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TMI Blog2023 (9) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... possible to hold that there has been a blatant violation of this Regulation, which would justify the revocation of CB license. There is an attempt to embellish the allegations against the Appellant. It has been stated that the Appellant had knowledge before hand that the importer firms were dummy firms and was aware of this fact even prior to removal of the goods from custom bonded warehouses. This Court finds that there is no such finding against the Appellant in the orders of the Commissioner or the learned Tribunal and the same is also not evident from the statement dated 14.07.2017, which is the sole document relied against the Appellant; and therefore, this submission of the Respondent is not borne out from the record. Proportionality of the punishment handed down to the Petitioner - HELD THAT:- This Court however takes note that the Appellant was unable to provide the KYC records of the importer firms to DRI and Customs authorities despite undertaking to do so in reply to question in its statement dated 14.07.2017 and thereby raising an inference of lapse in collecting the KYC documents. This fact has also been highlighted by the Respondent in the written submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 26.03.2021 (Final Order No. C/A/51174/2021-CU [DB] hereafter the impugned order ) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereafter the Tribunal ) in Customs Appeal No. 50618/2019. 2. The Appellant had filed the aforementioned appeal before the learned Tribunal impugning the order-in-original dated 04.02.2019 passed by the Commissioner of Customs, (Airport and General), New Delhi (hereafter the Commissioner ). In terms of the said order dated 04.02.2019, the Commissioner had (i) revoked the Appellant s Customs Broker License (CHA License No. R-12/DEL/CUS/2009 - hereafter the CB License ); (ii) directed forfeiture of the security deposit of ₹ 75,000/- furnished by the Appellant; and (iii) imposed a penalty of ₹ 50,000/- on the Appellant. 3. The question that arises for consideration before this Court is that whether the Appellant, under Customs Brokers Licensing Regulations, 2018 (hereafter the CBLR, 2018 ) read with Customs Brokers Licensing Regulations, 2013 (hereafter the CBLR, 2013 ), is liable for reporting an offence committed in relation to goods stored in the bonded warehouse, after the same have been imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter forwarded its investigation report dated 10.05.2018 in this matter to the Commissioner. In view of the report, a show cause notice dated 10.08.2018 (hereafter SCN ) was issued to the Appellant stating that the Appellant had failed to perform its various obligations under the CBLR, 2018 read with the CBLR, 2013; and had acted in contravention thereof. The SCN further proposed revocation of the license, forfeiture of security and imposition of penalty. 4.8. Subsequently, an Inquiry Officer was appointed, who conducted the inquiry and submitted an inquiry report dated 06.11.2018 recording his finding that the allegations made in the SCN are proved against the Appellant and recommended action. 4.9. That on receipt of the Inquiry Report, the Appellant submitted its reply dated 28.01.2019 stating that there is no violation of the provisions of CBLR 2018 read with CBLR 2013. The Commissioner however, did not accept the Appellant s contention and passed the order-in-original dated 04.02.2019, revoking the Appellant s CB license, forfeiting the security deposit of ₹ 75,000/- as well as imposing a penalty of ₹ 50,000/-. 4.10. The Appellant thereafter filed the Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this stage. He states that the Appellant admittedly had no role in the falsification of the documents submitted by the accused showing re-export of the said goods. He states that the Appellant had no role to play in the diversion of the goods and there is admittedly, no allegation that the Appellant had any prior knowledge of the said intentions of the importer firms or that he has abetted in the aforesaid act of diversion. 7.2. He states that the punitive measure of revocation of the Appellant s CB License is disproportionate in the facts and circumstances of this case. Contentions of the Respondent 8. In reply, the learned counsel for the Respondent states that in view of the inculpatory admissions made by Mr. Diva Kant Jha i.e., proprietor of Appellant in his statement record before the DRI on 14.07.2017, the violation of the obligations cast upon him under the CBLR, 2018 read with CBLR, 2013 stands proved. 8.1. She states that the failure of the Appellant to obtain the requisite KYC documents and/or verify the documents made available to him by the importer firms is a clear violation of the mandatory obligations under the CBLR, 2018 read with CBLR, 2013. