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TMI Blog2024 (3) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... ants facilities at Speedy CFS, particularly the trailer truck, entry/exit gates were used for pilferage of customs seized goods contained in container No.GESU-4913126. We find that it is clearly proved by the above factual reports arising out of the investigation conducted by Customs that the appellants CFS had violated the obligations cast upon them under Regulations 5(1)(i)(n), 6(1)(f) and 6(1)(i) of HCCAR, and hence we do not have any hesitation in arriving at the conclusion that the appellants did not fulfil the conditions of Regulation 5(1)(i)(n), 6(1)(f) and 6(1)(i), by their failure to restrict unauthorized access into the premises and allowing the pilferage of goods and by their failure to provide safe and secure storage facility of customs seized goods kept in the containers within Speedy CFS premises and allowed certain unauthorized persons to remove the customs seized goods. Hence, we are of the considered view that imposition of penalty on the appellants under Regulation 12(8) of HCCAR and Section 117 of the Customs Act, 1962, is sustainable. The HCCAR apply to the custodian under the provisions of Section 141(2) of the Customs Act, 1962 which interalia prescribe the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Customs had passed an order on 18.11.2020. Hence, there are clear violations of the HCCAR and Section 141(2) of the Customs Act, 1962 by the appellant and thus we do not find any infirmity in the impugned order imposing penalty u/s 117 ibid on the appellants. Thus, the appeal filed by the appellants is dismissed - The miscellaneous application stands disposed of. - MR. S.K. MOHANTY, MEMBER (JUDICIAL) AND MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) Shri Jitu Motwani, Advocate for the Appellant Shri S.K. Hatangadi, Authorized Representatives for the Respondent ORDER This appeal has been filed by M/s Speedy Multimodes Limited, Navi Mumbai (herein after, referred to, for short as the appellants ), being aggrieved against the Order-in-Original No. 01/2023-24/COMMR/NS-GEN/CAC/JNCH dated 05.04.2023(referred to as impugned order ) passed by the learned Commissioner of Customs (General), Jawaharlal Nehru Custom House (JNCH), Nhava Sheva. 2.1 Briefly stated, the facts of the case are that the appellants inter-alia are operating Speedy Multimode Container Freight Station (Speedy CFS), at Nhava Sheva and was appointed as a custodian of Container Freight Station (CFS) under Section 45(1) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrived at Speedy CFS at 2.30 P.M. on 08.12.2020, for ascertaining whether the imported cargo contained in container No. GESU 4913126 is lying safely. The panchnama proceedings were drawn for the above verification revealed that the panchnama witnesses verified the container seal No. SML 1054 affixed to the said the container and opened all packages one by one, and the goods were found in all a total of 652 packages. The aforesaid verification revealed that there were for 4 carton boxes containing 100 cartons, each containing 240 sticks of cigarettes (4X100X240=96,000 sticks); 448 carton boxes, each containing 60 cartons and each carton containing 240 sticks of cigarettes (448X60x240=64,51,200 sticks); and the balance 200 carton boxes were found to be wrapped with polyethene on it and found to contain with one bag of stones, clothing rugs on the top along with 10 cartons of cigarettes. (200X10X240=4,80,000 sticks). Thus the verification conducted by the CIU-JNCH and the DRI revealed that as against the seized 93,60,000 sticks Gudang Gram brand cigarettes, they actually found only 70,27,200 sticks, revealing a shortage of 23,32,800 cigarettes sticks. 2.4 Thus, the modus of removing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a large scale operator dealing with capacity of almost 1200 containers and has 700 employees and grave hardship will be caused by the sudden disruption by suspension of license, the Hon ble High Court of Bombay was of the opinion that they should grant time to the Respondent department to take instructions and considering that the suspension order will come into force on 16 April 2023, the period needs to be deferred. Accordingly, the Hon ble High Court adjourned the case for 02.05.2023, by rescheduling the period of suspension to commence from 04.05.2023, subject to further orders to be passed by them in the said Writ Petition. As the department respondents sought time, the matter was further adjourned to 12.06.2023 with a stay on commencement of suspension up to 19.06.2023. Subsequently, the matter was heard from both sides and a final order was passed by the Hon ble High Court of Bombay on 19.06.2023 extending the protection granted by the Court to continue to operate till an order is passed by this Tribunal on their application for stay, appeal and by keeping all the contentions of the parties open for passing appropriate orders by this Tribunal within a period of three months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds were given only in the month of September October, 2020. However in terms of Disposal manual-2019, the department is required to dispose of the seized cigarettes immediately after seizure as these are categorised as goods having short shelf-life. Further, the successful auction bidder M/s D.K. Enterprises had carried out the labelling activity by opening the container having seized goods and closed the container; in this regard, he stated that for ensuring that the entire seized goods were safely kept inside the container after labelling, neither there exist any documents nor panchnama proceedings were drawn by the customs authorities. Hence he pleaded that the appellant shall not be held responsible for the delay in disposal of the goods by the department and for not accounting the seized goods during the process of such labelling. 