CESTAT Revokes Courier License for Intentional Fraud

Commissioner Of Customs Vs Air Logix Solutions (CESTAT Delhi)

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Delhi, in response to an appeal, has revoked the courier license of Air Logix Solutions following intentional fraudulent activities. The Commissioner of Customs had filed the appeal, challenging the Order-in-Original No. 92/MK/Policy/2019 dated 2.9.2019, which imposed a penalty of Rs. 50,000 on the respondent. The appeal contended that the penalty was insufficient given the intentional fraud committed by Air Logix Solutions.

Background: Air Logix Solutions held the status of a licensed courier with registration No. DEL/POL/COUR/22/2005 issued by the Ministry of Finance dated 27.6.2008. The respondent was obligated to comply with the provisions laid in the Notification No. 07/98-Customs (NT) dated 9.11.1998. An investigation was initiated on April 23, 2018, based on information received that Air Logix Solutions repeatedly used Aadhar No. 233962343459 with different Bills of Entry (BOE) for importing parcels through courier. The Aadhar number was found to have been used 22,433 times between November 2017 and March 2018.

During the investigation, it was discovered that KYC (Know Your Customer) and POD (Proof of Delivery) documents were missing, and the Aadhar number used did not match the GSTN No. given in BOEs. Verification of proof of deliveries revealed that addresses were fictitious, and consignments were bogus. The respondent was served a show-cause notice proposing the revocation of their courier registration for violating CIER, 2010 regulations.

The original Order-in-Original imposed a penalty of Rs. 50,000 on the respondent but did not revoke the courier registration. The Customs department, dissatisfied with the penalty, filed the present appeal, seeking revocation of the courier license.

Tribunal’s Findings: The Tribunal, after considering the arguments, held that the respondent knowingly committed intentional fraud. The respondent used the same Aadhar number for multiple BOEs with different consignees, and the verification report confirmed that addresses were bogus, and consignments were intentionally diverted.

The Tribunal noted that the respondent failed to exercise due diligence, violated KYC requirements, and knowingly submitted incorrect information. The software used by the respondent was manipulated intentionally, as confirmed by statements from the software developer. Despite being aware of the misuse of Aadhar numbers, the respondent did not inform the Customs department.

The Tribunal observed that the penalty of Rs. 50,000 was disproportionate to the intentional misconduct committed by the respondent. It accepted the appellant’s plea for the revocation of the courier registration.

Conclusion: The CESTAT Delhi, in its judgment, revoked the courier license of Air Logix Solutions for intentional fraud in using Aadhar numbers, submitting false KYC information, and knowingly diverting consignments. The decision emphasizes the gravity of intentional misconduct by courier services and highlights the need for strict compliance with regulations to maintain the integrity of customs processes. 

FULL TEXT OF THE CESTAT DELHI ORDER

Present appeal has been filed pursuant to review order No.14/2019 dated 27.11.2019 passed by the Commissioner of Customs (Airport & General), New Delhi.

2. The brief facts of the case are as follows:

3. That the respondent, M/s. Air Logix Solutions is the licensed courier vides registration No. DEL/POL/COUR/22/2005 issued by the Ministry of Finance dated 27.6.2008. The respondent was required to strictly adhere to the provisions laid in the Notification No.07/98-Customs (NT) dated 9.11.1998. On 23.04.2018, an information was received that the respondent was using one Aadhar No.233962343459 repeatedly with different Bills of Entry (BOE) for import of parcels through courier and it was found to have used 22433 times during the period from November 2017 to March 2018. Pursuant to said information, search was conducted at the premises of the respondent, no documents pertaining to KYCs (Know Your Customers) and POD (proof of delivery) were found. Proceedings were recorded under panchnama dated 23.4.20 18. Statements of various concerned including G-Card Holder of the respondent, Shri Tikaram, of Shri Atish Mohanty, partner of respondent, of Shri A. Murugan, proprietor of Femtosoft Technologies and of Project Manager of M/s. Wipro Ltd., Shri Vikash Kaushik were recorded. The respondent vide letter dated 11.6.2018 submitted some documents including PODs alongwith Bills of Entry and KYC document of the consignees. It was found that aforementioned Aadhar number was used as KYC for several BOE’s for different consignees. It was also found that GSTN No. given in BOEs i.e. Aadhar No.233962343459 did not match with the copy of KYC document attached with the respective BOE.

