Introduction: In a recent legal case before the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Kolkata, the question of whether a Customs House Agent (CHA) can be penalized for their alleged involvement in overvaluation during an export came to the forefront. The case involved M/s United Custom House Agency (P) Ltd and Shri Prakash Ghosh, Proprietor of M/s Overseas Shipping Agency, who faced penalties for their roles in an improper export.
Detailed Analysis: The facts of the case revolve around an exporter, M/s Mahabir Metal, who had two consignments of steel-made kitchen tableware for export to Bangladesh. The investigation into this case was initiated on the grounds that the exporter had resorted to overvaluation to claim excess drawback benefits. A Show Cause Notice was issued to the exporter along with both the appellants (CHA and Shri Prakash Ghosh) as co-noticees.
The case was adjudicated by the Commissioner of Customs, and a penalty of Rs. 10,00,000 was imposed on both appellants under Section 114(iii) of the Customs Act, 1962, for abetting the improper export. In response to the penalty, both the appellants filed appeals before CESTAT Kolkata.
The CHA, M/s United Custom House Agency (P) Ltd, argued that their role was limited to filing the necessary documents, which were provided by the exporter. They emphasized that there were no allegations in the impugned order suggesting that they had committed any irregularities in the documents they filed. When the seized consignments were examined, they matched the invoices and other documents. Therefore, the CHA asserted that they could not be held responsible for any overvaluation carried out by the exporter to claim excess drawback.
Shri Prakash Ghosh, the Proprietor of M/s Overseas Shipping Agency, clarified that he held a G-Card but did not have a valid CHA license to operate independently. He claimed that his role was to assist the CHA in filing documents with the customs authorities and that he cooperated fully with the investigation. He also stated that he had no role in any alleged over-invoicing by the exporter.
Both appellants pointed out that the department had initiated similar investigations against other exporters, and they were included as co-noticees. They highlighted that in two such cases, CESTAT Kolkata had already set aside the orders passed by the lower authorities. The appellants argued that the principles applied in those decisions were directly applicable to their case, and they requested that the penalties be set aside.
The Learned Additional Commissioner (AR) argued that the appellants abetted over-invoicing in the exports, justifying the imposition of penalties.
Conclusion: The case underscores the distinction in roles between Customs House Agents (CHAs) and the exporters themselves. CHAs, whose primary function is to assist with customs documentation and clearances, cannot be held directly responsible for overvaluation carried out by the exporters to claim excess benefits.
In this specific case, CESTAT Kolkata ruled in favor of the appellants, asserting that no penalty should be imposed on them as they had no role in the alleged offense of overvaluation. The decision reaffirms the importance of distinguishing the responsibilities and liabilities of CHAs from those of exporters in cases of alleged customs violations.
The case also serves as a reminder that the Customs, Excise, and Service Tax Appellate Tribunal plays a crucial role in interpreting and applying relevant customs and tax laws, ensuring a fair and just outcome for appellants.
In conclusion, the ruling by CESTAT Kolkata exemplifies the need for a nuanced understanding of the roles and responsibilities of various stakeholders in customs and taxation matters, providing clarity on the extent of liability in cases of alleged violations.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The present appeals have been filed against the common Order-in Original dated 12.01.2016 passed by Commissioner of Customs (Prev), wherein he has imposed a penalty of Rs. 10.00,000/-each on the CHA, M/s United Custom House Agency (P) Ltd (Appellant1) and Shri. Prakash Ghosh, Proprietor of M/s. Overseas Shipping Agency, for their role in the improper export.
2. Briefly stated facts of the case are that the exporter M/s Mahabir Metal has placed two consignments of steel made Kitchen Tableware for export to Bangladesh vide Bills of Export Nos.4691 and 4692 both dated 02.08.2010. Investigation was initiated against the exporter on the allegation that that they have resorted to overvaluation for getting excess draw back. On completion of the investigation, Show Cause Notice dated 31.03.2013 was issued to the exporter along with both the Appellants, as co-notices. The Notice was adjudicated by the Commissioner vide Order-in-Original dated 12.01.2016, wherein a penalty of Rs.10,00,000/- each was imposed on the Appellants under Section 114(iii) of the Customs Act, 1962, for abetting the improper export. Aggrieved against the penalty imposed on them, both the Appellants have filed appeals before this Tribunal.
3. In their submissions, the CHA stated that they their role is only filing of the documents. They have filed the documents before customs authorities as provided by the exporter. There is no allegation in the impugned order that they have committed any irregularity in the documents filed by them. On examination of the seized consignments, it tallied with the invoices and other documents. They cannot be held responsible for overvaluation, if any, done by the exporter for getting excess draw back.
4. The Appellant 2 stated that he is a G-Card holder and not having any valid CHA license to operate on his own. He only assisted the CHA in filing of the documents before the customs authorities. He fully cooperated with the authorities for the investigation. He has no role in the alleged over invoicing, if any, done by the exporter.
5. The Appellants stated that the department has initiated similar investigation against some other exporters also, wherein they were included as co-noticees. In case of two such exporters, this Tribunal has already set aside the orders passed by the Lower Authorities vide Final Order Nos. 75525-75527/dated 16/09/2020 and 76353-76356/2023 dated 18/08/2020. The ratios of the said decisions are squarely applicable to them accordingly, they prayed for setting aside the penalties imposed on them.
6. The Ld. A.R. submitted that the Appellants abetted the over invoicing of the exports accordingly penalty has been rightly imposed on them.
7. Heard both sides and perused the appeal documents.
8. We observe that the Appellants acted as CHA and Clearing and forwarding agents in the export consignments. Their role is restricted to filing of the documents. We also find that there is no allegation in the impugned order that they have violated any of the provisions of the CHA Regulations. We agree with the contention of the Appellants that they cannot be held responsible for over invoicing if any, done by the exporter for the purpose of getting excess drawback. We also find that this Tribunal has already decided similar issues vide Final Order Nos. 75525-75527/dated 16/09/2020 and 76353-76356/2023 dated 18/08/2020, wherein the orders passed by the Lower Authorities were set aside. Following the ratio of the said decisions, we hold that no penalty is imposable on the Appellants, as they have no role in the alleged offence. Accordingly, we set aside the penalties imposed on the Appellants in the impugned order.
9. In view of the above discussion, we allow the appeals filed by the Appellants, with consequential relief, if any, as per law
(Dictated and pronounced in the open Court)