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage; xxx xxx xxx (n) verify correctness of Importer Exporter Code (IEC) number , Goods and Services Tax Identification Number (GSTIN), identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information; (Emphasis Supplied) Regulation 10(b) of CBLR, 2018 read with 11(b) of CBLR, 2013 11. The Commissioner has held the Appellant guilty of contravention of this Regulation on the finding that the Appellant herein has admitted that Mr. Sanjeev Maggu used to perform various functions pertaining to these importer firms such as bond approval from the New Custom House, New Delhi. The Commissioner held that the Appellant had become aware that the importer firms were dummy firms being (illegally) run by Mr. Ramesh Wadhera in connivance with Sh. Sanjeev Maggu and yet he allowed Sh. Sanjeev Maggu to transact business with Customs authorities; and this act and omission of the Appellant was in contravention of this Regulation. 11.1. The Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 8 in the statement recorded before the DRI on 14.07.2017 and opined that the Appellant failed to seek clarification from the importer firms as regards the re-exports. 14. As per Section 146 of the Act, the role of a custom agent is related to the business of entry or departure of goods at any Customs Station. The obligation of the Appellant in the facts of this case was to facilitate clearance of goods for warehousing, at the Customs Station and no further. Therefore, the duty of the Appellant as a Customs Broker came to an end once the imported goods, after its clearance from the Customs Station, reached the public bonded warehouse. 14.1. The Appellant, admittedly was not charged with any responsibility for clearance of the goods from the public bonded warehouse for the purpose of re-export. 14.2. The imported goods meant for the re-export were stored at the public bonded warehouses and the illegality by the importer firms was committed when the said goods were diverted by them into the domestic market without payment of the applicable custom duty. It is stated by the Respondent that the said importer firms filed fabricated documents to falsely show the re-export of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 28 to the owner/importer as a person chargeable to duty. The notice must, therefore, be served on the owner/importer. A service on the clearing agent of the owner/importer long after the clearing agent has ceased to deal with the goods in question under the Customs Act, cannot be treated as valid service of notice on the owner/importer. 9. Learned counsel for the appellant relied upon Section 229 of the Contract Act, 1872 under which any notice given to or information obtained by the agent, provided it be given or obtained in the course of the business transacted by him for the principal, shall, as between the principal and third parties, have the same legal consequences as if it had been given to or obtained by the principal. A contract between the importer and his clearing agent, however, is a special contract under which a clearing agent is authorised to perform various functions under the Customs Act for the purpose of clearing the goods from the Customs. Once he has discharged all his duties and functions as such agent and the goods in question have been cleared and delivered to the importer/owner, his work as a clearing agent in respect of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms Broker himself/herself for the clearance of the goods from the Customs Station at the time of entry or departure. In the facts of this case there is no finding that there was any error or discrepancy in the warehousing bill of entry submitted by the Appellant at the Customs Station. 15.6. Therefore, in the facts of this case, in the opinion of this Court there has been no violation of Regulation 10(d) of CBLR, 2018 read with 11(d) of CBLR, 2013. 15.7. The question framed at paragraph no. 3, is accordingly, answered in the aforesaid terms. Regulation 10(e) of CBLR, 2018 read with 11(e) of CBLR, 2013. 16. In the facts of this case, this Court is of the opinion that there has been no violation of Regulation 10(e) of CBLR, 2018 read with Regulation 11(e) of CBLR, 2013. The Commissioner held that the Appellant by dealing with Sh. Sanjeev Maggu on behalf of the importer firms in clearance of the cargo, failed to exercise due diligence and thereby causing loss to the revenue. The learned Tribunal referred to the answer given by the Appellant to question no. 8 in the statement dated 14.07.2017 to uphold this finding of the Commissioner. 16.1. The said Regulation c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter firms. The said fact of valid IEC has not been disputed by the Respondent. 