3.4 Further, Learned Advocate stated that the appellants have not failed to provide security to the seized goods. Hence, he stated that the appellants are not responsible for the theft which occurred due to the contractors/third party engaged in packing and relabelling the seized goods. Learned Advocate also stated that the order for recovery of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Customs (General) in the impugned order dated 05.04.2023, in exercise of the powers vested with him under Regulation 11(1) of HCCAR, after duly following the procedure stated therein, had ordered for suspension of approval which was granted to the appellants for operation as Customs Cargo Service Provider (CCSP) for a period of 15 days w.e.f. 16.04.2023 to 30.04.2023 subject to certain conditions or relaxation, for allowing import-live cargo pending clearance and existing export consignments to be exported and for auction of goods on which notices have been issued at the appellants CFS. Besides the above, the impugned order also imposed penalty on the appellants under Section 117 ibid and Regulation 12(8) of HCCAR and ordered for recovery of the value of pilfered goods under Regulation 5(6) of HCCAR. Thus, we would like to examine the case before us in great detail with respect each of its factual matrix as well as on the legality of the Handling of Cargo in Customs Areas Regulations (HCCAR), 2019 framed under of Section 141 (2) of the Customs Act, 1962. 6.2 We further note that the Hon ble High Court of Bombay in its judgement dated 19.06.2023 had observed as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,22,67,440/- being the value of preferred goods is sustainable under Regulation 5(6) of HCCAR; and (iii) whether the appellants CFS have violated the obligations cast upon them under Regulations 5(1)(i)(n), 6(1)(f) and 6(1)(i) and consequent to the determination of these violations as applicable, whether imposition of penalty on the appellants under Regulation 12(8) of HCCAR and Section 117 of the Customs Act, 1962, is sustainable. 7. On perusal of the records and factual matrix of the case, it is seen that there was a specific information received by Central Intelligence Unit (CIU) of JNCH Customs that some unscrupulous persons in and around the Speedy CFS area are contemplating to exchange/transfer seized cargo lying in Speedy CFS, the officers of CIU-JNCH and DRI-MZU had arrived at Speedy CFS at 2.30 P.M. on 08.12.2020, for ascertaining whether the imported foreign origin cigarettes in container No. GESU 4913126, which were earlier seized by DRI-MZU and kept under safe custody of custodian CFS is lying safely or not. Earlier, on specific intelligence received by DRI-MZU that imported foreign origin cigarettes in container No. GESU 4913126 belonging to M/s Siddhivinayak Trading C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CFS vide their letter reference No. SML/HR/Notice/Dec.2020/012 dated 09.12.2020, for registration of FIR on the said theft. Further, the appellants CFS also informed the local police authorities about the possible modus of such theft. The relevant paragraphs of the letter written by appellants to the local police authorities vide reference No. SML/HR/Notice/Dec.-2020/013 dated 10.12.2020 is extracted below: 1) Once the cargo is cleared by Customs authorities, the cargo is sent out of CFS by using exit gate pass which as per the procedure is finally signed by the General Manager Operations and or his immediate subordinate. In the matter under reference the said stolen cargo must have gone out of CFS using the exit gate pass duly signed by the then General Manager Operations Mr. Jitender Chauhan or his deputy Mr. Sandeep Likhite. we strongly feel that these two officials of our company may put more light on the matter to solve this case of alleged theft. Justin found that Mr. Jitender Chauhan has recently resigned from the services of our company and he is no more working with us. 3) when we started our own enquiries from our direct as well as indirect employees, we came to know that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area in such manner as may be prescribed and the responsibilities of persons engaged in the aforesaid activities shall be such as may be prescribed. Regulation 1. Short title and commencement.- (1) These regulations may be called the Handling of Cargo in Customs Areas Regulations, 2009. (2) They shall come into force on the date of their publication in the Official Gazette. xxx xxx xxx xxx Regulation 2. Definitions.