2023 (11) TMI 621 - AT - Customs

Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - under-valuation of goods in import of furniture, lighting fixtures, wood treatment chemicals, resins, varnishes, lacquers etc., by two persons through mis-use of various Import-Export Codes (IECs) - taking on lease/rent from the IEC holders illegally for the purpose of duty evasion - violation of Regulations 11(a), 11(d), 11(e), 11(m) and 11(n) of CBLR, 2013 - HELD THAT - The appellants CB had declared the description of the imported goods and value in the various B/Es for aforesaid imports as given in the invoices supplied by the respective importers. Further, the appellants were not aware of the under valuation of the imported goods as there was no evidence to the claim of the department that the appellants knew about undervaluation and further all incriminating documents were recovered only from the two persons namely S/Shri Purav Mehta and Pratik Mehta. Even at the time of clearance of goods for various importers in the past, the Customs assessing group and the Commissionerate did not find out any discrepancy in valuation or any misdeclaration. The action taken under CBLR, 2013 against the appellants CB is a follow up/ further action taken consequent to the customs offence case made out by DRI, MZU, and thus the present proceedings are only for the violations under the specific sub-regulations under CBLR, 2013. It is not the case of the Revenue that the description of the imported goods or classification of such goods under customs tariff was mis-declared in order to undervalue these imported goods. Further, any allegation of mis-declaration of imported goods in terms of its description or value could only be established, if the declaration in the Bill of entry has been different from the commercial invoice or other supporting documents. Violation of Regulation 11(d) ibid - HELD THAT - There is definitely a mention that the parallel invoices which are incriminating in nature for subject goods were found out during the search proceedings conducted at the premises of S/Shri Purav Mehta and Pratik Mehta. However, at the same time it is also on record that neither the customs authority at the time of import not the appellants were aware of such under-valuation - the conclusion arrived by the Principal Commissioner of Customs (General) on this valuation issue in the impugned order is not supported by any evidence or factual detail, to fasten the liability for such under valuation on the part of the appellants CB and thus the impugned order stating that the appellants have violated Regulation 11(d) ibid is also not sustainable. Violation of Regulation 11(e) ibid - HELD THAT - In the absence of any specific evidential document or factual record it cannot be stated that the information on under valuation have been withheld by the appellants, and more specifically under this issue of under valuation was brought on record only when the search operation of DRI, MZU was conducted at the premises of S/Shri Purav Mehta and Pratik Mehta resulting in recovery of parallel invoices and telegraphic transfer of foreign remittances. Thus, it is not feasible to sustain such a charge on the appellants that they did not exercise due diligence to impart correct information to their clients and thus the conclusion arrived at by the Principal Commissioner of Customs (General) is without any basis of documents or facts, in the impugned order with respect to Regulation 11(e) ibid, is not sustainable. Violation of Regulation 11(m) ibid - HELD THAT - From the plain reading of the requirements under Regulation 11(m) ibid, it is clear that there should be some grounds of inefficiency or unavoidable delay in clearance of the imported goods - neither, is there is any such claim of undue delay nor any demonstration of inefficiency in clearance of goods by the appellants. Thus, there are no merits on the grounds and the conclusion arrived on this point by the Principal Commissioner of Customs (General) in the impugned order. Thus, the conclusion that the appellants have violated Regulation 11(m) ibid is not sustainable. Violation of Regulation 11(n) ibid - HELD THAT - In the present case, the appellants CB had obtained the KYC documents and submitted the same to the Customs Department. Thus, there are no legal basis for upholding of the alleged violation of Regulation 11(n) ibid by the appellants in the impugned order on the above issue. Violation of of regulation 11(a) of CBLR, 2013 - HELD THAT - The appellants could have been proactive in fulfilling their obligation as Customs Broker for exercising due diligence, particularly when the import documents were obtained from the importers through an intermediary in ensuring that all documents relating to imports are genuine, the KYC documents given by the importer are also genuine and that these are not fake or fabricated. Thus, to this extent we find that the appellants CB are found to have not complied with the requirement of sub-regulation 11(a) and thus forfeiture of security deposit for failure in not being proactive for fulfilling of regulation 11(a) of CBLR, 2013 alone, is appropriate and justifiable. There are no merits in the impugned order passed by the learned Principal Commissioner of Customs (General), Mumbai in revoking the license of the appellants; and for forfeiture of security deposit, inasmuch as there is no violation of regulations 11(d), 11(e), 11(m) and 11(n) ibid, and the findings in the impugned order is contrary to the facts on record. However, in view of the failure of the appellants to have acted in a proactive manner in fulfillment of the obligation under sub-regulation 11(a) ibid, particularly when they have received the documents from importer through intermediary, it is justifiable to forfeit the entire security deposit given by the appellants, which would be reasonable - appeal allowed in part.

Summary

Issues Involved:
1. Violation of Regulations 11(a), 11(d), 11(e), 11(m), and 11(n) of CBLR, 2013.
2. Non-compliance with prescribed timelines for inquiry proceedings.
3. Justification for revocation of CB License and forfeiture of security deposit.

Summary:

1. Violation of Regulations 11(a), 11(d), 11(e), 11(m), and 11(n) of CBLR, 2013:
The appellants, M/s Durga Clearing Private Limited, were accused of under-valuation of imported goods and misuse of IECs for duty evasion. The Principal Commissioner of Customs concluded that the appellants violated Regulations 11(a), 11(d), 11(e), 11(m), and 11(n) of CBLR, 2013, based on the statements and evidence collected during the investigation. The appellants contended that they had obtained the required authorizations and submitted all documents as provided by the importers, claiming no knowledge of undervaluation or misuse of IECs. The Tribunal found that the appellants had declared the goods and value as per the documents provided and were unaware of the undervaluation, thus not violating Regulations 11(d) and 11(e). The Tribunal also found no evidence of inefficiency or undue delay in clearance, dismissing the violation of Regulation 11(m). The appellants had obtained and verified KYC documents, fulfilling the requirements of Regulation 11(n).

2. Non-compliance with prescribed timelines for inquiry proceedings:
The Tribunal noted significant delays in the inquiry proceedings, with the suspension of the CB license lasting over 18 months before being set aside. The Principal Commissioner justified the delays by stating that the timelines in CBLR are directory, not mandatory. The Tribunal, referencing the Hon'ble High Court of Bombay's guidelines, emphasized that delays must be justified with reasons and accountability. The Tribunal found that the delays were not reasonably explained, rendering the inquiry proceedings flawed.

3. Justification for revocation of CB License and forfeiture of security deposit:
The Tribunal concluded that the revocation of the CB license was not justified as the appellants were not found to have violated Regulations 11(d), 11(e), 11(m), and 11(n). However, the Tribunal upheld the forfeiture of the security deposit for the appellants' failure to be proactive in fulfilling their obligation under Regulation 11(a), particularly when dealing with documents received through intermediaries. The Tribunal modified the impugned order to this extent and allowed the appeal in favor of the appellants.

Conclusion:
The Tribunal set aside the revocation of the CB license but upheld the forfeiture of the security deposit due to the appellants' failure to fulfill their obligations under Regulation 11(a). The appeal was allowed with the modification that only the security deposit would be forfeited.