2018 (1) TMI 437 - AT - Customs

Fraudulent drawback - fake bank realization statements (BRCs) - Held that - the appellants were the CHA in respect of the exporters involved in 62 shipping bills wherein the BRCs were found to be fake and the exporters themselves have been found to have obtained IE Codes by giving non-existent addresses. In such circumstances, the needle of suspicion would also ordinarily fall on the CHA as one who had plausibly connived or at least abetted in the fraud. However, from the facts, what emerges is that there is no allegation that the appellants themselves were hand-in-glove with the fraudulent exporters. Appellants had only opened a branch office in Tirupur to cater to the ICD / CFS which were located there. Pre-signed shipping bills or bills of entry were kept in the Tirupur office for use by the staff working there. From the facts, it is also not disputed that one Mr. Ranganathan, an employee of their Tirupur branch had misused such pre-signed documents and was ostensibly in league with the exporters filed the export documents in their name and facilitated the fraudulent claims of drawback. While the appellant surely deserves a rap on the knuckles, revocation of the license for acts and commissions committed by their employee without their knowledge or intent is surely an overkill - appeal allowed.

Summary

Issues Involved:
1. Allegation of fraudulent drawback claims facilitated by the appellant.
2. Suspension and revocation of the appellant's CHA license.
3. Appellant's defense and arguments against the revocation.
4. Department's justification for revocation.
5. Tribunal's analysis and decision on the revocation of the CHA license.

Issue-wise Detailed Analysis:

1. Allegation of Fraudulent Drawback Claims:
The department alleged that M/s. Joveens Expotex, the appellant, facilitated fraudulent drawback claims by producing fake bank realization statements (BRCs) for 13 exporters. Out of 67 shipping bills involved, 62 were filed by the appellant. The exporters were untraceable, and it appeared they had fraudulently obtained Import Export Codes (IECs). The appellant's partner, Shri K.N. Poonja, admitted that pre-signed documents were kept in their Tirupur office and that an employee, Shri Ranganathan, misused these documents. The department concluded that the appellant caused a loss of ?2.04 crores to the exchequer.

2. Suspension and Revocation of CHA License:
The appellant's CHA license was suspended under Regulation 20(2) of CHALR 2004 on 24.1.2006, which was extended until 31.10.2006. The Tribunal limited the suspension to 31.8.2006. A show cause notice was issued on 27.7.2006, and after an enquiry, the Commissioner of Customs revoked the CHA license and forfeited the security deposit on 21.3.2017. The appellant appealed this decision.

3. Appellant's Defense and Arguments:
The appellant argued that their main office was in Coimbatore, and they opened a branch in Tirupur for clearing operations. They transacted business through an approved employee as permitted under Regulation 13(b) of CHALR 2004. The employee, Shri Ranganathan, involved in the fraud, worked with them for six months in 2003. The appellant lodged a police complaint against him for misuse of pre-signed documents. They contended that the fraud was perpetrated by unscrupulous individuals with the connivance of customs officials and without their knowledge. They also argued that KYC norms for verifying clients were introduced only in 2010, and no charges were levied against them in the police investigation. They cited various case laws where revocation of CHA license was deemed disproportionate when employees acted independently.

4. Department's Justification for Revocation:
The department argued that giving away signed copies of Bills of Entry and Shipping Bills was a grievous violation of CHALR, justifying the maximum punishment of license revocation. They cited the case of Commissioner of Customs Vs. H.B. Cargo Services, where the CHA was held liable for issuing signed blank shipping bills. The department emphasized the duty of the CHA to exercise due diligence and verify the correctness of the information provided by exporters.

5. Tribunal's Analysis and Decision:
The Tribunal noted that the appellants were the CHA for 62 shipping bills with fake BRCs and that the exporters used non-existent addresses. However, there was no allegation that the appellants were in collusion with the fraudulent exporters. The Tribunal found that pre-signed documents were kept for administrative convenience and used by the appellant's own staff. The misuse by Shri Ranganathan did not imply that the partners were aware or involved in the fraud. The Tribunal highlighted the delay in the proceedings, which took over ten years, and noted that no other violations were recorded against the appellant during this period. The Tribunal concluded that revocation of the license for acts committed by an employee without the appellant's knowledge was excessive. They drew support from various case laws, including Kunal Travels (Cargo) Vs. Commissioner of Customs, where revocation was deemed unjustified in the absence of the CHA's knowledge of the fraud.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal of the CHA with consequential relief as per law. The revocation of the CHA license was deemed disproportionate to the offence, considering the appellant's lack of knowledge and involvement in the fraud.