2024 (4) TMI 1068 - AT - Customs

Revocation of the custom broker license - forfeiture of security deposit - penalty - goods exported were falling under SCOMET list - export of the same without obtaining the license from the DGFT - violation of Regulation 11(d), 11(e) and 11 (n) of CBLR, 2013 - HELD THAT - To verify whether the export items as described in the export documents would fall under the SCOMET List, it is first required to first examine the amendment introduced in the SCOMET List. Notification No. 29/2015 20 dated 21.09.2017 was issued by the DGFT whereby amendments were introduced in Appendix 3 of SCOMET List. On examining the description of goods as mentioned by the exporter in the invoice, packing list and shipping bill with the description given in the entry, there are no similarity found to connect the goods in question to fall in the amended entry. The components designed for such fermenters in the entry have been specifically provided as cultivation chambers designed to be sterilised or disinfected, cultivation chamber, holding devices or process control units, capable of simultaneously monitoring and controlling two or more fermentation system parameters. That is the reason why neither the appellant nor the Customs Authorities were able to ascertain that the goods are covered as fermenters or as components for which export license is required. Since the goods exported do not fall in terms of the entry in the notification, there is no justification to penalise the appellant. Violation of provisions of Regulation 11(d)? - HELD THAT - The CHA was aware and had knowledge that the products falling under the SCOMET list required license from DGFT for its clearance but they were not aware that the fermenters and their components are falling under SCOMET list and export of the said items required export authorization for their clearance. From the export documents, it is apparent that the description of the goods is not such which would fall under the SCOMET list and therefore there was no scope for the appellant to advise the exporter for compliance of the export authorisation. Moreover, the amendment was introduced on 21.09.2017 and within two months thereafter the goods were exported and since it is an extremely technical matter, it appears that neither the CA nor the customs authorities were aware of its applicability. The Revenue has not clarified as to how the goods in question would fall under the entry of fermenters and components thereof nor the Adjudicating Authority has applied its mind to the respective shipping bills covering different items with reference to the description given in the entry - thus, the appellant who is merely a Customs House Agent cannot be expected to be an expert in SCOMET List and therefore the provisions of Regulation 11(d) cannot be invoked against the appellant. Violation of provision of Regulation 11(e) of CBLR - HELD THAT - The allegation on which the violation of Regulation 11(e) has been made out is the statement of the appellant where they have admitted that they never verified the product or parts manufactured in the factory nor verified the use of the export product and their parts. The allegation do not fall within the obligation as provided in Regulation 11(e) which requires the CHA to exercise due diligence to ascertain the correctness of information which he imparts to a client with reference to any work related to clearance of cargo baggage and hence, invocation of Regulation 11(e) is unsustainable - the appellant cannot be held guilty for violating Regulation 11 (e). Violation of provision of Regulation 11(n) of CBLR - HELD THAT - Regulation 11(n) requires the CHA to verify antecedent, correctness of Importer Exporter Code (IEC) number, identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. Here, also, Regulation 11(n) has been invoked on the same statement of the appellant that he was not aware that the fermenters and their components are falling under SCOMET list and the export of the said items required export authorisation for their clearance. These allegations are not relevant for the purposes of Regulation 11(n). Neither the Revenue has pointed out, nor the Adjudicating Authority has ascertained the actual violation in terms of Regulation 11(n), though the appellant claimed that in compliance to its obligations, they had verified the correctness of IEC code of the exporter, identified its client and its functioning as per the KYC norms as also the statutory documents issued by other Government Authorities - In the absence of any such allegations, it is unreasonable to say that the appellant had violated the provisions of Regulation 11(n) of the CBLR and hence the findings that the appellant failed to discharge their obligation under Regulation 11(n) is rejected. In similar circumstances, this Tribunal in the case of M/s. Trinity International Forwarders 2023 (8) TMI 133 - CESTAT NEW DELHI concluded that the Customs broker cannot be held guilty for violating the Regulation 11(d), 11(e) and 11(n) of CBLR, 2013 where the case of the Revenue was that the Customs Broker by filing the shipping bills with over-invoiced export values of the garments exported by the exporter so as to claim ineligible drawback. In that context, it was observed that the Customs Broker has no authority to inspect or examine the goods and the possibility of the Customs Broker suspecting that the goods may have been overvalued also does not arise. Penalty - HELD THAT - There are no specific discussion on the applicability of the parameters provided in the regulations so as to hold the appellant guilty of contravention thereof. The punishment of forfeiture of license is a very serious punishment affecting the livelihood of a person for all times to come, hence it was necessary for the Adjudicating Authority to have considered the issue of violation of the provisions of the Regulations on merits with an open mind as the punishment imposed on the appellant in the proceedings under the Customs Act was only penalty of Rs.20,000/- separately under both the Sections. The appellant has not violated the obligations under Regulation 11(d), 11(e) and 11 (n) of CBLR, 2013 and therefore the punishment of revocation of the Customs Broker License, forfeiture of security deposit and imposition of penalty is unsustainable. Consequently, the impugned order deserves to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether the goods exported fell under the SCOMET list and required a license from DGFT.
2. Whether the appellant contravened the obligations under Regulation 11(d), 11(e), and 11(n) of CBLR, 2013.

Summary:

Issue 1: Whether the goods exported fell under the SCOMET list and required a license from DGFT.

The appellant, a Custom House Agent (CHA), was penalized for facilitating the export of goods allegedly falling under the SCOMET list without obtaining the necessary license from DGFT. The Tribunal examined the amendment introduced in the SCOMET list by Notification No. 29/2015-20 dated 21.09.2017. It was found that the goods described in the export documents did not match the description in the SCOMET list. The Tribunal noted that neither the appellant nor the Customs Authorities could ascertain that the goods were covered under the SCOMET list at the time of export. Therefore, the Tribunal concluded that the goods in question did not fall under the SCOMET list, and there was no justification to penalize the appellant.

Issue 2: Whether the appellant contravened the obligations under Regulation 11(d), 11(e), and 11(n) of CBLR, 2013.

The Tribunal analyzed the obligations under Regulation 11(d), 11(e), and 11(n) of CBLR, 2013. Regulation 11(d) requires a CHA to advise clients to comply with the provisions of the Act. The Tribunal found that the appellant could not be expected to know the technical particulars of the goods, especially given the recent amendment to the SCOMET list. Therefore, the invocation of Regulation 11(d) was deemed unsustainable.

Regulation 11(e) mandates exercising due diligence to ascertain the correctness of information imparted to clients. The Tribunal observed that the appellant's failure to verify the product or parts manufactured in the factory did not fall within the obligation under Regulation 11(e). The Tribunal cited previous judgments stating that a CHA is not required to inspect the genuineness of the transaction but merely process documents related to cargo clearance.

Regulation 11(n) requires verifying the antecedents, correctness of IEC number, and identity of clients. The Tribunal found no evidence of the appellant failing to verify the IEC code, identity, or functioning of the client. Therefore, the invocation of Regulation 11(n) was also deemed unsustainable.

In conclusion, the Tribunal held that the appellant did not violate the obligations under Regulation 11(d), 11(e), and 11(n) of CBLR, 2013. Consequently, the punishment of revocation of the Customs Broker License, forfeiture of the security deposit, and imposition of a penalty was deemed unsustainable, and the impugned order was set aside.

The appeal was allowed.

[Order pronounced in open court on 23rd April, 2024]