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2022 (3) TMI 1268 - AT - CustomsRevocation of Customs Broker License - filing of benami Bills of Entry - forfeiture of security deposit - levy of penalty - under-valuation of imported goods - appellant s defence is that it was not a party to the SCN issued by the DRI and so knew nothing about it - HELD THAT - It is evident that the appellant was dealing with the Anil and Abhimanyu for a long time and was aware that a case of under-valuation of the imported goods was booked against them by DRI. It was also aware that thereafter, they continued to import the goods by changing the suppliers and also started importing in the name of new firms including one M/s. Popular Metal Industries whose IEC is issued in the name of Shri Madan Gopal. The appellant never met Shri Madan Gopal but it had been filing Bills of Entry in the name of Popular at the behest of Anil. Not only has the appellant not brought to the attention of the department when it was fully aware that after the case was booked by DRI, Anil continued to import goods in the same manner by changing the suppliers and in the names of other importers but it has, knowingly filed Bills of Entry to facilitate this process. Evidently, it is not true as in the statement on 3.4.2017, Shri Vikas Gupta not only indicated that it was aware of the SCN being issued to Anil Aggarwal but also that it was issued for undervaluation. Further, he also explained what followed- that Anil changed the suppliers and also started importing in the name of other firms. Therefore, the appellant s defence that it knew nothing about the SCN issued by DRI to Anil is not supported by the facts. The second line of defence of the appellant was that since the Department knew that the SCN was issued, it had no liability to inform the department - HELD THAT - It is true that the department need not be told that the SCN was issued. However, what is important is that Anil continued to import in the name of other firms by changing the suppliers also with the full knowledge of the appellant and the appellant continued to clear the goods in these benami transactions which, is nothing but collusion in the benami imports. The third line of defence of the appellant is that as Customs Broker, it earns its bread from trade facilitation and cannot act as a spy to the Department and if it spies for the department, it will lose its clients - HELD THAT - This defence cannot be accepted for more than one reason. Firstly, Regulation 10(d) of the CBLR 2018 (read with erstwhile Regulation 11(d) of CBLR, 2013) places an obligation on the Customs Broker to advise its client to comply with the legal provisions and in case of non-compliance, report to the Assistant Commissioner or Deputy Commissioner of Customs. Reporting so, does not amount to spying as asserted by the appellant but discharging its obligations - it is evident from the submissions that the appellant has developed its business model based not on fulfilling its obligations as Customs Broker but on facilitating frauds and evidently if it exposes the frauds by its clients such clients will not come to it. The Customs Broker s licence is not meant for those whose business is built on promoting and facilitating frauds. The fourth line of defence of the appellant is that it had not benefitted from the undervaluation - HELD THAT - It is immaterial whether the appellant had profited from the undervaluation or not. The mere fact that it has knowingly facilitated the fraud and has not brought it to the notice of the Assistant Commissioner or Deputy Commissioner of Customs and has also filed benami Bills of entry to facilitate fraud is sufficient for action against the appellant under the Customs Broker s licensing regulations. The appellant, in this case, has filed benami Bills of Entry for Anil and Abhimanyu knowing fully that the IEC in which it filed the Bills of Entry did not belong to them and that it was a modus operandi started by Anil after a case of under-valuation was booked by DRI. The appellant neither advised its clients against such benami imports nor has it informed the Assistant Commissioner or Deputy Commissioner as it was required to under the regulation 10(d) of CBLR, 2018 (read with Regulation 11(d) of CBLR, 2013) because it feels that such disclosure to the department would amount to spying for the department and it would lose its clients if it fulfils this obligation. The irresistible conclusion is that the appellant has built its business based on facilitating fraudulent transactions for its clients and wants its Customs Broker Licence restored so that it can continue in such business - In this case, the appellant knowingly, actively, facilitated benami imports and hence is accountable for its actions. Penalty - HELD THAT - In view of the limitation under section 18 of CBLR, 2013, the penalty of ₹ 50,000/- must be set aside while upholding the revocation of the licence and forfeiture of its security deposit. Learned counsel is correct in his submissions that under Regulation 18 of CBLR, 2013, there can be either revocation and forfeiture of security deposit OR imposition of penalty of up to Rupees fifty thousand. However, we do not agree with his submission that revocation of the appellant s licence must be set aside considering the gravity of the case and also considering that it built its business in a manner that if it fulfils its obligations of reporting violations by its clients to the Customs authorities it will lose its business and, therefore, instead, facilitates such clients. Therefore, we find that in view of the limitation under section 18 of CBLR, 2013, the penalty of ₹ 50,000/- must be set aside while upholding the revocation of the licence and forfeiture of its security deposit. Appeal allowed in part.