18.3. In this regard, it would be relevant to refer to the judgment of a Coordinate Bench of this Court in Kunal Travels (Cargo) (supra), wherein this Court held that when an importer firm holds an IEC, there is a presumption attached that the KYC of the importer by physical verification of the address would have been done by the Customs authorities. The relevant portion of the judgment in Kunal Travels (Cargo) (supra) reads as under: 12. Clause (e) of the aforesaid Regulation requires exercise of due diligence by the CHA regarding such information which he may give to his client with reference to any work related to clearance of cargo . Clause (l) requires that all documents submitted, such as bills of entry and shipping bills delivered etc. reflect the name of the importer/exporter and the name of the CHA prominently at the top of such documents. The aforesaid clauses do not obligate the CHA to look into such information which may be made available to it from the exporter/importer. The CHA is not an inspector to weigh the genuineness of the transaction. It is a processing agent of documents w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or of the consignment. Documents prepared or filed by a CHA are on the basis of instructions/documents received from its client/importer/exporter. Furnishing of wrong or incorrect information cannot be attributed to the CHA if it was innocently filed in the belief and faith that its client has furnished correct information and veritable documents. The misdeclaration would be attributable to the client if wrong information were deliberately supplied to the CHA. Hence there could be no guilt, wrong, fault or penalty on the appellant apropos the contents of the shipping bills. Apropos any doubt about the issuance of the IE Code to M/s. H.S. Impex, it was for the respondents to take appropriate action. Furthermore, the inquiry report revealed that there was no delay in processing the documents by the appellant under Regulation 13(n). (Emphasis supplied) 18.4. The Appellant has stated that there is no dispute that importer firms exist and they have participated in the investigation conducted by DRI. It is stated that the fact that these firms are dummy firms which are controlled by third parties was a fact which was not within the knowledge of the Appellant while he was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut from the record. Proportionality of the punishment handed down to the Petitioner 21. This Court however takes note that the Appellant was unable to provide the KYC records of the importer firms to DRI and Customs authorities despite undertaking to do so in reply to question no. 3 in its statement dated 14.07.2017 and thereby raising an inference of lapse in collecting the KYC documents. This fact has also been highlighted by the Respondent in the written submissions dated 11.09.2023. 21.1. In the opinion of this Court in view of the judgment of Kunal Travels (supra), the said inaction of the Appellant cannot justify the imposition of the maximum punishment of revocation of the license. There is no finding against the Appellant that he in any manner connived with the importer firms or abetted the said firms in their wrongful actions in diverting the goods to the domestic market without payment of customs duty, which led to the loss to the revenue. There is no finding that the Appellant earned extra commission for the assignment for clearance of imported goods from the Customs Station or has partaken in the illegitimate gains made by the importer firms. 21.2. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e., almost 4 years is itself a severe punishment and will serve as a reprimand to the Appellant to conduct its affairs with more alacrity. A penalty of revocation of license for failing to collect the KYC forms unjustly restricts the Appellant s ability to undertake the business CHA for the entire life. Thus, keeping in view the proportionality doctrine and keeping in view that the Appellant has already been unable to work for 4 years, this Court is therefore of the opinion that the impugned order of the learned Tribunal as well as the order-in-original dated 04.02.2019 to the extent that it revokes the Appellant s license and forfeits the security deposit is liable to be set aside. 23. The impugned order of the learned Tribunal as well as the order-in-original dated 04.02.2019 to the extent it imposes penalty of ₹ 50,000/- is upheld. 24. Since the tenure of the license expired on 09.03.2019, the Appellant will be at liberty to apply for the grant of a new license and if such an application is made, the same will be considered under the extant regulations. 25. The question framed at paragraph no. 3 is answered in favour of the Appellant. The appeal is allowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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