4. Verification of genuineness of POD was also conducted by the jurisdictional Commissinerate and the PODs were found forged. Most of the addresses were fictitious and the consignments were found bogus. The verification report clearly revealed that authorized courier/ respondent has failed to exercise due diligence and to comply with the conditions of provisions of Regulation of Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 (hereinafter referred to as “CIER,2010”). Resultantly the show cause notice bearing No.04/MK/Policy/2019 dated 12.03.2019 was served upon the appellant proposing revocation of their courier registration for contravention of provisions of Regulation 12 (1) (iv), 12 (1) (v) and 12 (1) (x) of Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 (hereinafter referred to as “CIER,2010”) for forfeiture of security deposit and imposition of penalty was also proposed. The said proposal was not accepted except that the penalty of Rs.50,000/- was imposed upon the respondent vide Order-in-Original No.92/MK/Policy/2019 dated 2.9.2019.

The said order has been reviewed vide aforesaid order directing the appellant-department to file appeal before this Tribunal. Resultantly, the present appeal has been filed by the department.

5. Heard Shri Rajesh Singh, ld. Counsel for the respondent-assessee ad Shri Shri R.P.Singh, Authorised Representative for the Respondent.

6. It is submitted on behalf of learned DR that the documents recovered during investigation clearly revealed that the respondent-assessee had used one aadhar No.233962343459 repeatedly as many as 22433 times during the period from November 2017 to March 2018 for importing parcel through courier for different fictitious consignee’s name and address. The same aadhar number was mentioned in all the bills of entry. That the KYC details filed in the Bills of entry were not same and were also found fake. Ld.DR mentioned that though respondent ^–assessee has taken defence that it was software mistake and it was absolutely unintentional but it is very much apparent on record that the respondent-assessee was well aware for using same aadhar number on all BOE’s. The software developer has categorically stated they used fields GSTIN Type” and “GSTIN Number” as per instruction of the company. It is also apparent admission of the G-Card holder of the respondent that KYC’s of the consignee were not properly maintained in the company office. It is also impressed upon that the original adjudicating authority has miserably failed to take into consideration clear admission and other cogent evidence on record which have sufficiently proved the alleged violation of provisions of CIER Regulations, 2010. The order under challenge is accordingly prayed to be set aside and appeal is prayed to be allowed in terms of observations made in the impugned review order.

7. While rebutting these submissions, ld. Counsel for the respondent ­assessee has submitted that Rule 12 (iv) of Regulation of CIER, 2010 has not been violated by the respondent as there was sufficient verification done about antecedents and identity with respect to five consignments. The respondent has exercised due diligence to ascertain the correctness of information in regard to alleged five consignments. The respondent also submits that all subject consignments were non commercial in nature. These were basically gift items imported from middle-east meant for dependent members of family of the respective consignor. Therefore, question of any loss of customs duty, does not arise. The allegations that KYC did not tally with the names mentioned in the Bills of Entry are vehemently denied by the respondent submitting that KYC as were received from sender on email, were filed for clearance. The Aadhar card was also submitted from Govt. The department also verified the Aadhar (KYC) but no objection was ever earlier raised. These facts are clear enough to show that the proper due diligence was done by the respondent and that there is no violation of any provisions of CIER Regulations, 2010.

8. Counsel has also relied upon the decision of the Tribunal in the case of FLE Fast Line Express Pvt.Ltd. vs. CC-2021 (378) ELT 361 (Tri.-Del.) to impress upon that when there is no evidence that courier was aware of real content of consignment, violation of Regulation of CIER, 2010 cannot be alleged against him. Otherwise also there is no provision under Regulation of CIER, 2010 requiring courier to physically verify the particulars. The decision in the case of Him Logistics Pvt.Ltd.-2017 (348) ELT 625 (Del.) is also relied upon.

9. With these submissions, ld. Counsel for the respondent has prayed for appeal to be dismissed and Order-in-Original dated 2.9.2019 is prayed to be upheld.

