Customs broker facilitating export of prohibited items liable for penal action

Sanjay Prabhakar Vs Commissioner of Customs (CESTAT Delhi)

CESTAT Delhi held that revocation of customs broker licence and penalty action thereof on customs broker justified as he duly facilitated export of Prohibited items i.e. Gutkha pouches.

Facts- The appellant is a Customs Broker. The appellant filed a Shipping Bill in the name of M/s Navrang Jewel and Export at the port ICD Loni wherein goods were declared as Pan Masala and other house hold products such as comb, sofa, broom brush etc. The goods were examined and Let Export Order was passed by the proper officer and goods were thereafter dispatched from ICD Loni to Gateway port of Pipavav for further export. However, on information, DRI stopped and further examined the goods at Pipavav, wherein as against the declared pan masala, DRI allegedly found 42,00,000 number of Gutkha pouches – a prohibited item.

Upon completion of inquiry, DRI issued a show cause notice proposing penal action against the appellant. Taking into account the said show cause notice of DRI to be an offence report, Commissioner (Airport & General) suspended the licence of the appellant and issued a show cause notice proposing to hold the appellant responsible for contravention of various provisions under Regulation 10 of Customs Brokers Licensing Regulations, 2013 (hereinafter referred to as CBLR, 2013) and revocation of their Customs Broker (C.B.) licence, forfeiture of security and penalty under Regulation 18 of CBLR, 2013. The CB licence of the appellant which was valid till 29.12.2021 was revoked, his security deposit of Rs. 75,000/- was forfeited and a penalty of Rs. 50,000/-was imposed on the appellant.

Conclusion- Held that the confessional statements of the appellant clearly indicate that he was aware that actual exporter was Shri Salim Dola whereas the IEC being used was in the name of Shri Shubham Garg, proprietor of Navrang Jewel and Exports. Sh. Garg in his statement accepted that he had allowed Mehmood, alias Guddu to use his IEC for ₹50,000 per consignment.

Held that the retraction by the appellant cannot negate the evidentiary value of his confessional statements. Further, the denial of request for cross examination, in the face of the said statement of the appellant, cannot be a violation in view of the above. It is also interesting to note that other than the appellant, none of the others investigated in this offence have retracted their statements.

FULL TEXT OF THE CESTAT DELHI ORDER

This appeal has been filed to assail the order in original dated 26.03.2019 passed by the Commissioner of Customs, New Delhi

2. The present appeal is being preferred by Sanjay Prabhakar, GH-1/142, Paschim Vihar, New Delhi, a Customs Broker (hereinafter referred to as the appellant) against Order-in-Original No. 49/MK/REVOCATION/POLICY/2019 dated 26.03.2019 passed by the learned Commissioner of Customs, (Airport & General).

3. The appellant is a Customs Broker and is engaged in customs clearance of export and import of goods. During his usual course of business, appellant filed a Shipping Bill No. 7549865 dated 24.07.2017 in the name of M/s Navrang Jewel and Export at the port ICD Loni wherein goods were declared as Pan Masala and other house hold products such as comb, sofa, broom brush etc. The goods were examined and Let Export Order was passed by the proper officer and goods were thereafter dispatched from ICD Loni to Gateway port of Pipavav for further export. However, on information, DRI stopped and further examined the goods at Pipavav, wherein as against the declared pan masala, DRI allegedly found 42,00,000 number of Gutkha pouches – a prohibited item. During the course of investigation, appellant in his statement dated 06.08.2017 stated that on the instructions of Shri Mehmood (a middleman) and Shri Shubham Garg (the exporter), appellant prepared invoice and other documents and filed the said Shipping Bill, that he had agreed to clear the goods on payment of Rs.5,000/- as clearing charges while other logistic charges were separate and that appellant was not informed by said Shri Mehmood and Shri Shubham Gard, that the goods being exported contained Gutkha and thus the appellant was not in the knowledge of real content of the consignment. It is claimed that since the said statement dated 06.08.2018 was not as per wishes of DRI, they detained the appellant and pressurized and threatened him of dire consequences. Under the pressure caused by DRI, appellant in his later statement dated 07.08.2017 stated that during their meeting, Shri Shubham Garg and Shri Mehmood had told him that they wanted to export Gutkha and other house hold items to Kuwait and thus appellant knew that there was Gutkha in the consignment which was being cleared from customs by his firm. Similar statement was given by appellant on 08.08.2017.

