CUSTOMS BROKER IS NOT LIABLE FOR WRONG VALUATION OF GOODS

[Mr. M. GOVINDARAJAN]

In M/S. SRI VELAVAN LOGISTICS SERVICES PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS, CHENNAI-IV - 2022 (12) TMI 986 - CESTAT CHENNAI, the Department issued show cause notices dated 03.08.2019 on four persons including the appellant who is the customs broker.  The allegations placed in the show cause by the Department are that there was an attempt to export goods which were undervalued.  The market survey conducted on 15.02.2019 revealed that an exactly similar looking product to the one which was attempted to be exported costed Rs.59/- (M.R.P.) per piece including G.S.T.   the value of the goods in question was computed at Rs.115/- per piece in terms of Rule 6 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.  The same was accepted by the authorized representative of the importer.

In the show cause notice issued to the appellant it was alleged that was alleged to have rendered themselves liable for action under the Customs Broker Licensing Regulations (CBLR), 2013 for contravening the provisions of Regulations 11(n) and 11(d).  It was also proposed in the Show Cause Notice as to the imposition of penalty under Section 114 of the Customs Act, 1962. The appellant gave reply to the show cause notice but the other three co-noticees did not file any reply to the Authority.  The Adjudicating Authority vide Order-in-Original No. 80744/2021 dated 08.03.2021 rejected the FOB in terms of Rule 8(1) of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 read with Rule 7 and inter alia also imposed a penalty of Rs.10,00,000/- on this appellant under Section 114.

The appellant, being aggrieved against the order of Adjudicating Authority filed an appeal before the Appellate Authority.  The Appellate Authority confirmed the order of the Adjudicating Authority.  The Appellate Authority held that the appellant violated Regulation 11(n) of CBLR.

Against the order of the Appellate Authority the appellant filed the present appeal before the Appellate Tribunal.    The Tribunal heard the submissions of both sides.  The Tribunal frames the issue to be decided in this appeal is as to whether the Revenue was justified in imposing penalty under Section 114 of the Customs Act, 1962 on the Customs Broker for an alleged violation of Regulations 11(n) and 11(d) of the Customs Brokers Licensing Regulations, 2013.

Section 114 of the Customs Act provides that any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable, -

• in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding 3 times the value of the goods as declared by the exporter or the value as determined under this Act, whichever is the greater;
•  in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding 10% of the duty sought to be evaded or Rs.5000/-, whichever is higher.

where such duty as determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within 30 days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be 25% of the penalty so determined;

•  in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater.

Regulation 11 of the Customs Brokers Licensing Regulations, 2013 provides the obligations that are to be fulfilled by the Customs Brokers.  Regulation 11(d) provides that the Customs Broker shall advise his client to comply with the provisions of the Act and in case of noncompliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be.  Regulation 11(n) provides that the Customs Broker shall advise 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.

The Tribunal observed that very foundation of this case appears to be very shaky since there is an allegation as to the violation of Regulations 11(n) and 11(d) of the CBLR against which the proposal issued was to penalize the appellant / Customs Broker under the provisions of the Customs Act.  The consequences of violation of the CBLR are not provided under the CBLR, 2013.

The Tribunal observed that Section 114 of the Customs Act, 1962 prescribes imposition of penalty on any person who, in relation to any goods, does or omits to do any act, which act or omission would render such goods liable for confiscation under Section 113, or abets the doing or omission of such an act.  In this case the only allegation is undervaluation of the goods for which the same were held liable for confiscation under Section 113(i) and 113(ia) of the Customs Act.

The Adjudicating Authority has not given any justifiable reasons except adopting the valuation in terms of Rule (examination of the applicant) after rejecting the FOB value in terms of Rule 8(1) [Execution of Bond and furnishing security].  The Tribunal did not found any reasons brought on record as to the doubts about the truth or accuracy of the value declared in relation to the export of goods.

The valuation of any goods could never be the domain of a Customs Broker as the same depends upon the contract between the exporter and the importer wherein no Customs Broker would have any say.  Both the Adjudicating Authority as well as the Appellate Authority nowhere revealed the role of the Customs Broker in either fixing the value at the time of entering into the contract by the exporter with the importer or at the time of declaring the same.

The Tribunal, therefore, held that the appellant, a Customs Broker, cannot be fastened with a liability under the Customs Act, more so having alleged a different violation altogether.  The Tribunal set aside the order of Appellate Authority and allowed the appeal.