2023 (3) TMI 545 - AT - Customs

Levy of penalty on CHA u/s 114 (iii) and Section 114AA respectively of the Customs Act, 1962 - allegation of abatement - fraudulent export of ladies Leather Uppers Shoe for claiming Drawback Incentive Scheme from ICD - mis-declaration of quantity of export goods - HELD THAT - The exporter has made a serious offence by mis-declaring the quantity i.e. against 30,000 pairs declared in the export document only physical quantity found 405 pairs. Moreover, the value was also shown exorbitantly high. Though the appellant has acted as CHA and it does not appear the direct involvement of the appellant in the fraud of export goods but when against one invoice, the exporter asked the appellant CHA to split the consignment and make 8 shipping Bills, that itself is a reason that the appellant should have acted diligently and inquired about the reason for this abnormal act of splitting the consignment into 8 shipping Bills. He was also supposed to inform this to the Customs authority. The Customs authority also found suspicious because of 8 shipping Bills against one consignment. Therefore, this negligence of the CHA resulted into attempted of fraudulent export by his client. Therefore, the appellant is liable for penalty under Section 114(iii) and Section 114AA. However, looking to the nature of role of the CHA in the entire episode, penalty of Rs. 5,00,000/- in each section is very harsh, therefore, the penalty reduced from 5 lakhs each under Section 114(iii) and Section 114AA to Rs. 2 Lakhs in each section. Appeal allowed in part.

Summary

Issues:
- Appeal against penalties imposed under Section 114(iii) and Section 114AA of the Customs Act, 1962 for facilitating fraudulent export.

Analysis:

Issue 1: Penalties Imposed on the Appellant
The appeal challenged the penalties upheld by the Commissioner of Customs (Appeals) against the appellant under Section 114(iii) and Section 114AA of the Customs Act, 1962. The department accused the appellant of facilitating a fraudulent export scheme by misdeclaring the quantity and value of goods. The appellant, a Customs House Agent (CHA), argued that he was unaware of the exporter's fraudulent activities and should not be penalized for the exporter's wrongdoing. The appellant cited various judgments to support his defense, emphasizing his limited role as a CHA in the transaction.

Issue 2: Role of the Appellant
The appellant's counsel contended that the appellant's involvement was solely as a CHA and that he had no knowledge or part in the exporter's fraudulent actions. However, the department's representative reiterated the findings of the impugned order, emphasizing the seriousness of the misdeclaration by the exporter and the suspicious nature of splitting one consignment into 8 shipping bills.

Issue 3: Judicial Analysis and Decision
The Member (Judicial) carefully considered both parties' submissions and the case records. While acknowledging that the appellant may not have directly participated in the fraudulent export, the Member noted the appellant's failure to inquire or inform the Customs Department about the abnormal splitting of the consignment into multiple shipping bills. This negligence on the part of the CHA contributed to the attempted fraudulent export by the client. Consequently, the appellant was held liable for penalties under Section 114(iii) and Section 114AA. However, considering the nature of the appellant's role, the Member deemed the original penalties of Rs. 5,00,000/- each under both sections as excessively harsh and reduced them to Rs. 2 Lakhs in each section.

In conclusion, the impugned order was modified to reduce the penalties imposed on the appellant, and the appeal was partly allowed with the revised penalty amounts pronounced in the open court on 10.02.2023.