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TMI Blog2022 (6) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant for undertaking KYC. The only allegation that has been made the ground for not complying/ discharging the obligations casted under CBLR, 2018 is that CB had not physically met and physically verified their premises. The CB was require to do the KYC on the basis of the documents prescribed. Undisputedly such KYC was done by the appellant, only what was not done was physical meeting and physical verification of the premises. There are no merits in any of the findings recorded by the Principal Commissioner, in respect of any of the charges framed against the appellant under regulation 10 (a), (d) (n), 13 (12) whereas the findings recorded by the enquiry officer are more justifiable and logical. It is also not the case of revenue that appellant was in any way involved in abetting or colluding with the alleged fraudsters in the substitution of export consignments after their clearance from CFS. If the fact of not involvement with the act of smuggling the Red Sanders, is to be held in favour of the Appellants than in our view the punishments inflicted by the impugned order on the appellants are excessive and not proportionate to the violations committed if any. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as all the F , G H cards issued there under immediately. 2. This order is passed without prejudice to any other action which may be taken against the Customs Broker under the Customs Act, 1962, or any other act for the time being in force in the Union of India. 2.1 A case of substitution of the export consignment at the Chennai Port, by the Red Sanders was undertaken for investigation by the Directorate General of Revenue Intelligence. During the investigation it was revealed that the shipping bills for the export of the said consignments were filed by the appellant/ employee of the Appellant as Custom Broker. 2.2 After making necessary enquiries, Commissioner Customs Chennai VIII, vide his order dated 22.03.2019 prohibited the appellant from undertaking activities at Chennai Port. The text of order is reproduced below: ORDER 12. In view of the discussions above and in exercise of the powers conferred under provisions of Regulation 15 of the Customs Broker Licensing Regulations, 2018, I prohibit the Customs Broker M/s Friend Syndicate Clearing Pvt Ltd. (CB No. 11/435) [PAN AABCP0413G] from working in any section of the Customs Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the powers conferred under provisions of Regulation 16 (2) of the Customs Broker Licensing Regulations, 2018, hereby order that the suspension of CB License No 11/435 [PAN AABCP0413G] held by M/s Friends Syndicate Clearing Pvt Ltd., ordered vide Order No 93/2018-19 dated 29.03.2019, will continue to remain in force at Chennai Customs Commissionerate while the suspension at other Customs Commissionerates/ Stations where the CB is authorized to operate is hereby revoked with immediate effect, pending enquiry under Regulation 17 of CBLR, 2018. 14. This order is being issued without prejudice to any other action that may be taken against the CB or any other person(s)/ firm(s) etc., under the provisions of the Customs Act, 1962, or any Rules/ Regulation framed thereunder or any other law for the time being in force. 2.5 A show cause notice dated 08.07.2019 was issued to appellant proposing to revoke the license, forfeit the security deposit and for imposition of penalty, alleging as follows: 05. Further, from the facts of the case and the statement of Shri Udhyarajan, it appears that they carried out Customs Broker work and allowed the use of their Customs broker licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., (C.B Licence No. 11/435; PAN NO. AABCF0413G) did not exercise due diligence in discharging their obligations as mandated its duties as mandated under Regulations 10(a), 10(d), 10(n) 13(12) of CBLR, 2018 and for wilful/ intentional violation the license of M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) was liable for revocation under Regulation 14 of CBLR, 2018. Therefore, action was taken and the Customs Broker License held by M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) was suspended vide order No 93/2018-19 dated 29.03.2019 under the provisions of regulation 16 (1) of CBLR, 2018. Thereafter Personal Hearing to the CB was given and suspension of M/s. Friends Syndicate Clearing Pvt. Ltd., (C.B Licence No. 11/435; PAN NO. AABCF0413G) was revoked except Chennai by the competent authority vide order No 20/2019-20 dated 20.06.2019 under Regulation 16 (2) of the CBLR, 2018. 