4. Upon completion of inquiry, DRI issued a show cause notice on 05.02.2018 proposing penal action against the appellant. Taking into account the said show cause notice of DRI to be an offence report, Commissioner (Airport & General) suspended the licence of the appellant and issued a show cause notice on 08.10.2018 proposing to hold the appellant responsible for contravention of various provisions under Regulation 10 of Customs Brokers Licensing Regulations, 2013 (hereinafter referred to as CBLR, 2013) and revocation of their Customs Broker (C.B.) licence, forfeiture of security and penalty under Regulation 18 of CBLR, 2013. An Inquiry Officer was appointed to enquire into the matter. The appellant vide his letter dated 17.12.2017 requested the Inquiry Officer for cross examination of certain persons relying upon whose statements, the appellant was implicated in the matter. However, the said request of the appellant was not acceded to by the Inquiry Officer. A detailed reply to the show cause notice was filed negating all the charges levelled against the appellant, but the impugned order dated 26.03.2019 was passed based on the findings in the report of the Inquiry Officer. The CB licence of the appellant which was valid till 29.12.2021 was revoked, his security deposit of Rs. 75,000/- was forfeited and a penalty of Rs. 50,000/-was imposed on the appellant.

5. The learned counsel submitted that the impugned order is biased and had relied on the report of Inquiry Officer. The appellant had requested for granting cross examination of Shri Shubham Garg, the exporter, Mehmood @ Guddu, Shri Manoj Srivastava, Inspector and Shri Dayashankar, Superintendent, to bring to the fore true and correct facts of the case. However, the same was denied on the ground that appellant was adopting the dilatory tactics. He submitted that the aforesaid persons were involved in the said smuggling offence, and had implicated the appellant to avoid punishment. It is pertinent to mention that the appellant had requested for cross examination on 17.12.2018 wherein the due date for completion of inquiry was 07.01.2019. This indicates that the Inquiry Officer had sufficient time to permit cross examination of the said persons. The Inquiry Officer instead finalised the inquiry report on 01.01.2019 in haste. He submitted that in this manner, the Inquiry Officer had contravened the provisions of Regulation 17(4) of CBLR 2018.

6. He further submitted that Shri Shubham Garg, the exporter, in his statement dated 18.08.2017 has accepted the fact that he along with Shri Mehmood alias Guddu (a middleman) met the appellant in 1^st week of July 2017 at Karol Bagh, to seek details of documents required for export. He once again met the appellant around 16/17^th July, 2017 to furnish documents asked for by appellant for export. The appellant was fully aware as to who was the real exporter and that there is a middleman also. It was Shri Shubham Garg, the exporter who had signed the Shipping Bill. He relied on the CESTAT judgment in S. Sawant & Co. Vs. Commissioner of Customs (General), Mumbai – 2012 (284) ELT 363 (Tri.-Mumbai), wherein it was held that “signing of import documents by importer, amounts to authorization.” Further, in the matter of Dominic & Co. Vs. Commissioner of Customs (General), Mumbai – 2013 (296) ELT 494 (Tri.-Mumbai) CESTAT has held that “if authorization not asked for by the customs officers at the time of clearance and Bills of Entry duly signed by CHA, authorization by importer implied.” He stated that the appellant had obtained an authorization from the exporter and had therefore not contravened the provisions of Regulation 10(a) of CBLR, 2018 (erstwhile 11(a) of CBLR, 2013). He added that the appellant had advised the exporter to comply with the provision of the Customs Act, 1962. In his statement dated 06.08.2018, the appellant had in unequivocal terms, stated that at the time of filing the Shipping Bill, that he had no knowledge about the presence of Gutkha in the export consignment. He was informed by the exporter and Shri Mehmood that goods being exported were Pan Masala. In this context, he relied on the judgment in Dominic & Co. (supra), wherein CESTAT has held that “as no discrepancy found in the documents filed, so question of advice does not arise”. In view of aforesaid, appellant had advised his client to comply with the provisions of the Act and had not contravened the provision of Regulation 10(d) of CBLR, 2018 (erstwhile 11(d) of CBLR, 2013).

