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2023 (9) TMI 1198 - AT - CustomsLevy of penalty u/s 114(iii) and 114AA of the Customs Act, 1962 against Customs Broker (CB) - overvaluation of goods - appellants have acted as agent of exporter and is therefore deemed to be the exporter of the goods or not - HELD THAT - The department has obtained details as to the price at which the exporter purchased the goods from the supplier viz., M/s. Moonlight Industries. This invoice and other KYC documents were submitted by the appellant before the officers. The appellant being a Customs Broker is duty bound to exercise diligence while performing the duties. In the present case, the appellant has obtained authorization from exporter and all KYC documents. The IEC, PAN details, GST registration etc. have been obtained. In such circumstances, it cannot be said that the appellant has not acted diligently. In the present case, the main argument put forward by the AR is that the letter dated 14.06.2019 issued to the exporter was replied by the Trichy office of the appellant. This is too flimsy evidence to allege that appellant had connived in the overvaluation of the goods. Merely because a letter by exporter at Delhi is seen dispatched from Trichy postal circle, it cannot be presumed that the appellant has sent it or that appellant has connived with exporter. The allegation against a Customs Broker in involvement of import/export fraud is serious as it affects their livelihood - there are no material sufficient to establish guilt on the part of the appellants. After appreciating the facts and evidence, we hold that the department has failed to establish that the appellants have connived or abetted in the overvaluation of goods and attempted export of the same. There is no iota of evidence to establish that appellants had falsified any documents. The ingredients of section 114A stands un established. Moreover, the invocation of sub-section (3) of section 147 against these appellant is totally erroneous. The impugned order against the appellants are set aside. The appeals are allowed.
Issues Involved:
1. Alleged overvaluation of goods for export. 2. Imposition of penalties under Section 114(iii) and 114AA of the Customs Act, 1962. 3. Application of Section 147(3) of the Customs Act, 1962 to deem the Customs Broker as the exporter. 4. Role and due diligence of the Customs Broker in verifying KYC documents. 5. Prior revocation of the Customs Broker's license under CBLR, 2018. Summary: Overvaluation of Goods: The department alleged that the exporter inflated the value of "Air Inlet Automobile spare parts" to claim ineligible MEIS benefits and undue IGST refunds. Market enquiry revealed a significant discrepancy between the declared value and the actual market price, leading to the seizure of goods and issuance of a Show Cause Notice under Section 124 of the Customs Act, 1962. Imposition of Penalties: Penalties were imposed on the appellants under Section 114(iii) and 114AA of the Customs Act, 1962, holding them liable as agents of the exporter. The original authority imposed penalties totaling Rs. 8,00,00,000 on various appellants, asserting they acted as agents and thus were deemed to be the exporter under Section 147(3) of the Customs Act, 1962. Application of Section 147(3): The Tribunal found that Section 147(3) does not bind the Customs Broker (CHA/CB) who acts on behalf of the importer/exporter with the goods. The Tribunal cited the case of Gajanan B. Sudrik vs. CC(EP) Mumbai to support this argument, stating that the principal is not bound by unauthorized acts of an agent. Role and Due Diligence of the Customs Broker: The Customs Broker obtained all necessary KYC documents, including IEC, PAN details, and GST registration, before filing the shipping bills. The Tribunal noted that the Customs Broker exercised due diligence and there was no evidence of connivance or abetment in the overvaluation of goods. The Tribunal referenced the case of Kunal Travels (Cargo) vs CC (ING) New Delhi, emphasizing that due diligence by the CHA does not imply intent to defraud unless proven otherwise. Revocation of License under CBLR, 2018: A Show Cause Notice was issued under CBLR, 2018, alleging violations and proposing revocation of the Customs Broker's license. The Tribunal had previously set aside the revocation order, and the High Court of Kerala modified the Tribunal's order, removing the observation that the appellant needed to reapply for the license. Conclusion: The Tribunal concluded that the department failed to establish that the appellants connived or abetted in the overvaluation of goods. The evidence was insufficient to prove any fraudulent intent or falsification of documents by the appellants. Consequently, the penalties imposed under Section 114(iii) and 114AA were set aside, and the appeals were allowed with consequential relief. (Order pronounced in open court on 25.09.2023)
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