2.6 Thereafter enquiry was conducted against the appellant and the Inquiry Officer vide his report dated 21.05.2021 concluded as follows: Sr No Charges against the CB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from the exporter (M/s. Ever Stone Minerals) on its Letter head bearing original rubber stamp. They also received KYC documents of exporter, authenticity of which has not been disputed by the department. The genuineness of IEC, GSTIN and that of the exporter is not in dispute. The exporter has also presented himself for statement recording before DRI-CZU. Thus, it is not the case of exporter or IEC being bogus or fictitious. The container was stuffed and sealed in the presence of the officer assigned and the employee of the Appellant. The employee of the Appellant also took photograph of the container which was also submitted as evidence to DRI- CZU. There is a specific finding that Quartz Lumps have been substituted with red sanders logs enroute to the port after stuffing. It is submitted that, pursuant to the stuffing of the container, the Custom Broker has no further obligation towards the goods and the goods no longer remain in control of the Custom Broker. Thus, they have not violated Regulation 10(a), 10(d), 10(n) and 13(12) of the CBLR, 2018. There is no requirement under CBLR, 2018, to physically verify the existence of the exporter as have been held in follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order along with the submissions made in appeal and during the course of arguments. 4.2 While considering the charges made against the appellant, inquiry officer has observed as follows: 17. As regards to the allegation of violation of Regulation 10(a) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 10(a) of the CBLR, 2018 in the instant case. I have gone through entire documents relevant to the case and I find that is not indicated and brought any evidence in support of the said charge. During the personal hearing and through written submission also, the Customs Broker contested that the department have failed to indicate any specific instance where the Customs Broker have effected the clearance of the goods without an authorization from their clients. It has also been submitted by the Customs broker that during the statements they have produced a copy of the authorization, which will establish that there was no substance in the allegation of not obtaining the authorization. In the Statement of Shri K, Udhayarajan, Business Development Manager of CB Company, FSCPL Liner Company, RR Shipping recorded under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is not conclusively proved . 19.1 As regards to the allegation of violation of Regulation 10(n) of CBLR 2018, it has been submitted by the Customs Broker that there has been no violation of Regulation 10(n) of the CBLR, 2018 in the instant case. It was submitted by the Customs broker that the correctness of the IEC number and Identity of the exporter are not in doubt or dispute; that the SCN under reference also does not make an averment that IEC was forged. The exporter (IEC holder) in fact presented himself during Investigation and his statement was also recorded as can be seen from the SCN F No. DRUCZUNIH/48/ENQ-1/Int-19/2018 dated 08.02.2019. The KYC documents were duly received by the Customs Broker and are on record. There is no discrepancy in IEC and address of the exporter. 19.2 t find that it was not disputed that KYC documents were not received by the Customs Broker. I find that no physical verification of the importer's/exporter's premises is mandated in the CBLR, 2018. In this regard, I rely upon the decision in the case of APS Freight Travels Pvt. Ltd, V8, Commissioner of Customs (General). New Delhi, reported in 2016 (344) ELT 602 (Tr. -Del) wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncipal place of business (iii)mailing address of the company (iv)telephone, fax number, e-mail address. (i)Certificate of incorporation (ii)Memorandum of Association (iii) Articles of Association (iv)Power of Attorney granted to its managers, officers or employees to transact business on its behalf. (v)Copy of PAN allotment letter (vi)Copy of telephone bill 3. Partnership firm (i)Legal name (ii)Permanent address, in full, complete and correct. (iii)Name of all partners and their addresses, in full complete and correct. (iv)telephone, fax number, e-mail address of the firm and partners (i)Registration certificate, if registered (ii)Partnership deed (iii)Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf (iv)Any officially valid document identifying the partners and the person holding the Power of Attorney and their addresses. (v)Telephone bill in the name of firm/partners. 4. Trusts, Foundat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of the CBLR in the Instant case... 20.2 The matter was adjudicated by the Joint Commissioner of Customs Chennai IV, Chennal vide F.No. Adjn/DRVEDC/02/2019- CH-N dated 24.01.2020. Vide the said order Penalty of Rs. 10,00,000/- was imposed on Sh. K Udhayarajan U/S 114 and Rs.5,00,000/- U/S 114AA of the Customs Act, 1962. There la no penalty/ fine Imposed on Customs Broker M/s, Friends Syndicate Clearing Pvt. Lid, in the above said order, 20.3 I rely upon the decision in the case of Natvar Parkh Co. Pvt Ltd. Vs. Commissioner of Customs, Chennai, reported in 2012 (281) ELT 116 (Tri. Chennai), wherein the Hon'ble CESTAT observed that: 18. After hearing both sides / find that there is nothing to indicate that the appellant has acted malafide In any manner. It is usual in international trade these days for logistics companies to act as agents of the importers and exporters and engage CHAs on their behalf. 