7. The learned Counsel submitted that the appellant’s statement dated 15.12.2017 was obtained by the DRI by force which had been duly retracted. Further, the appellant had no prior knowledge as to presence of Gutkha in the instant export consignment. In this regard, the counsel relied on Kunal Travels (Cargo) Vs. CC (I&G), IGI Airport, New Delhi– 2017 (354) ELT 447 (Del.),of the Tribunal, wherein it was held that “if goods did not corroborate with declaration in Shipping Bills, it cannot be deemed to be mis-declaration by Customs House Agent.” The statements dated 07.08.2017, 08.08.2017 and 15.12.2017 of the appellant are contrary to that of his statement dated 06.08.2017. He submitted that contradictory and retracted statements have no evidentiary value. He stated that the appellant had duly verified the antecedents of the exporter and IEC number before taking up the assignment of impugned goods. He had obtained the PAN and IEC documents from the exporter and had duly verified the same on the sites of Income Tax Department and Directorate General of Foreign Trade. It is a matter of record that the exporter had used the said address for the purpose of correspondence and obtaining of IEC. Besides, the exporter Shri Shubham Garg in the present case was duly found to be existent and appeared before the Customs authorities and it is not a case of the Department that his credentials were found to be wrong. He relied on Tribunal’s decision in the matter of Setwin Shipping Agency Vs. CC (General), Mumbai – 2010 (250) ELT 141 (Tri.-Mumbai)which held that there is no requirement for the CHA (Customs Broker) to verify physically the premises of importer/exporter. In the matter of Him Logistics Pvt. Ltd. Vs. Commissioner of Customs, New Delhi – 2016 (338) ELT 725 (Tri.-Del.),the Tribunal held that there is no stipulation or legal requirement for physically verifying business or residential premises of importer. The CB cannot be held responsible for fraudulent IEC by importer. Once the CB has carried out verification as per KYC norms, the extreme punishment of revocation of licence was not sustainable. The said order of the CESTAT has been upheld by the Hon’ble High Court of Delhi – 2017 (348) ELT 625 (Del.). He relied on the following decisions where similar view was taken:

(i) Global Linkerz United Agencies Vs. CC, New Delhi – 2009 (238) ELT 76;

(ii) Thawerdas Wadhoomal Vs. CC, Mumbai – 2008 (221) ELT 252;

(iii) N. Lall & Bros. Vs. CC, Calcutta – 2001 (137) ELT 723;

(iv) G. Exports Vs. CC, New Delhi – 2000 (121) ELT 754.

In view of aforesaid appellant had verified the antecedents of the exporter and, therefore, had not contravened the provisions of Regulation 10(n) of CBLR, 2018 (erstwhile 11(n) of CBLR, 2013). The Ld Counsel submitted that since the beginning of his business of customs clearance in 2012, the appellant had never been issued show cause notice on account of any violation of any provisions of Customs Act, 1962. Therefore, the revocation of the CB license was very harsh punishment.

8. The learned authorised representative submitted that the appellant had not followed the requirements as per Clause 10(a) of CBLR, 2018. He stated that the fabricated documents were prepared in the office of the F card holder. It is on record that Sh. Shubham Garg had sublet his IEC for monetary consideration and the Customs broker was aware of the same. The appellant failed to inform the customs authorities about this and had contravened the provisions of CBLR. Such wilful omission on part of the F card holder to verify the authenticity having a prior knowledge of verifying the genuineness of the importer/exporter, address, identity proves beyond doubt the circumstantial evidence of the connivance of the appellant. In his statement the appellant had categorically accepted that he had connived out of greed for easy money and had been paid ₹ 1.5 lakh. He further submitted that the appellant had violated the provisions of Clause 10(b) of the CBL Regulation as it was revealed that during stuffing of the goods at an unspecified place and during examination, the customs clearances were attended by a person authorised by the appellant. This has also been accepted by the appellant in his statement. Thus, when proper authorisation was not obtained as per Clause 10(a), the question of exercising due diligence under Clause 10(e) and advising his clients about the provisions of the Act and Rules as per Clause 10(d) is not satisfied. The appellant had violated the provisions of Clause 10(f) as he had knowingly withheld the information that the IEC had been sublet and counterfeit prohibited goods were attempted to be exported. The appellant did not undertake any KYC verification of the exporter by using reliable independent authentic documents, data or information and thus was involved in submitting fabricated documents before the customs authorities. The appellant had connived with fraudsters and had failed his duties as a customs broker required under CBLR, 2018. There was no infirmity in the order of the Commissioner in revoking the customs broker license. The authorised representative relied on the following decisions in support of his arguments:

