Ayushi Logistic Company Vs Commissioner of Customs (CESTAT Kolkata)
CESTAT Kolkata held that Customs Broker cannot be held liable for mis-declaration as Bill of Entry (BOE) was filed by the Customs Broker based on the documents given by the importer and there is no evidence brought on record to show that the Customs Broker was aware of the misdeclaration.
Facts- The Appellant is a Customs Broker. It was alleged that the Customs Broker filed two Bills of Entry for the importer M/s. Puskar Tradecom Pvt Ltd declaring the goods as ‘White Calcined Pigment’ and ‘Industrial Washing Liquid’, whereas on examination, the goods were found to be ‘Chlorides of Paraquat’ and ‘Emamectin Benzoate’. Accordingly, it was alleged that the Customs Broker has facilitated mis-declaration of the goods. Pursuant to issue of show cause notice by DRI u/s. 124 of the Customs Act, 1962, an order was passed by the Commissioner of Customs (Airport & Administration), Kolkata suspending the license of the CB under the Regulation 16(1) of the Customs Brokers Licensing Regulations, 2018.
Notably, first inquiry report was submitted by the appointed officer on 27.02.2020. However, the Commissioner nominated another inquiry officer, and the second inquiry report was submitted on 14.06.2021. Hon’ble High Court set aside the second inquiry report. Accordingly, based on first inquiry report, Principal Commissioner of Customs passed order for revocation of Customs Broker License and forfeiture of full amount of security deposit and also imposed penalty of Rs. 50,000.
Conclusion- The Bills of Entry were filed as per the description available in the documents given by the Importer. If there is any misdeclaration in the documents submitted by the Importer, then they are solely responsible for the misdeclaration. To establish the complacency of the Customs Broker, it must be proved that the Customs Broker had prior knowledge about the misdeclared description, before filing the Bills of entry. There is no evidence brought on record to show that the Customs Broker was aware of the misdeclaration. The misdeclaration came to light only after proper investigation by DRI.
We hold that the allegations in the Notice that the Custom Broker has violated the provisions of Rules 10(a), 10(d), 10(e), 10(f) and 13(12) of the CBLR, 2018, are not proved.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Appellant is a Customs Broker CB in short ) having license No.A-53, Code No.2428, issued by the Commissioner of Customs (Airport & Admn.), Customs House, Kolkata having validity of the license up to 04.10.2027. An Offence Report dated 14.03.2019 was received on 18.03.2019 from the Additional Director, DRI enclosing a Show Cause Notice issued by DRI vide Fo.No.DRI/KZU/CF/ENQ-162(Int-37)/2018/1117-1126 dated 22.02.2019. It was alleged that the Customs Broker filed two Bills of Entry for the importer M/s. Puskar Tradecom Pvt.Ltd. declaring the goods as ‘White Calcined Pigment’ and ‘Industrial Washing Liquid’, whereas on examination, the goods were found to be ‘Chlorides of Paraquat’ and ‘Emamectin Benzoate’. Accordingly it was alleged that the Customs Broker has facilitated mis-declaration of the goods. Pursuant to issue of Show Cause Notice by DRI under Section 124 of the Customs Act, 1962, the Customs Broker Order No.34/2019 dated 11.04.2019 was passed by the Commissioner of Customs (Airport & Administration), Kolkata suspending the license of the CB under the Regulation 16(1) of the Customs Brokers Licensing Regulations, 2018. The said suspension was confirmed vide Order-in-Original No.KOL/CUS/AIRPORT/ADMN/13/2019 dated 01.05.2019 passed under Regulation 16(2) of the CBLR, 2018. Subsequently, a Show Cause Notice No.18/2019 Commr (A & A) dated 12.06.2019 was issued under Regulation 17(1) of the CBLR, 2018 by the Commissioner of Customs proposing revocation of the Customs Broker License of the Appellant and forfeiture of the Security Deposit under Regulation 14 of CBLR, 2018.
2. An Inquiry Officer was nominated to conduct the inquiry and the Inquiry Officer submitted an Inquiry Report on 27.02.2020. Subsequently, the Commissioner has nominated another Inquiry Officer, who submitted another Inquiry Report dated 14.06.2021. Aggrieved by the said second Inquiry Report, the Appellant approached the Hon’ble High Court of Calcutta. The Hon’ble High Court vide its Order dated 07.09.2021 set aside the second Inquiry Report and directed the Ld.Principal Commissioner to proceed in accordance with law on the basis of the first Inquiry Report. Accordingly the Principal Commissioner of Customs has passed order dated 08.12.2021, wherein he ordered for revocation of Customs Broker License held by the Appellant and forfeiture of full amount of Security Deposit furnished by the CB. He also imposed a penalty of Rs.50,000/- on the CB. Operating portion of the order is as under:-
30.1 I, hereby Order for revocation of the Customs Broker Licence held by M/s. Ayushi Logistic Co. [Licence No.A-53, Code No.2428, (PAN No.ABIFA7767K)] and forfeiture of full amount of Security Deposit furnished by the Customs Broker as per provisions of Regulation 14 of CBLR, 2018 for violation of Regulations 10(a), 10(d), 10(e), 10(f) and 13(12) of the CBLR, 2018.