20.4 Thus, from the facts available in the instant case, the role of Customs Broker Ms. Friends syndicate clearing Pvt. Ltd. In exercising such supervision as may be necessary to ensure proper conduct of his employees in the transaction of business and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... betting would not sustain . 21.4 Further, I rely upon the decision in the case of N.T. Rama Rao Co. Vs. Commissioner of Customs, Chennai-Vill reported in 2020 (371) E.L.T. 789 (Tri - Chennai), wherein the Hon'ble Tribunal held that: 5. Heard both sides and perused the records of the case. On going through the records of the case, it is clear that the customs broker has filed a shipping bill for the purported export of natural slate stone on behalf of M/s. Amrita Export. The same has been permitted to be stuffed Into the container, after due examination by the Preventive Officer posted in the CFS, a onetime bottle seal has also been affixed. The allegations against the appellants appear to be based on the statements of personnel of the Customs Broker, Sh S, Muthukrishnan in charge of Customs Broker in his statement dated 28-8-2017 and Shri N.V.S. Prasad, General Manager of the Customs Broker in his statement dated 1-9-2017 have accepted that they have never met the exporter and have not verified the KYC details and genuineness of the EC holder and failed to notice the difference in the name of the exporter. We find that there is certain force in the argument of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations other than Chennai 21:7 The documentation, carting, stuffing, examinations, sealing are carried out in the presence of authorized representative of the CB and Customs Officers. The transportation of CFS stuffed sealed containers from CFS to the port, is the sole responsibility of the CFS. I have perused the copy of the said Shipping Bill as submitted by the Customs Broker, bearing No. 6605230 dated 01.08.2018 and endorsement of the P.O. Viking CFS, wherein details of the said five containers and packages/crtns., sealed with Customs OTL No. and Liner Seal number duly endorsed by the Customs Officer after stuffing and examination is over. It is evident that no irregularity has taken place during the material period i.e. stuffing, examination and upto sealing, which was held in the premises of Viking CFS. 21.8 In view of the fact that the substitution of stuffed goods by the contraband was done after the goods in containers were removed from the warehouse, the role of the CB in attempted illegal contraband export cannot be established. Neither any of the involved persons have attributed anything about the involvement of the CB. Thus, the CB has not violated the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents from Shri' S. Venkatesan, forwarder M/s. VKR Impex.The investigation revealed that the CB accepted the documents from a person who was not an employee of the exporter and CB never tried to find out the genuineness and antecedents of the exporters. The CB had no interaction with the exporter IEC holder. Despite enough experience in Customs Broking, it is strange that this did not arouse suspicion in mind of CB especially when CB was not in touch with their clients by any means. Thus it is evident that Customs Broker was deliberately not dealing with the exporter and he obtained authorization without proper verification of KYC documents in order to run their business. The whole purpose of obtaining authorization has been defeated i.e. to ensure that the CB has interacted with the genuine exporter and is aware of the goods to be cleared on behalf of the client. The CB has filed the Shipping Bill without proper verification of the authorization letter from the exporter as mandated under Regulation 10(a) of the CBLR, 2018. Hence, I hold that the CB failed to fulfill the obligation of Regulation 10(a) of CBLR, 2018. 8. It has been alleged that CB had not advised his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri R. Paneerselvam, the actual proprietor of IEC of M/s. Ever Stone, Minerals, Chennai, had refused to accept any relations with the subject export consignment and the persons Shri, Murugan of M/s. Marvels Exports. Shri K. Udhayarajan also admitted that they did not verify the KYC of the exporter as mandated by the CBLR, 2013 (Now CBLR, 2018) and they had blindly trusted the forwarder Shri S. Venkatesan for want of runs business. They also accepted that if they had verified the genuineness of the forwarder, they would not have taken this business reference from him and could have avoided this kind of smuggling of red sanders and admitted their mistake. The CB conveniently made no efforts to know if the exporter was genuine or not and instead consciously turned a blind eye to all discrepancies as they were a part of the syndicate. As a Customs Broker, while accepting the documents from the third person, they did not take due