a licensed Customs Broker, authorized by the department. They cited a standing order issued post the incident, requiring permission for outsourcing, but the export predated this order. The Tribunal reiterated Regulation 6(2) of HCCAR, 2009, emphasizing the need for written permission to outsource functions. Despite the appellant's contentions, the Tribunal held that the penalty was justified due to the service provider's responsibility and the smuggling offense involved, dismissing the appeal.

3. The Tribunal highlighted the appellant's failure to obtain written permission for outsourcing, regardless of outsourcing to a licensed entity. The argument that the standing order postdates the incident was rejected, emphasizing that regulations predated the order. Considering the nature of the offense and the appellant's responsibilities as a service provider, the Tribunal found no grounds to interfere with the penalty imposed. The appeal was deemed meritless and dismissed, upholding the penalty and emphasizing compliance with regulations to prevent unauthorized activities.