2022 (9) TMI 444 - AT - Customs

Levy of penalty on customs broker - 112(a) of the Customs Act, 1962 - mis-declaration (undeclared) of imported goods - on examination it is found that the consignment contained undeclared goods and also goods which infringed IPR - HELD THAT - Although the goods were declared as metal Frame, building material accessories, building material gutter, screw etc. in the Bill of Entry, on examination it was seen that more than 90% of the goods were undeclared items. Only 25 cartons out of 717 cartons contained the goods described in the Bill of Entry. The total number of cartons also exceeded the declared number of cartons and were found to be 775 cartons. There is misdeclaration and undeclaration of goods. Further, most of the undeclared goods bear the brand of reputed companies and they were found to be counterfeit products. Thus, there is infringement of IPR laws also. Though it can be seen that the appellant who is a Customs Broker has filed the Bill of Entry on the basis of the documents handed over to him by a person representing the importer, in the present case, it has to be seen that the importer is not traceable as the company s address and GST registration shown in the documents are fake. The importer did not care to appear or attend the proceedings. He has not come forward to claim the goods. The main argument put forward by the learned counsel for appellant is that the allegations would only be violation of CBLR, 2018 and that the Customs Broker cannot be held responsible under sec. 112(a) of the Customs Act, 1962. Though it may be true that the Customs Broker acts as per the instructions of the importer, in the present case, as the importer himself is not traceable and the address as well as GST registration reflected in the documents are found to be fake, the act of the Customs Broker in filing the Bill of Entry acquires deep introspection. The Customs Broker has a very important position and has to safeguard the interest of both the importer and the Customs - The Regulation is intended to make the clearance of export and import in a hassle-free manner for both importer/exporter and the customs. The trust embedded in the Customs Broker who has been issued a licence cannot be used in a negligent manner so as to permit undeclared / prohibited goods in large quantities. There are no grounds to set aside the penalty imposed under sec. 112(a) of the Customs Act, 1962 on the appellant - penalty of Rs.50,000/- has been imposed on the appellant as per Order in Original dated 8.9.2020 under CBLR, 2018 - the penalty of Rs. 5,00,000/- imposed under section 112(a) of the Customs Act, 1962 is high and requires to be reduced - Appeal allowed in part.

Summary

Issues Involved:
1. Misdeclaration and undeclaration of goods.
2. Infringement of Intellectual Property Rights (IPR).
3. Imposition of penalties under Section 112(a) of the Customs Act, 1962.
4. Applicability of Customs Broker Licensing Regulations (CBLR), 2018.

Issue-wise Detailed Analysis:

1. Misdeclaration and Undeclaration of Goods:
The appellant, a Customs Broker, filed a Bill of Entry declaring the imported goods as "metal frame, building material accessories, building material gutter, screw, etc." in 717 cartons. Upon examination by the Special Intelligence and Investigation Branch (SIIB), it was found that only 25 cartons contained the declared goods, while the rest contained undeclared items such as mobile batteries, spectacles, USB cables, and branded counterfeit goods. The total number of cartons was 775, exceeding the declared quantity. The original authority determined the value of the declared goods and undeclared goods separately, ordering their confiscation under various sections of the Customs Act, 1962, and imposing penalties.

2. Infringement of Intellectual Property Rights (IPR):
The undeclared goods included counterfeit items bearing brand names like Samsung, Apple, Nike, and Adidas, which were registered under Intellectual Property Rights (IPR) with Customs. Representatives of the IPR holders confirmed the counterfeit nature of the goods and requested their destruction under the IPR (Imported Goods) Enforcement Rules, 2007. The original authority ordered the absolute confiscation of these goods as prohibited under Section 11 of the Customs Act, 1962, and other relevant laws.

3. Imposition of Penalties under Section 112(a) of the Customs Act, 1962:
The appellant was penalized Rs. 5,00,000/- under Section 112(a) of the Customs Act, 1962, for aiding in the misdeclaration and undeclaration of goods. The appellant argued that the allegations pertained to violations under the CBLR, 2018, and that a separate penalty of Rs. 50,000/- had already been imposed under these regulations. The Tribunal, however, upheld the imposition of penalty under Section 112(a), noting that the Customs Broker's role is crucial in safeguarding the interests of both the importer and Customs. The Tribunal reduced the penalty to Rs. 1,50,000/- considering the penalty already imposed under CBLR, 2018.

4. Applicability of Customs Broker Licensing Regulations (CBLR), 2018:
The appellant contended that the violations fell under CBLR, 2018, and not under the Customs Act, 1962. The Tribunal referred to precedents and observed that the Customs Broker has a duty to verify the authenticity of the importer and the documents. The Tribunal emphasized that the Customs Broker's negligence in verifying the importer's details led to the clearance of prohibited goods. The Tribunal concluded that actions under CBLR, 2018, do not preclude penalties under the Customs Act, 1962, for grave offenses.

Conclusion:
The Tribunal upheld the penalty under Section 112(a) of the Customs Act, 1962, while reducing it to Rs. 1,50,000/- considering the penalty already imposed under CBLR, 2018. The appeal was partly allowed with consequential relief, if any. The judgment underscores the responsibility of Customs Brokers to verify the authenticity of importers and documents to prevent the clearance of prohibited and undeclared goods.