10. Having heard rival contentions of both the parties and after perusing entire records of the impugned appeal, we observe and hold as follows:

11. There is no denial of the respondent to the fact that same GSTIN number/Aadhar No.233962343459 has repeatedly been used for several Bills of entry filed during the period of November, 2017 to March, 2018. There is also no denial to the fact that consignees were different for these Bills of Entry and even consignors were different. The said admission has also been observed by the original adjudicating authority however the authority has held it to just be lack of due diligence on the part of respondent towards observing obligations of authorized courier. The adjudicating authority did not revoke courier’s registration nor forfeited the amount of security, except that the penalty of Rs.50,000/- has been imposed on the respondent. The department has filed impugned appeal being aggrieved of the fact that verification report of Cochin Commissionerate (Preventive) has clearly concluded that the addresses for five consignments were bogus/fictitious but the report has been ignored by the adjudicating authority. The report sufficiently reveals that the obligations under impugned Regulation have been so violated by the respondent that it amounts to intentional misconduct. Imposition of penalty is therefore alleged to be highly disproportionate to the fraudulent act committed by the respondent.

12. From the admissions as observed above, in our opinion, it also becomes apparent fact that the respondent has failed to verify the correctness of IEC code and even identity of its clients. The respondent was aware of the use of same Aadhaar Number for all BOEs still the Authorized Courier nor to verify the said Aadhaar Number or did not verify the antecedent, correctness of Import Export Code (IEC) number, identity of its Further, the respondent during the time of uploading of the Bill of Entry failed to take note that the data entered was not correct. The respondent did not inform the Custom Department that KYC details filed in the Bill of Entry was not the same which was received via email in respect of any given import. G. card holder of respondent, Shri Tikaram has also admitted in his statement dated 23.04.20 18 that KYCs of the consignee were not properly maintained in the company office. Investigation also revealed that the GSTIN given in the BOEs i.e. the Aadhaar No.233962343459 did not match with the copy of the KYC document attached with the BOEs filed by the respondent. The respondent did not even bother to inform the said mistake to the Customs department, despite that KYC details filed by him in the Bills of Entry was not the same as was reflected in those Bills of Entry. Accordingly, we hold that respondent has contravened the provisions of Regulation 12(1) (v) of CIER.2010.

13. We also observe that to ascertain as to whether the imported goods indeed reached the declared importers, a verification of genuineness of the PODs (Proof of Deliveries), submitted by the authorized courier and KYC was carried out by the Commissioner of Customs, ACC (Export), New Delhi through the jurisdictional Commissionerate(s). The Joint Commissioner, Commissioner of Customs (Prev.), Cochin vide letter C. No. VIII/26/21/2018 CCP(Prev.)4807/18 report dated 28.11.2018 provided the verification report in respect of 19 addresses out of 24 addresses pertaining to M/s. Air Logix Solutions and other authorized courier companies. Failure of delivery of the consignment to the consignee or denial of receipt of the consignment by the consignee that the addresses were found bogus during verification of genuineness of the PODs, proves that the imported goods were never destined to the consignees named in the BOEs and have been intentionally diverted.

It is known to reasonable prudence that such diversion was not possible without indulgence of the authorized courier, the respondent. Thus, we hold that the respondent was knowingly involved in the diversion of imported goods and he intentionally and knowingly misused the ID’s of consignees in whose name the goods were shown imported, consignees being the relatives of NRI consignees. The goods otherwise meant for some one else.

14. We further observe from the record that the respondent has taken plea that the mistake of same Aadhaar No. to have been uploaded for several BOEs to be the consignee’s software mistake. But is apparent from the statement of Shri A. Murugan, Proprietor of Femtosoft Technologies and Shri Vikas Kaushik, Project Manager of M/s. Wipro Limited, who acknowledged developing a software for Courier Company (including the present respondent) to convert Excel input into XML file that can be used for bulk uploading of data to ECCS server for filing of Courier Bills of Entry. Further Mr. Murugan explained that if any courier company wanted to edit any information in XML File generated by the software, the right has been given to the courier company who before uploading the same to ECCS Server, company could check any data/information in XML File and if it is desired it can change the data or undo any error that may be detected. Shri A. Murugan categorical reported that the fields “GSTIN Type” GSTIN Number” were kept constant with values “Aadhar Number “233962343459” as per direction of the respondent. This particular deposition corroborated the indulgence of respondent in the alleged act. Also there is absence on the part of the respondent to bring to the notice of all concerned including competent authority about repeated use of one and same Aadhar number at different occasions for the different consignees. Respondent gave no information about the said mistake to the department nor ever took the plea that it was happening due to software error. From said statements above, it becomes clear that software was so designed under the instructions of respondent. GSTIN field showing Aadhaar number was directed by the respondent himself to be kept constant while software was developed. The edit option was with the respondent. He has failed to upload the correct edited information. Thus respondent cannot be allowed to take shelter of plea of “software error”. Thus we hold that the alleged/impugned act was not merely lack of due diligence but was intentional misconduct.