Issues Involved:
1. Violation of Regulation 10(a) of CBLR 2018 (read with Regulation 11(a) of CBLR 2013) 2. Violation of Regulation 10(d) of CBLR 2018 (read with Regulation 11(d) of CBLR 2013) 3. Violation of Regulation 10(e) of CBLR 2018 (read with Regulation 11(e) of CBLR 2013) 4. Violation of Regulation 10(n) of CBLR 2018 (read with Regulation 11(n) of CBLR 2013) 5. Revocation of the appellant's license under Regulation 14(b) CBLR 2018 (read with Regulation 18(b) of CBLR 2013) 6. Forfeiture of the security deposit of ?1,10,000/- under Regulation 14(b) of CBLR 2018 (read with Regulation 18(b) of CBLR 2013) 7. Imposition of a penalty of ?50,000/- under Regulation 18(1) read with Regulation 14(b) of CBLR 2018 (read with Regulation 22 read with 18(b) of CBLR 2013) Detailed Analysis: 1. Violation of Regulation 10(a) of CBLR 2018 (read with Regulation 11(a) of CBLR 2013): The appellant failed to obtain authorizations from the actual IEC holders, specifically from Shri Madan Gopal, the proprietor of Popular Metal Industries. Instead, the appellant processed Bills of Entry based on documents obtained from Anil, who was not the IEC holder. This deliberate act of filing benami Bills of Entry constitutes a clear violation of Regulation 10(a) of CBLR 2018. 2. Violation of Regulation 10(d) of CBLR 2018 (read with Regulation 11(d) of CBLR 2013): The appellant did not advise its clients to comply with the Customs Act and allied regulations. Despite knowing about the under-valuation case booked by DRI against Anil, the appellant continued to facilitate benami imports without reporting these violations to the Deputy Commissioner or Assistant Commissioner of Customs. The appellant's defense that it cannot act as a spy for the department was rejected, as fulfilling its obligations under the law does not amount to spying but is a necessary duty. 3. Violation of Regulation 10(e) of CBLR 2018 (read with Regulation 11(e) of CBLR 2013): There was no evidence that the appellant provided false or incorrect information to its clients. Therefore, the Tribunal found that Regulation 10(e) of CBLR 2018 read with Regulation 11(e) of CBLR 2013 was not violated in this case. 4. Violation of Regulation 10(n) of CBLR 2018 (read with Regulation 11(n) of CBLR 2013): The appellant failed to verify the correctness of the IEC, GSTIN, and the identity of the clients using reliable, independent, and authentic documents. The appellant knowingly filed Bills of Entry using the IEC of Popular Metal Industries without the knowledge of the IEC holder, Shri Madan Gopal, thereby violating Regulation 10(n) of CBLR 2018. 5. Revocation of the appellant's license under Regulation 14(b) CBLR 2018 (read with Regulation 18(b) of CBLR 2013): The Tribunal upheld the revocation of the appellant's license, citing that the appellant knowingly facilitated fraudulent transactions and benami imports. The appellant's business model was built on facilitating such violations, and restoring the license would likely result in continued fraudulent activities. 6. Forfeiture of the security deposit of ?1,10,000/- under Regulation 14(b) of CBLR 2018 (read with Regulation 18(b) of CBLR 2013): The Tribunal upheld the forfeiture of the security deposit, finding no reason to interfere with this part of the impugned order. The appellant's actions warranted the forfeiture as a necessary consequence of its violations. 7. Imposition of a penalty of ?50,000/- under Regulation 18(1) read with Regulation 14(b) of CBLR 2018 (read with Regulation 22 read with 18(b) of CBLR 2013): The Tribunal set aside the penalty of ?50,000/- imposed on the appellant, noting the limitation under Regulation 18 of CBLR 2013, which allows for either revocation and forfeiture of security deposit or imposition of a penalty, but not both. Conclusion: The appeal was partly allowed, modifying the impugned order to set aside the penalty of ?50,000/-. The revocation of the appellant's license and forfeiture of the security deposit were upheld.
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