30.2 I, hereby order for imposing penalty of Rs.50,000/- (Rupees Fifty Thousand only) on the CB M/s. Ayushi Logistic Co., by exercising powers conferred upon me under Regulation 18 of CBLR, 2018 for violation of Regulation 10(a), 10(d), 10(e), 10(f) and 13(12) of the CBLR, 2018.
3. The Appellant is before us against the above said order of the Ld.Principal Commissioner of Customs.
3. The Ld.Advocate for the Appellant submits that the Order dated 08.12.2021 was passed by the Ld.Adjudicating authority based on the first Inquiry Report dated 27.02.2020 which was void ab initio since the inquiry was conducted by the Inquiry Officer in violation of the Principles of Natural Justice. The Inquiry Officer has not granted any opportunity of personal hearing to the Appellant before finalizing the Inquiry Report. The Inquiry Report was required to be submitted within 90 days from the date of issue of the notice as per Regulation 17(5) of the CBLR, 2018. However, the Inquiry Report in this case was not submitted within the time period stipulated in Rule 17 (5) 0f CBLR, 2018. The Adjudicating authority merely relied upon the Inquiry Report dated 27.02.2020 and revoked the license based on the Inquiry Report which is not sustainable in law. Accordingly, he requested for quashing of the impugned order.
4. The Ld.Authorized Representative for the Department reiterated the points stated by the Adjudicating authority in the impugned order and stated that the Customs Broker has failed to exercise reasonable diligence to ensure that the Bils of Entry were filed with proper declaration. The importer has grossly mis-declared the goods which was facilitated by the Appellant by filing the above said two Bills of Entry. Accordingly, he argued for dismissal of the Appeal and confirming the order dated 18.12.2021 passed by the Adjudicating authority.
5. Heard both sides and perused the Appeal records.
6. The issue before us is –
(a) Whether the Ld Principal Commissioner of Customs was right in passing the Order dated 18.12.2021 based on the first Inquiry Report.
(b) Whether the Customs Broker has failed in his duties as enshrined in the CBLR, 2018.
(c) Whether the revocation of license and forfeiture of Security Deposit, as per the Order dated 18.12.21 by the Ld.Principal Commissioner, is in order.
7. We find that the Ld.Commissioner of Customs appointed an Inquiry Officer to conduct the inquiry and submit a report before finalizing of the Show Cause Notice No.18/2019 /Commr (A & A) dated 12.06.2019. The Inquiry Officer has submitted a Report dated 27.02.20. Not satisfied with the Inquiry Report the Ld.Commissioner of Customs appointed another Inquiry Officer, who submitted a second Inquiry Report dated 14.06.2021. Aggrieved by the second Inquiry Report, the Appellant approached the Hon’ble High Court of Calcutta. The Hon’ble High Court vide Order dated 17.09.2021 quashed the second Inquiry Report and directed the Principal Commissioner to decide the Notice in accordance with law on the basis of first Enquiry Report. The order of the Hon’ble High Court is reproduced below:-
“Pursuant to my order dated 6th September, 2021, learned Counsel appearing for the Customs Authority, who was asked to produce the record relating to second enquiry report dated 14th June, 2021, which was challenged by the petitioner in this writ petition on the ground that the Principal Commissioner of Customs, after submission of the first enquiry report and filing of objection against that and holding a hearing, he has no jurisdiction for asking for second enquiry report, has produced the record. With regard to second enquiry report learned advocate appearing for the Customs Authorities when he was asked by me as to under which provision of law the Principal Commissioner of Customs has asked for second enquiry report, he has relied on the provision of 17(7) of Regulation of Customs Brokers Licensing Regulations, 2018. On perusal of said regulation, I find that nowhere this regulation confers power upon the Principal Commissioner of Customs for asking for a second enquiry report.