15. Respondent himself had provided proof of deliveries which got verified by the Cochin Commissionerate. The Verification report revealed as follows:

16. The said report sufficiently established the fact that the respondent has imported consignments in the name of consignees who were not even aware of the fact that their identity has been misused by the respondent i.e. courier company for import purpose. The report is held cogent evidence to show that authorized courier has failed to verify the correctness of IEC code and even identity of its clients. As observed above, it was done intentionally by the respondent, hence is wrongly held to be the mere act of negligence.

17. Regulations 12(1) (iv) and 12 (x) of CIER,2010 are extracted below:-

“REGULATION 12. Obligations of Authorised Courier. (1) An Authorised Courier shall –

(i) to (iii) ———-

(iv) verify the antecedent, correctness of Importer Exporter Code (IEC) Number, identity of his client and the functioning of his client in the declared address by using reliable, independent, authentic documents, data or information;

(v) exercise due diligence to ascertain the correctness and completeness of any information which he submits to the proper officer with reference to any work related to the clearance of imported goods or of export goods;

(vi) to (ix) – – — –

(x) abide by all the provisions of the Act and the rules, regulations, notifications and orders issued thereunder.”

18. Regulation 12(1)(iv) requires an authorised courier to verify the antecedents, correctness of IEC number, identity of his client and the functioning of his client in the declared address by using reliable, independent, authentic documents, date or information. In the normal course, this would be easy for any courier because it has to finally deliver the goods by itself at the declared address of the consignee after clearance from the customs. In this case, instead, the appellant has facilitated imports and attempted to obtain clearance of the goods in the name of many consignees whose IEC did not match with the respective KYC. Thus, we hold that the appellant has violated Regulation 12(1)(iv) of CIER, 2010.

19. Regulation 12(1) (v) requires the couriers to exercise due diligence to ascertain the correctness and completeness of any information which he submits to the proper officer with reference to any work related to the clearance of imported goods or of export goods. In this case, the appellant has intentionally filed documents (BOEs) to clear the goods by mis-declaring the names of the consignees and consignors and by knowingly using same GSTIN for all BOEs meant for different consignees, without informing the same to the proper officer. Respondent has knowingly violated this Regulation as well.

20. Regulation 12(1)(x) requires authorised courier to abide by all the provisions of the Act and the rules, regulations and notifications and orders issued thereunder. In this case the appellant has actively violated the provisions of the act and rules by knowingly filing the bills of entry in the name of wrong consignees by using wrong KYCs.

21. The Regulations also provide that the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may revoke the registration of an authorised courier and also pass an order for forfeiture of security on any of the following grounds:

(a) Failure of the authorised courier to comply with any of the conditions of the bond executed by him under Regulation 11;

(b) failure of the authorised courier to comply with any of the provisions of these Regulations;

(c) mis-conduct on the part of the authorise courier by within the jurisdiction of the Principal Commissioner which in the opinion of Principal Commissioner render it unfit the transit any business in the Customs Airport.

(d) Regulation 14 provides for imposition of a penalty which may extend to 50,000/- for contravention of any of the regulations or abatement such contravention or for failure to comply with any provisions of the regulation which it was his obligation to comply with.

22. In view of above discussions, we also find that there is sufficient evidence on record to hold that the above said Regulations have been violated by the respondent. The violation invite revocation of courier licence as per Regulation 11 discussed above. But the original adjudicating authority despite acknowledging the alleged violations has merely imposed penalty. Since the alleged act is proved to be intentional act of the respondent, we hold that mere imposition of penalty of Rs.50,000/- (fifty thousand) is disproportionate punishment. Hence, we accept the prayer made by the appellant-department for revocation of courier registration of the respondent for committing intentional fraud while importing several goods in the name of those being gifts from Non Resident Indian (NRI) to their family member residing in India, which otherwise were not imported by them nor were meant for them.

23. As a result of entire above discussion, the findings under challenge are hereby set aside and the appeal of Department is hereby Consequently the courier licence of the respondent is hereby revoked. Early hearing application is also disposed of.

(Order pronounced in open court on 29.11.2023)