care to verify the client, their business functioning, antecedents, genuineness of business, the export details and its correctness etc., using any independent, reliable and authentic means: There is no denying the fact that the CB M/s. Friends Syndicate Cleari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase in spirit and in rem. 4.4 From the above facts as stated in the inquiry report and in the impugned order, it is quite evident that the entire case made against the appellant is on account of their failure not to properly and completely verify the antecedents of the person/ client entrusting them with the paper and consignment for export. In view of the judgements relied upon by the Appellant and those referred in the inquiry report there was no need for physical visit to the premises and meeting with the client before taking the job. Principal Commissioner has relied upon the statement recorded during the course of investigation. These statements have not been corroborated. Even the statutory documents produced by the appellant for undertaking the KYC of the exporter (IEC Holder) have not been verified and found to fake etc. It is not even the case of revenue that these documents were not taken by the Appellant for undertaking KYC. The only allegation that has been made the ground for not complying/ discharging the obligations casted under CBLR, 2018 is that CB had not physically met and physically verified their premises. The CB was require to do the KYC on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-declaration of retail sale price on auto parts imported by them for assessment under Section 4A of the Central Excise Act, 1944 for CVD. We find that the bill of entry was filed by the appellant after the goods were detained by the officers of DRI. The said bill of entry was filed on first check basis for verification of the goods before assessment. In such a situation, we find that no mala fide or intentional violation of any provisions of the Customs Act can be alleged on the part of the Customs broker. Regarding KYC norms and obligations under Regulation 11, we find that case as made out in the original order is neither convincing nor sustainable. 9. We find that the impugned order did not make out a sustainable case for revocation of licence. In the case of Setwin Shipping Agency v. CC (General), Mumbai - 2010 (250) E.L.T. 141 (Tri.-Mumbai), the Tribunal held that there is no requirement for the CHA to verify physically the premises of importer/exporter. The Tribunal also observed that it is a settled law that the punishment has to be commensurate and proportionate to the offence committed. In the present case, we notice that the punishment of revocation is not justifia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of discussions as above we do not find any merits in any of the findings recorded by the Principal Commissioner, in respect of any of the charges framed against the appellant under regulation 10 (a), (d) (n), 13 (12) whereas the findings recorded by the enquiry officer are more justifiable and logical. In the case of ACE Global Industries [2018 (364) ELT 841 (Tri Chennai)] tribunal observed as follows: 6. We are unable to appreciate such a peremptory conclusion. The CBLR, 2013 lays down that stepwise procedures are to be followed before ordering any punishment to the Customs broker. True, the said regulations do contain provisions for revocation of the license and for forfeiture of full amount of security deposit, however these are maximum punishments which should be awarded only when the culpability of the Customs broker is established beyond doubt and such culpability is of very grave and extensive nature. In case of such fraudulent imports, for awarding such punishment, it has to be established without doubt that the Customs broker had colluded with the importer to enable the fraud to take place. No such culpability is forthcoming in respect of the appellant herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o exercise due diligence to ascertain the correctness of information he imparts to his client. (iv) Regulation 11(n) for failure to verify antecedent, correctness of IEC no. and identity of the client. 8. The investigations undertaken by DRI has established that the imports have been made making use of the IEC Code number of M/s. Unisys Enterprises. The partners of M/s. Unisys Enterprise have admitted that they were not the actual importers but the import was organized by Shri Amar Vachhar. For monitory considerations, the IEC code number was allowed to be utilised by M/s. Unisys Enterprise. It is further on record that Shri Amar Vachhar has been in touch with Shri Sameer Jha, proprietor of appellant firm. 9. Violation of Regulation 11(a) has been alleged against the appellant. The argument of the appellant is that there is no need for a personal meeting of the CB with the importer. However, we find that this is a case where IEC of the importer firm was being misused by a third person, Shri Amar Vachhar who was neither partner nor held any other official position in that firm. Both the partners of M/s. Unisys Enterprises have disclosed in their statements to DRI t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has relied upon the following decisions in his order: Rubal Logistics Pvt. Ltd. [2019 (368) E.L.T. 1006 (Tri. Del.]