Learned counsel appearing for the Customs also could not demonstrate from the record as to what was the reason for asking for submission of second enquiry report and particularly without passing a formal order of rejection or discarding of the first enquiry report. It is submitted on behalf of the respondent Customs Authority that after submission of the first enquiry report, the enquiry officer was transferred. I failed to understand what difference it will make when the first enquiry report is a part of the record thereafter whether enquiry officer is posted there or transferred, how does it make any difference and more so when the Principal Commissioner has not rejected or discarded the first enquiry report by a specific formal order.
Learned counsel appearing for the Customs Authority could not justify such action of the respondent from any provision of law and in my view, such action of the respondent Principal Commissioner of Customs taking shelter under Regulation 17(7) of the Customs Brokers Licensing Regulations, 2018 to justify his action of asking for second enquiry report, without discarding or rejecting first enquiry report of his own department’s officer and without passing any formal order having no authorization under any provision of law for such action, and such action of the Principal Commissioner of Customs is invalid and illegal. However, this order will not prevent the Principal Commissioner of Customs to proceed in accordance with law on the basis of first enquiry report. Learned Counsel appearing for the petitioner has submitted that he has no objection with regard to any proceeding on the basis of first enquiry report and pass any final order in accordance with law.
So far as the second impugned enquiry report is concerned, the same stands quashed.
It is recorded that this Court has not gone into the merit either of the first enquiry report or the objection of the petitioner against the first enquiry report.
W.P.O. No.530 of 2021 is disposed of accordingly.”
8. From the order of the Hon’ble High Court reproduced above, we observe that the Hon’ble High Court has categorically directed the Ld.Principal Commissioner of Customs to decide the Notice based on the first Inquiry Report. Thus, we find that there is no infirmity in finalizing the Show Cause Notice based on the first Inquiry Report.
9. Regarding the role of the Customs Broker in the alleged offence, we find that the Show Cause Notice has alleged that the Custom Broker has violated the provisions of Rules 10(a), 10(d), 10(e), 10(f) and 13(12) of the CBLR, 2018. For the sake of easy reference the said provisions are reproduced below:
As per Regulation 10(a) of CBLR, 2018, “A Customs Broker shall obtain an authorization from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorization whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs AS the case may be”
As per Regulation 10(d) of CBLR, 2018, “A Customs Broker shall advise his client to comply with the provisions of the Act and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be”.
As per regulation 10(e) of CBLR, 2018 “A Customs Broker shall exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage”.
As per regulation 10(f) of CBLR, 2018 “A Customs Broker shall not withhold information contained in any order, instruction or public notice relating to clearance of cargo or baggage issued by the Customs authorities, as the case may be, from a client who is entitled to such information”.
As per Regulation 13(12) of the Customs Broker Licensing Regulations, 2018 “A Customs Broker shall exercise such supervision as may be necessary to ensure proper conduct of his employees in transaction of business and he shall be held responsible for all acts or omissions of his employees during their employment”.
10. We examined the above provisions of CBLR 2018 along with violations, if any, by the Customs Broker in respect of all the above said CBLR 2018 provisions.
11. As per Regulation 10(a) of CBLR, a Customs Broker has to produce authorization from each of the companies, who employ them to the Commissioner of Customs. It is seen that the Appellant has produced authorization issued by Shri Manoj Agarwal, Proprietor of M/s. Puskar Tradecom Pvt. Ltd. Thus they have complied with the provision of Regulation 10(a) of CBLR 2018 and no violation of this provision noticed.
12. Regarding Regulation 10(d), the Customs Broker has to advise his client to comply with the provisions of the Act and any non-compliance shall be brought to the notice of the Deputy Commissioner of Customs. In the instant case, the Customs Broker filed two Bills of Entry as per the declarations made by the importer in the documents given to the Customs Broker. The allegation in the Notice is that the Customs Broker has filed the said Bills of Entry for the importer M/s. Puskar Tradecom Pvt. Ltd, by declaring the goods as ‘White Calcined Pigment’ and ‘Industrial Washing Liquid’, whereas on examination, the goods were found to be ‘Chlorides of Paraquat’ and ‘Emamectin Benzoate’. The goods in question are chemicals which cannot be identified by naked eye. The Customs Broker has to file the Bills of Entry on the basis of the documents given by the importer. Only proper testing in a chemical lab will establish the correct description of the goods. The mis-declaration, in this case came to light only after the investigation conducted by DRI, after testing the samples in a chemical lab. The Custom Broker is not expected to draw samples and test in a lab to ascertain the correctness of the declaration made by the Importer, before filing the Bills of Entry. Thus, there is no evidence on record to conclude that the Customs Broker was aware of the mis-declaration of the goods in the documents submitted by the Importer before filing of the Bills of Entry. Thus, we hold that there is no violation of Rule 10(d) of CBLR 2018, on the part of the Customs Broker.