(i) Bhaskar Logistic Services Vs UOI [2016 (340) ELT-17 (Pat)]

(ii) Commissioner of Customs Vs K.M. Ganatra [2016 (332) ELT- 15 (SC)

(iii) Jasjeet Singh Marwaha Vs UOI [2009 (239) ELT-407(Del)

(iv) M/s Falcon India Vs Commissioner of Customs, Delhi [2022 (3) TMI-CESTAT-NEW DELHI]

9. We have heard the learned counsel for the appellant and the learned authorised representative for the Department. The issue before us for decision is whether there were sufficient grounds for the adjudicating authority to revoke the CB license of the appellant.

10. We find that the learned counsel for the appellant has laid emphasis on the fact that the appellant had retracted his three statements, and therefore the same will not have any evidentiary value. However, we find that there are statements of others, which corroborates the involvement of the appellant in the current case. In this regard we find that the adjudicating authority has clearly held that the confessional statements of the appellant clearly indicate that he was aware that actual exporter was Shri Salim Dola whereas the IEC being used was in the name of Shri Shubham Garg, proprietor of Navrang Jewel and Exports. Sh. Garg in his statement accepted that he had allowed Mehmood, alias Guddu to use his IEC for ₹50,000 per consignment. Mehmood, alias Guddu in his statement also accepted that Sh Salim Dola had offered him rupees one lakh to export viz., Shubham Garg, Mehmood alias Guddu, Salim Ismail Dola, Shri Jaibir etc. Vimal Gutka to Kuwait. In order to complete the customs formalities, he contacted the appellant for the same. Therefore, the obligation of obtaining the authorisation from the actual exporter was not discharged by the appellant. This is corroborated by the statements of others involved in this smuggling endeavour. Thus there is sufficient corroboration to the confessional statement of the appellant. Therefore mere retraction of his statement cannot negate the action of the appellant. Otherwise also, the confessional statement was recorded by the Custom officer which is different from the police officer. In this context, we note that the Apex Court in its judgment in the case of Surjeet Singh Chhabra Vs UOI [1997(89) ELT 646 (SC)] held as follows:

“3. It is true that the petitioner had confessed that he purchased the gold and had brought it. He admitted that he purchased the gold and converted it as a Kara. In this situation, bringing the gold without permission of the authority is in contravention of the Customs Duty Act and also FERA. When the petitioner seeks for cross-examination of the witnesses who have said that the recovery was made from the petitioner, necessarily an opportunity requires to be given for the cross-examination of the witnesses as regards the place at which recovery was made. Since the dispute concerns the confiscation of the jewellery, whether at conveyor belt or at the green channel, perhaps the witnesses were required to be called. But in view of confession made by him, it binds him and, therefore, in the facts and circumstances of this case the failure to give him the opportunity to cross-examine the witnesses is not violative of principle of natural justice. It is contended that the petitioner had retracted within six days from the confession. Therefore, he is entitled to cross-examine the panch witnesses before the authority takes a decision on proof of the offence. We find no force in this contention. The Customs officials are not police officers. The confession, though retracted, is an admission and binds the petitioner. So there is no need to call panchwitnesses for examination and cross-examination by the petitioner.”

