2021 (8) TMI 640 - AT - Customs

Levy of penalty on Customs Broker - Section 114AA of the Customs Act, 1962 - wrongful duty drawback claim - case is that no evidence of the mobile phones having been manufactured in India so as to claim duty drawback in terms of Section 75 of Customs Act - HELD THAT - The appellant who is the Customs Broker has only filed the shipping bills pertaining to the exports made by the ADPL Customs Intelligence Unit conducted the investigation and prima facie found that the mobile phones exported were not manufactured in India and have been manufactured in China and the exporter ADPL was not entitled to drawback under Section 75 of the Act. A SCN was issued demanding drawback of ₹ 1,20,02,815/- along with interest but after following the due process, the Additional Commissioner only confirmed the demand of drawback to the tune of ₹ 50,48,749/- as per Rule 16 of Customs, Central Excise Service Tax Drawback Rules, 1995. Further, the rejection of this amount is under challenge before the Revisionary Authority. In the present case, the Department has failed to prove that there was a mala fide and wilful mis- representation by the Customs Broker. It seems that the Commissioner (Appeals) has totally misunderstood the facts and has wrongly observed that the appellant (Customs Broker) and the exporter have been operating from the same premises and have an identical ICE Code which leads one to suspect the bona fides of the appellant. This finding of the Commissioner is factually incorrect and without any basis - the Commissioner on the basis of these facts has wrongly come to the conclusion that the appellant is involved in the illegal export whereas the appellant is only a Customs Broker who has filed the shipping bills on the basis of the documents furnished by the exporter. The imposition of penalty itself is not sustainable in law - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Imposition of penalty under Section 114AA of the Customs Act, 1962 on the Customs Broker for alleged misrepresentation.
- Applicability of penalty provisions in cases involving fraudulent exports.
- Interpretation of legal provisions and relevant case laws in determining liability for penalty.
- Review of the Commissioner's decision to uphold the penalty imposed on the Customs Broker.

Analysis:
1. Imposition of Penalty on Customs Broker:
The case involved the imposition of a penalty of ?50,000 on the Customs Broker (CHA) under Section 114AA of the Customs Act, 1962. The penalty was based on the allegation that the Customs Broker was involved in misrepresentation by presenting shipping bills on behalf of the exporter. The Customs Intelligence Unit's investigation revealed that the mobile phones exported were manufactured in China, making the exporter ineligible for duty drawback under Section 75 of the Act.

2. Applicability of Penalty Provisions:
The Customs Broker argued that the penalty under Section 114AA of the Act should not apply to them as the provision is meant for those who make false declarations or file false documents. The Tribunal noted that the penalty provision is primarily intended for cases involving fraudulent exports, as highlighted in the 27th Report of the Standing Committee on Finance. The Tribunal emphasized that the Department failed to establish mala fide and wilful misrepresentation by the Customs Broker.

3. Interpretation of Legal Provisions:
The Tribunal analyzed the legal provisions and case laws cited by both parties. It observed that the penalty was solely imposed on the Customs Broker and not on the exporter. The Tribunal found that the Commissioner's decision to uphold the penalty was based on incorrect observations, such as the alleged similarities in operations between the Customs Broker and the exporter. The Tribunal concluded that the penalty imposition lacked legal sustainability and set aside the penalty on the appellant.

4. Review of Commissioner's Decision:
The Tribunal reviewed the Commissioner's decision and found factual inaccuracies in the observations made regarding the Customs Broker's involvement in illegal exports. The Tribunal clarified that the Customs Broker's role was limited to filing shipping bills based on the exporter's documents. The Tribunal, therefore, overturned the penalty imposed on the Customs Broker, emphasizing the lack of evidence of fraudulent intent or misrepresentation.

In conclusion, the Tribunal allowed the appeal of the appellant by setting aside the penalty imposed under Section 114AA of the Customs Act, 1962, highlighting the absence of fraudulent intent or misrepresentation by the Customs Broker in the case.