13. As per Regulation 10(e), a Customs Broker shall exercise due diligence to ascertain the correctness of the information he imparts to his client. There is no evidence brought on record to show that the Customs Broker has imparted any wrong information to the Importer. The Customs Broker has filed the said Bills of Entry as per the documents submitted by the Importer. The Customs Broker cannot be held responsible for the mistakes, if any , found on the descriptions mentioned in the documents. Thus, we hold that there is no violation of Rule 10 (e) of CBLR 2018, by the Customs Broker.
14. As per Regulation 10(f), the Customs Broker shall not withhold any information issued by the Customs from the client. There is no evidence brought on record to establish that the Customs Broker has violated the above said provision of CBLR, 2018. The misdeclaration came to light only after investigation by DRI after conducting a test of the samples drawn. The Customs Broker is not expected to draw samples to ascertain the correctness of the declarations made in the documents of the Importer. Hence, the Customs Broker cannot be faulted for the misdeclaration found later by DRI after proper investigation.
15. As per Regulation 13(12) of CBLR, the Customs Broker shall exercise such supervision as may be necessary to ensure proper conduct of his employees in the transaction of his business. In the instant case, it is alleged that Shri Prabir Majhi, one of the partners (G Card holder) of the Appellant entered into a conspiracy for monetary consideration with Shri Jyotirmoy Biswas of Team Logistics to clear the consignments with the license of the Appellant. Hence, the notice alleges that the Appellant was involved in the clearance of the restricted items mis-declared in the two Bills of Entry, as he has not properly supervised the conduct of his employee Shri Prabir Majhi and the Customs Broker has contravened the provisions of Rule 13 ( 12 ) of CBLR 2018.
15. In this regard, it is observed that the Show Cause Notice relied upon the statement of Sh. Prabir Majhi to substantiate the allegation that the Customs Broker has failed to exercise proper supervision over his employees. In his statement Shri Prabir Majhi admitted that he had lent the Customs Broker Licence of the Appellant to Shri Jyotirmoy Biswas and got Rs.1,000/- per consignment. He also agreed that he should not have lent his licence to Shri Jyotirmoy Biswas of Team Logistics to clear the consignment . Shri Jyotirmoy Biswas used the Customs Broker License of the Appellant and facilitated the clearance of M/s.Puskar Tradecom Pvt.Ltd., hence the Notice alleges that the Appellant has violated the Rule 13(12) of CBLR 2018.
16. We find that the Bills of Entry were filed in the name of the Appellant with the digital signature of the Authorized Representative of the Appellant, who is a G card holder. The role of Shri Jyotirmoy Biswas in filing of the Bills of Entry is not supported by any documentary evidence except the statements. Mere statements without any corroborative evidence cannot be conclusive proof to establish the alleged role of Shri Jyotirmoy Biswas in the mis-declaration. The Appellant is responsible for the works done by his employee Sh Prabir Majhi in filing the Bills of Entry. As discussed earlier, the Bills of Entry were filed as per the description available in the documents given by the Importer. If there is any misdeclaration in the documents submitted by the Importer, then they are solely responsible for the misdeclaration. To establish the complacency of the Customs Broker, it must be proved that the Customs Broker had prior knowledge about the misdeclared description, before filing the Bills of entry. There is no evidence brought on record to show that the Customs Broker was aware of the misdeclaration. The misdeclaration came to light only after proper investigation by DRI. If there is a mischief done by Sh Jyitirmoy Biswas, he can be penalized for his mischief. Since, he is not an employee of the Customs Broker, the Appellant cannot be held responsible for the misdeclaration if any, on the part of Sh. Jyotirmoy Biswas or the Importer. Thus, we hold that the allegation in the Notice that the Appellant failed to exercise proper control over his employees, is not proved and hence the allegation in the Notice about the contravention of Rule 13 ( 12) by the Customs Broker is not sustainable.
17. In view of the above discussion we hold that the allegations in the Notice that the Custom Broker has violated the provisions of Rules 10(a), 10(d), 10(e), 10(f) and 13(12) of the CBLR, 2018, are not proved. Thus, we hold that the Order in Original dated 8.12.2021, passed by the Ld.Principal Commissioner of Customs is not sustainable and it is liable to be set aside. Accordingly, we hold that the revocation of license and forfeiture of Security Deposit, as per the Order dated 08.12.21 passed by the Ld.Principal Commissioner, as not sustainable. In view of the above discussion, we allow the appeal filed by the Appellant with consequent relief, if any.
(Order pronounced in the open Court on 12 April 2023.)
