2018 (1) TMI 439 - AT - Customs

Smuggling - red sander logs - prohibited goods - allegations raised against both these appellants are that they did not obtain the KYC details of the exporter - Held that - Commissioner has observed that the appellant had requested for permission for outsourcing the services of transporting the goods. Pending such application, the offence had occurred. That since the appellant had sought permission for outsourcing the transportation with effect from8/2015 and as they had already taken necessary steps to comply with the provisions of the Regulations, there is no violation of the Regulations - main allegation being no complying with KYC norms and there being no allegation of direct involvement, in the alleged offence - the confiscation of the container in the present case is unjustified and requires to be set aside. The penalties imposed on M/s. Bhavani Shipping Services India Pvt. Ltd. as well as the confiscation of the container and the redemption fine imposed requires to be set aside - penalty imposed on M/s. Sea Port Lines (India) Pvt. Ltd. is also set aside. Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Legality of penalty imposed on M/s. Chola Logistiks Pvt. Ltd.
2. Legality of penalty imposed on M/s. Bhavani Shipping Services India Pvt. Ltd.
3. Legality of penalty imposed on M/s. Sea Port Lines (India) Pvt. Ltd.
4. Legality of confiscation of the container.

Detailed Analysis:

1. Legality of penalty imposed on M/s. Chola Logistiks Pvt. Ltd.:

The appellant, M/s. Chola Logistiks Pvt. Ltd., argued that they are merely a CFS agent and had no role in the illegal export of red sander logs. They claimed the export cargo was examined and sealed by customs officers before leaving their premises. The penalty was imposed for allegedly failing to secure the transit of the export goods from CFS to port, violating clause 6(1)(k) of Handling of Cargo in Customs Area Regulation, 2009, and Public Notice No. 1/2014. However, the Commissioner had previously dropped proceedings against them for these alleged violations, noting they had sought permission for outsourcing transportation services, which was pending approval when the offense occurred. Consequently, the penalty imposed on M/s. Chola Logistiks Pvt. Ltd. was found unsustainable and set aside.

2. Legality of penalty imposed on M/s. Bhavani Shipping Services India Pvt. Ltd.:

M/s. Bhavani Shipping Services India Pvt. Ltd. contended that they were penalized for not obtaining KYC details of the client, M/s. Sea Port Lines (India) Pvt. Ltd., who was their immediate customer. They argued there was no statutory requirement for them to obtain KYC details of all users down the line and cited several judgments to support their claim. The Tribunal noted that the appellant had no direct transaction with the exporter and had complied with KYC norms for their immediate client. In similar cases, penalties were reduced or set aside when there was no evidence of direct involvement in smuggling. Thus, the penalty on M/s. Bhavani Shipping Services India Pvt. Ltd. was set aside.

3. Legality of penalty imposed on M/s. Sea Port Lines (India) Pvt. Ltd.:

M/s. Sea Port Lines (India) Pvt. Ltd. faced similar allegations of not obtaining KYC details of the exporter. They argued that the container was booked on a commission basis and they had verified the KYC details through M/s. John Cargo and Transport Services, Chennai. The Tribunal found that the appellant had no direct contact with the exporter and had complied with KYC norms through their client. Citing similar judgments, the Tribunal concluded that penalties for non-compliance with KYC norms without direct involvement in smuggling were unwarranted. Therefore, the penalty on M/s. Sea Port Lines (India) Pvt. Ltd. was set aside.

4. Legality of confiscation of the container:

The Tribunal addressed the issue of confiscating the container, noting that a container is distinct from a package and should not be subject to confiscation. The Hon’ble High Court of Calcutta in IMSA Shipping Agency Pvt. Ltd. vs. Commissioner of Customs held that containers should be released after detaining and warehousing the goods. Based on this precedent, the Tribunal found the confiscation of the container in the present case unjustified and set it aside.

Conclusion:

The penalties imposed on M/s. Chola Logistiks Pvt. Ltd., M/s. Bhavani Shipping Services India Pvt. Ltd., and M/s. Sea Port Lines (India) Pvt. Ltd., as well as the confiscation of the container, were all set aside. The appeals were allowed with consequential relief, if any.

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