- (1) In these regulations, unless the context otherwise requires, - (a) Act means the Customs Act, 1962 (52 of 1962); (b) Customs Cargo Services provider means any person responsible for receipt, storage, delivery, dispatch or otherwise handling of imported goods and export goods and includes a custodian as referred to in section 45 of the Act and persons as referred to in sub-section (2) of section 141 of the said Act; xxx xxx xxx xxx Regulation 5. Conditions to be fulfilled by Customs Cargo Service provider The Customs Cargo Service provider for custody of imported goods or export goods and for handling of such goods in a customs area shall fulfill the following conditions, namely:- (1) Provide the following to the satisfaction of the Principal Commissioner of Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... custody; (j) be liable to pay duty on goods pilfered after entry thereof in the customs area; xxx xxx xxx xxx (q) abide by all the provisions of the Act and the rules, regulations, notifications and orders issued thereunder. We also find that the sub-section (2) to Section 141 was firstly introduced in the Union Budget for the year 2008, by amending Section 141 which is extracted below: Amendment of section 141 69. Section 141 of the Customs Act shall be numbered as sub-section (1) thereof and, after sub-section (1) as so numbered, the following sub-section shall be inserted, namely :- (2) The imported or export goods may be received stored, delivered, despatched or otherwise handled in a customs area in such manner as may be prescribed and the responsibilities of persons engaged in the aforesaid activities shall be such as may be prescribed. In terms of the Rules of Procedure and Conduct of Business in Lok Sabha, there is a requirement for any bill providing for giving law making power on the subject or to any person i.e., power to make delegated legislation in the form of Regulations in this case, to follow the requirements of Rule 70. The said rule is extracted below: 70. A Bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. 10.1 Learned Advocate appearing for the appellants giving his written submission during the hearing challenged the impugned order on the grounds that the order of the Commissioner demanding the value of pilferage of goods as per Regulation 5(6) of HCCAR which has not been proposed in the SCN and thus have gone beyond the scope of SCN. Thus he claimed that the learned Commissioner has erred in his order and thus the impugned order is not sustainable. Further, he had questioned about the legality of the order on recovery of the value of pilfered goods kept in the safe custody of custodian/CCSP and the imposition of penalty in the impugned order. 10.2 It could be seen from SCN dated 26.07.2021, that it has been proposed for initiating action under Regulation 11 of HCCAR for suspension/revocation of the appointment as CCSP by initiating a separate inquiry proceedings under Regulation 12 HCCAR, besides imposition of penalty. It is also seen that Regulation 12 ibid provide for detailed procedure for appointment of inquiry authority, providing sufficient opportunities for the CCSP who are alleged to have violated HCCAR and in the course of inquiry consider all documentary evidences, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by consolidating the existing legal provisions governing Sea Customs, Land Customs and Air Customs, by enacting a new legislation through introduction of the Customs Bill, 1962 (Bill No. 56 of 1992) in the Parliament on 15th June, 1962, which became the Customs Act, 1962 (Act 52 of 1962) with effect from 13.12.1962. The Statement of objects and reasons for introduction of the Customs Bill and the relevant notes on clauses which explain the specific provisions of Section 141 ibid, is extracted below: STATEMENT OF OBJECTS AND REASONS The Sea Customs Act which lays down the basic law relating to customs was enacted more than 80 years ago. It has been amended from time to time and some important amendments were made by the Sea Customs (Amendment) Act, 1955. General and comprehensive revision of the Act has not so far been undertaken. Several provisions of the Act have become obsolete. Difficulties have also been experienced in the implementation of certain other provisions. The trade has been pressing for certain changes and facilities. Smuggling, consequent to controlled economy, has presented new problems. To meet these requirements, it has become necessary to revise the Act. The Lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd goods in a customs area shall, for the purpose of enforcing the provisions of this Act, be subject to the control of officers of customs. Clause 141 is a new provision under which all conveyances and goods in a customs area shall for the purposes of enforcing the provisions of the new law be subject to the control of customs officers. This is necessary for effective control over goods and conveyances. The new clause covers the provisions in the existing Sections 77 and 78. The plain reading of the above provisions and the notes on clauses explain that the earlier system of imported goods being discharged to the Port Commissioners or Port