CHA cannot be penalised on assumptions & presumptions devoid of concrete facts showing wrongdoing

Commissioner of Customs Vs Jayachandran (CESTAT Chennai)

The case revolved around a botched smuggling attempt of red sanders under the disguise of ‘General Merchant’. The respondent, S. Jayachandran, General Manager of M/s. Triway Forwarders Pvt. Ltd, was exonerated from charges as the adjudicating authority found no act of omission or commission on his part that made the goods liable for confiscation. This resulted in the Revenue filing an appeal against the decision. However, the CESTAT supported the initial adjudication and declared that non-compliance with CBLR does not warrant penalties under the Customs Act, 1962. This decision was based on the lack of concrete evidence of wrongdoing and upheld the principle that penalties should not be levied merely because a legal provision provides for it. They should be considered on the basis of concrete facts and the extent of the wrongdoing.

The CESTAT Chennai’s ruling has shed light on an important aspect of customs law. It underlined the need for substantial proof of wrongdoing when levying penalties under the Customs Act, 1962. The lack of compliance with the CBLR regulations does not, in itself, attract penalties under sections 114 and 114AA of the act. This decision is significant as it provides valuable insight into the nuances of customs law and can serve as a precedent for similar cases in the future.

FULL TEXT OF THE CESTAT CHENNAI ORDER

This appeal is filed by Revenue against Order-in-Appeal Seaport C. Cus. II No. 1030/2020 dated 27.11.2020 passed by the Commissioner of Customs (Appeals – II), Chennai) who has upheld the adjudication order wherein the adjudicating authority has exonerated the respondent from the charges levelled against him and from imposing penalty under sec. 114 and 114AA of the Customs Act, 1962.

2. Brief facts of the case are that an attempt was made to smuggle out red sanders in the guise of ‘General Merchant (Idly Rice, Atta in bags)’ vide shipping bill dated 30.5.2018 filed by M/s. Triway Forwarders Pvt. Ltd. in the name of exporters M/s. Zeeya Enterprises, Sivagangai. Based on specific intelligence, DRI seized 12.42 MTs of red sanders valued at Rs.5.89 crores from containers covered under the shipping bill. In this regard, investigations conducted revealed an elaborate conspiracy to smuggle out red sanders logs. Accordingly, Show Cause Notices were issued to the persons involved in the transaction. The adjudicating authority while passing the order had refrained from imposing penalty on S. Jayachandran, General Manager of M/s. Triway Forwarders Pvt. Ltd. under section 114 and 1114AA of the Customs Act, 1962 on the ground that he had not done any act of omission or commission which made the goods liable for confiscation, relying upon the judgment passed in the case of Commissioner of Customs Vs. I. Sahaya Edin Prabhu reported in 2015 (320) ELT 264 (Mad.). Department after reviewing the order passed by the adjudicating authority filed appeal before Commissioner (Appeals), who after hearing the parties upheld the adjudication order and dismissed the appeal filed by the department. Hence the department is before this Tribunal.

3. Cross-objections have been filed by the respondent.

4. Shri N. Satyanarayana, learned AR (AC) appeared for the appellant and Smt. A. Aruna, learned Advocate appeared for the respondent.

5. Shri N. Satyanarayana, learned AR reiterated the grounds made in the appeal. He submitted that the respondent failed to verify the antecedents of the exporter of the goods and he has not complied with Regulation 11(n) and has thereby contravened the Regulations.

6. The learned counsel Smt. A. Aruna submitted that the allegations made against the respondent is violation of Regulation 11(n) under CBLR, 2013. For such failure, penal provisions are given under CBLR even for the individual persons who violate the Regulation. Lapse or failure to comply with CBLR does not attract penalty action under sec. 114 and 114AA of the Customs Act, 1962. The Show Cause Notice issued to Customs Broker in this case under CBLR to revoke their license for violation of Regulation 11(n) has been dropped by the jurisdictional Commissioner. The department is legally and factually wrong to contend that mens rea is not required to impose penalty under sec. 114 and 114AA. She submitted that to impose penalty under sec. 114, as an abettor of the main offence, mens rea on the part of the respondent has to be established whereas the investigation has not established any positive role or mens rea on the part of the respondent in the attempted smuggling. Similarly, to impose penalty under section 114AA, department has to establish that the respondent has filed false or incorrect documents, declaration or statement knowingly and intentionally whereas no such case has been made out by the Revenue. She relied on the following case laws to support her contention:-

a. Extrusion Vs. Collector of Customs reported in 1994 (70) ELT 52 (Cal.)

b. Akbar Badruddin Jiwani Vs. Collector of Customs reported in 1990 (47) ELT 161 (SC)

c. Global Star Logistics Vs. Commissioner of Customs, Tuticorin – 2019 (370) ELT 675 (Tri. Chennai)

d. Commissioner of Customs, Tuticorin Vs. Sri Durga Shipping Services – 2019 (370) ELT 832 (Tri. Chennai)

e. Villavarayar & Co. Vs. Commissioner of Customs, Tuticorin – 2018 (359) ELT 117 (Tri. Chennai)

7. I have heard both sides and perused the records. I find that the charge against the appellant as given in para C 2 of ‘Review Order no 03/2021’ is limited to the appellant not verifying the genuineness of the exporter and his place of functioning, as under:

“C. In this subject case, Shri S. Jayachandran, General Manager, M/s. Triway Forwarders P. Ltd. has admitted that they had received the IEC copy and other documents for export and they had not verified the functioning of the exporter at the declared address and they had not verified the genuineness of the IEC holder and his antecedent. The above act of omission and commission committed by the Customs Broker had paved the way for attempted illegal export of red sanders. Their omission to verify with the shipper had led to confiscation of the red sanders under section 113 of the Customs Act, 1962 thereby rendering themselves liable for penalty under section 114 and 114AA of the Customs Act, 1962. ”

7.1 I find that The Hon’ble Tribunal in the case of Thawerdas Wadhoomal Vs. Commr. Of Cus. (General), Mumbai reported in 2008 (221) ELT 252 (Tri-Mumbai) has held that the CHA is not supposed to look into details of genuineness of the importer when IEC is produced by the importer. It is seen that documents required as per the KYC are basically issued by government authorities and agencies and the presumption is that the details like name, address etc shown there in are true. The department has not alleged that these documents submitted by the appellant were fake. Nor is there any concrete allegation of connivance with the exporter. This being so, I find that there was no concrete proof of a blame worthy conduct by the appellant to impose penalties or for any other action as per the Act or Rules to merit a remand. Penalties should not be imposed merely because a legal provision provides for it. It is a discretion of the authority to be exercised judicially and in consideration of all the relevant circumstances, bound by the rules of reason and law. Such action cannot be taken on assumptions and presumptions devoid of concrete facts showing wrongdoing.

8. Based on the discussions above I find that the appeal fails and the impugned order merits to be upheld. I order accordingly. The cross objections filed by the appellant is also disposed of on the above lines, with consequential relief, if any, as per law.

(Pronounced in open court on 31.07.2023)