2024 (9) TMI 1328 - AT - Customs

Levy of penalty u/s 114(i) of the Customs Act, 1962 - smuggling - export of Red Sanders - Failure to comply with KYC requirements - HELD THAT - The role played by Shri Arup Mukherjee and M/s. Bose Enterprises was shorn of adhering to prescribed procedures and formalities as enshrined in law. Both the appellants herein completely failed in ascertaining the whereabouts by way of KYC of the persons associated from whom they had sourced the business nor were they in possession of any letters of authorization or profile assessment and verification report etc. of their ultimate client M/s. Bhadrakali Export Pvt.Ltd., Nepal for whom they undertook the said transit clearance of Nepal based cargo meant for export to Korea. The appellant s plea that as the show cause notice makes out no allegation of abetment against the appellants, no penalty can be imposed on them under section 114(i) of the Customs Act, 1962, cannot be agreed upon. The fact that the present attempted export of Red Sanders was attempted through a chain of intermediaries with at no stage of any mention of KYC documents coming through is a pointer to the grave omissions at different stages facilitating the said export of banned goods. Shri Arup Mukherjee who used to make payments to the appellant M/s. Bose Enterprises with reference to services rendered by them thus cannot absolve himself of his role as an intermediary in the sordid saga of the said attempted export. The fact that he was an important link and sourcing the business for the customs broker without either knowing his clients nor having obtained necessary documents to ascertain and fulfill the KYC requirements is certainly an omission of serious proportions and having admittedly been in the trade sourcing business for several years it indeed is an omission of multitude ramifications and no less casual and deliberate in nature. The appellants have not made out a convincing case for non-imposition of penalty on them. However, considering the facts and circumstances of the case and the totality of the action on part of the two appellants, a penalty of Rs.4,00,000/- each would meet the ends of justice - Appeal disposed off.

Summary

Issues:
Attempted export of Red Sanders in a Customs Transit Declaration (CTD) consignment, Penalty imposition under Section 114(i) of the Customs Act, 1962, Failure to comply with KYC requirements, Allegations of abetment, Statutory responsibilities of a Customs House Agent (CHA), Role of intermediaries in attempted export.

Analysis:
The judgment pertains to a case involving the attempted export of Red Sanders detected in a Customs Transit Declaration (CTD) consignment. The Order-in-Original imposed a penalty of Rs.50.00 Lakh each on the two appellants for their involvement in the case. The DRI officers interdicted a consignment of Red Sanders wood logs disguised as Nepalese cane handicrafts. Investigations revealed the involvement of various individuals and firms in the attempted smuggling operation.

The appellants, a Customs Brokers Firm and another trading company, were found to have failed in adhering to prescribed procedures and formalities. They did not fulfill the Know Your Customer (KYC) requirements as required by law. The appellants sourced the business through intermediaries without obtaining necessary documents or verifying the profiles of the exporters and importers involved. The adjudication order highlighted the gross failure and omission on the part of the appellants in performing their statutory responsibilities as Customs House Agents (CHAs).

The appellants argued against the imposition of penalties under Section 114(i) of the Customs Act, 1962, citing the absence of allegations of abetment in the Show Cause Notice. However, the Tribunal emphasized that the law allows for penalties for acts or omissions that render goods liable to confiscation, not just for abetment. The Tribunal found that the appellants' failure to comply with KYC requirements and their role in facilitating the attempted export warranted penalties.

The Tribunal considered the seriousness of the omissions and the role played by the appellants in the attempted export of banned goods. While acknowledging the lack of abetment allegations, the Tribunal concluded that penalties were justified based on the appellants' actions. A penalty of Rs.4,00,000/- each was imposed on the two appellants to meet the ends of justice. The appeals were disposed of accordingly, emphasizing the importance of fulfilling statutory responsibilities and complying with regulatory requirements in customs clearance operations.