Trust were being replaced with the new provision of appointment of custodian under Section 45 of the newly introduced Customs Act in 1962. The then existing system of shipping agents being responsible for discharge and damage, if any, were deleted and under the new dispensation, the custodian was being made responsible for accounting and holding custody of the imported goods, till the time these goods were cleared for home consumption or for transhipment or to be moved to bonded warehouses. At that relevant time, since port trusts were handling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... custodian who was initially appointed by the Commissioner of Customs, JNCH Customs vide Notification No. 03/2018 dated 05.02.2018 and were further given custodianship for extended period as per their application and the custodianship were periodically renewed from time to time. Therefore, it must be understood that the custodians appointed under Section 45(2) ibid, are governed by the legal provisions of the Customs Act, 1962 as a whole including Section 141 of the said Act. 12. The background behind the legislation of Section 141(2) ibid, indicates that the Comptroller Auditor General of India (C AG) had undertook a review on the working of ICDs/CFSs by conducting test check of records of customs as well as custodians for three years from 2000-2001 to 2002-2003 in relation to transmission of import/export goods between ICD/CFS and gateway port, proper storage, safe custody and clearance thereof on payment of appropriate Customs duty to the Government. The report of C AG presented to the Parliament in paragraph 3.7 of Report of C AG for the year ended March, 2004, No.10 of 2005, Union Government (Indirect Taxes Customs) were further examined by the Public Accounts Committee (PAC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment/Board can take suitable punitive action against the erring Custodians so that revenue could be protected. For this, if necessary, the Customs Act, 1962 may be amended. In pursuance of these recommendations, the Government had inserted a new Section 141(2) to the Customs Act, 1962 and thereafter under its authority framed the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR, 2009). The HCCAR, 2009 provide for the manner in which the imported goods/export goods shall be received, stored, delivered or otherwise handled in a Customs area. These regulations also prescribe the responsibilities of persons engaged in the aforesaid activities. The said regulations also provided for transitional provisions under Regulation 4, whereby the existing custodians who were earlier appointed under Section 45 of the Customs Act, 1962 shall continue to operate without any disruption in their export/import operations. However, the regulations stipulated that the existing custodians would be required to provide specified facilities and fulfil the conditions mentioned in Regulation 5 and 6, within the specified time period. It was also clarified by the CBIC in the circular No.13/2009-C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of exports and imports, is legally valid under the Handling of Cargo in Customs Areas Regulations, 2019. However, as the said period prescribed in the impugned order i.e., 16.04.2023 to 30.04.2023 had already expired, we do not consider it necessary to impose such suspension now and therefore the impugned order to this effect is non-implementable. 15.1 In terms of Section 2 of the Customs Act, 1962, the phrases import and imported goods have been defined. The relevant provisions have been extracted as below: Section 2 Definition: In this Act, unless the context otherwise requires (18) import , with its grammatical variations and cognate expressions, means bringing into India from a place outside India; (19) imported goods means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption; In the present case, the imported foreign origin cigarettes which are being attempted to be smuggled were seized and handed over in container No. GESU- 4913126 for safe custody with the appellants CFS, and have not yet been cleared by the customs authorities out of the appellants CFS, at the relevant time of verification of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c regulations which have been shown to have violated under the impugned order, we may like to refer to CBIC Circular No.13/2009-Customs dated 23.03.2009 which was issued for explaining the salient features of the HCCAR. The relevant paragraph of the said circular is extracted below: Circular No.13/2009-Customs F.No.450/55/2008-Cus.IV Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs 159A, North Block, New Delhi - 1. 