. 6.1 These provisions require the Customs Broker to exercise due diligence to ascertain the correctness of any information and to advice the client accordingly. Though the CHA was accepted as having no mens rea of the noticed misdeclaration/under- valuation or mis-quantification but from his own statement acknowledging the negligence on his part to properly ensure the same, we are of the opinion that CH definitely has committed violation of the above mentioned Regulations. These Regulations caused a mandatory duty upon the CHA, who is an important link between the Customs Authorities and the importer/exporter. Any dereliction/lack of due diligence since has caused the Exchequer loss in terms of evasion of Customs Duty, the original adjudicating authority has rightly imposed the penalty upon the appellant herein. HLPL Global Logistics Pvt. Ltd. [2019 (370) E.L.T. 501 (Tri. - De!.)} wherein it was held that - Under the circumstances, we are in agreement with the finding of the Ld. Adjudicating authority that CHA helps not properly verified the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be suspended or revoked on any of the grounds as mentioned in Regulation 21. It is, therefore, clear that if any of the grounds enumerated existed, two courses are open to the Commissioner. One is to suspend the licence and the other is to revoke it. Suspension would obviously mean that licence would be for a particular period inoperative. An order of revocation would mean that licence is totally inoperative in future, it loses its currency irretrievably. Obviously, suspension/revocation, as the case may be, has to be directed looking to the gravity of the situation in the background of facts. For minor infraction or infraction which are not of very serious nature order of suspension may suffice. On the contrary, when revocation is directed it has to be only in cases where infraction is of a very serious nature warranting exemplary action on the part of the authorities, otherwise two types of actions would not have been provided for. Primarily it is for the Commissioner/Tribunal to decide as to which of the actions would be appropriate but while choosing any of the two modes, the Commissioner/Tribunal has to consider all relevant aspects and has to draw a balance sheet of gravit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has stressed that the infraction in this case is not a routine matter, but rather, illegal smuggling of narcotics by the G card users. However, given the factual finding that the CHA was not aware of the misuse of the G cards (and thus, also unaware of the contents being smuggled), no additional blame can be heaped upon the CHA on that count alone. Rather, the only proved infraction on record is of the issuance of G cards to non-employees, as opposed to the active facilitation of any infraction, or any other violation of the CHA Regulations, whether gross or otherwise. Neither have any such allegations been raised as to the past conduct of the appellant, from the time the license was granted in January, 1996. Equally, it is important to note that the appellant has - as of today - been unable to work the license for 8 years, and thus been penalized in this manner. This is not to say that the trust operating between the Customs Authorities and the CHA is to be taken lightly, or that violations of the CHA Regulations should not be dealt with sternly. A penalty must be imposed. At the same time, the penalty must - as in any ordered system - be proportional to the violation. Just as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the licence or its refusal of its renewal. 4.15 Madras High Court has in case of Transport Logistics [2016 (338) ELT 380 (Mad)] held as follows: 13. In any event, for giving signed blank forms to third parties, the revocation of licence is harsh penalty and the punishment should commensurate for guilty of offence. Therefore, the order of the Commissioner of Customs revoking the CHA licence as confirmed by the CESTAT is set aside. 14. By this order, this Court only restore the CHA licence. However, forfeiture of the security deposit is concerned, there is a violation of CHA regulation by the appellant. Interest of justice would be met by restoring the CHA licence and confirming the order of forfeiture of security deposit. 4.16 We also take note of the following submissions made by the appellant which have not been disputed by the revenue authorities: They have been performing as CB for nearly 40 years and have developed goodwill for their firm in trade. They have performed their functions throughout as Custom Brokers with utmost care and diligence, and their past record is evidence for their goodwill, integrity and efficiency in handling the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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