23rd March, 2009. Subject: Handling of Cargo in Customs Areas Regulations, 2009 - regarding. *** A reference is invited to Notification No.26/2009-Customs (N.T.) dated 17.3.2009 bringing into effect the Handling of Cargo in Customs Areas Regulations, 2009 (referred in short as 'regulations'). The regulations provide for the manner in which the imported goods/ export goods shall be received, stored, delivered or otherwise handled in a customs area. The regulations also prescribe the responsibilities of persons engaged in the aforesaid activities. It may be recalled that the Public Accounts Committee (2005-06) in its twenty-seventh report had recommended for formulating appropriate legal provisions and guidelines to cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and to safeguard revenue. From plain reading the legal provisions of these regulations and the CBIC Circular, it transpires that the CCSP is required to fulfil the responsibilities laid down under the HCCAR and this includes both in respect of activities under taken by him as custodian as well as in respect of various service providers contracted or employed by the CCSP for providing the services on their behalf. One of the conditions to be fulfilled for appointing as CCSP under Regulation 5(i)(n) and 5(ii) is that the CCSP shall provide security and access control to prohibit unauthorized access into the premises, as well as provide safe, secure and spacious premises for loading, unloading, handling and storing of the cargo and for the examination and other operations as may be required in compliance with any law for the time being in force. In the present case, the DRI-MZU sealed imported goods were handed over to the appellants for safe custody of the seized goods in container No.GESU-4913126 at the appellants CFS. The facts of the case and the customs, as well as police investigation brings out clearly the conclusion that the appellants facilities at Speedy CFS, particularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of customs seized goods kept in the containers within Speedy CFS premises and allowed certain unauthorized persons to remove the customs seized goods. Hence, we are of the considered view that imposition of penalty on the appellants under Regulation 12(8) of HCCAR and Section 117 of the Customs Act, 1962, is sustainable. 19. It further transpires from the records of the case that a separate Police investigation had been conducted on the theft of seized goods in FIR dated 28.07.2021 by Uran Police Station; nine persons were arrested as accused in the above fraud including Shri Anand G Shinde, then Supervisor and Shri Ganesh Krishna Mhatre, then Assistant Junior Officer who are the employees of appellants CFS. It is also a fact on record submitted by the appellants that one Shri Vinay Tandel, employee of the appellants was receiving acknowledgement on all copies of panchnama dated 05.02.2019 and 11.12.2020 and he had vested interests in keeping copy of such documents and the appellants were never got to know of these documents. However, learned Advocate for the appellants attempted to project that the police investigation has not implicated the appellants CFS and only their emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, we find that the appellants have failed to fulfil the responsibilities entrusted on them under Regulation 6(1)(a) and 6(1)(b) of HCCAR. 20. The conditions applicable to CCSP, custodian/CFS under Regulation 5(6) include an undertaking to indemnify the Commissioner of Customs from any liability arising on account of damages caused or loss suffered on imported or export goods due to various unnatural causes or otherwise handling of such goods. Customs investigation conducted with regard to the imported goods clearly proved that the imported foreign origin cigarettes were stored for safe custody and due to various acts of negligence on the part of the appellants, part of such seized goods were pilfered. Further JNCH Customs have found one another attempt for removal of seized red sanders, by the same Speedy CFS. The serious violations on security of the CFS and the goods stored inside the CFS, established through inquiry report under HCCAR and Police investigation, have led to the action to safeguard government interest on the seized goods, and thus recovery of the above amount. Hence, we find that there is no illegality in the impugned order in seeking recovery of the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guidelines of the CBIC circular and thus did not put any embargo on existing export goods meant for export and imported goods-live consignments already available with the CFS for its home consumption clearance by the importers. Further, auction of the goods for which notices have been issued under Section 48 by the custodian/CCSP and under other auction process were also permitted during such suspension period. Hence, the export and import trade has not been affected by this suspension action. Further, it is clear that the appellants work was not entirely shutdown and that there was sufficient work for the personnel employed and the contractors engaged by the appellants, disproving the appeal made by the learned Advocate that the suspension action has adversely affected the importers and exporters community and that livelihood of a large number of persons employed by them were affected. However, as the period for which the suspension of 15 days was ordered was in terms of specific dates, i.e., from 16.04.2023 to 30.04.2023, which had expired during the process of this appeal, and stay of the order given by the Hon ble High Court of Bombay vide judgement dated 19.06.2023 in Writ Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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