In view of the above, we hold that the retraction by the appellant cannot negate the evidentiary value of his confessional statements. Further, the denial of request for cross examination, in the face of the said statement of the appellant, cannot be a violation in view of the above. It is also interesting to note that other than the appellant, none of the others investigated in this offence have retracted their statements

11. The learned counsel has submitted before us that the appellant was not aware of the nature of the consignment that was being exported. We find that this contention is not correct, as Shri Salim Dola in his statement dated 07.08.2017 recorded under Section 108 of the Customs Act, 1962 has admitted that the container no. MRKU6319529 was stuffed with Vimal Gutka for export at the rented premises of Kanjhawala, Delhi under the supervision of Jaibir, Mehmood alias Guddu, himself and one representative of the CHA. This clearly establishes that the appellant was fully aware of the contents of the container. He was also aware that there was no factory/godown stuffing permission accorded to this unit. It is also established that the invoice and the packing list were prepared in the appellant’s office. Shri Shubham Garg in his statement dated 08.09.2017 has categorically stated that he had never authorised any person to sign and submit on his behalf the invoice cum packing list no. NJE/EXP/17-18/001 and the same had been fabricated by Mehmood alias Guddu and the appellant. The contention of the learned counsel that the appellant had duly verified the correctness of the IEC and other KYC documents is negated by the statement of the appellant himself. The appellant has stated that the customs clearance work of Navrang Jewel and Export was received through a forwarding firm Atlas, Noida and Mr Mehmud and Shubham Garg. The KYC documents of Navrang Jewel and Export were provided by Shri Garg but the dealing was done by Mehmood who advised the appellant to file free Shipping Bills for export. The appellant had full knowledge that the IEC of Shubham Garg was being used by Salim Dola for export of Gutka and other household items to Kuwait. It is apparent that the appellant had failed to verify the antecedent, correctness of the IEC, the identity of his client and functioning of his client and had in fact facilitated in the attempt to smuggle counterfeit Vimal Gutka in plastic pouches. It is very clear that the customs broker had contravened the provisions of CBLR, 2018 and erstwhile CBLR, 2013. We note that the Commissioner, in the impugned order has discussed in great detail each and every violation of the appellant, along with all the evidence to substantiate each of these violations. We do not find any reason to differ from that.

12. We find that the Delhi High Court in the case of Jasjeet Singh Marwaha (supra) has held that the CHA can be held responsible for the violation of the Customs Act, and not only the violation of CHALR (now referred to as CBLR). The relevant para of the judgment is reproduced hereinbelow:

“6.3 The provisions referred to hereinabove make it clear that an owner or importer can act through an agent. In the instant case, the appellant who is admittedly the CHA of the importers, both filed as well as filled up the contents of the bill of entry, a fact which is not denied, on behalf of the three importers referred to hereinabove. In view of these facts and the provisions referred to hereinabove, it cannot be said that the agent cannot be held to be liable for violation of the provisions of the Act. The purpose of providing for appointment of an accredited agent, that is, an agent who has been issued a licence under the Regulations framed under the Act, is not only to facilitate the clearance of goods, but in doing so, to hold either one of them or both accountable for the actions which they take, based on which the clearance of goods imported into the country is brought about. The contention that the licence of a CHA can be suspended only for violation of the Regulations framed under the Act i.e., CHALR, 2004 is clearly untenable given the purpose for which the licence is issued and the provisions of the Act.”

13. The Tribunal in M/s Falcon India Vs Commissioner of Customs, New Delhi held as under:

“33. The above decisions lay down that the Customs Broker(or Custom House Agent) is a very important person in the transactions in the custom House and it is appointed as an accredited broker as per the regulations and is expected to discharge all its responsibilities under them. Violations even without intent are sufficient to take action against the appellant. While it is true, as has been decided on a number of cases, that the customs broker is not expected to do the impossible and is not expected to physically verify the premises of the importer or doughty documents issued by various governmental authorities for KYC, it is equally true that the Customs Broker is expected to act with great sense of responsibility and take care of the interests of both the client and the Revenue. It is expected to advise the client to follow the laws and the client is not complying, it is obligated under the regulations to report to the Asst Commissioner of the Deputy Commissioner. Fulfilling such obligations is a necessary condition for the CB license and cannot be termed as ^„spying for the Department‟ as argued by the appellant before us. It has also been argued that if it spies for the department, it will lose its business. It is evident from the facts of this case that the appellant was not only aware of the benami Bills of Entry but has actually filed them with the full knowledge that they were benami and they were filed by Anil after case of under evaluation has been booked by DRI against him. It is afraid of losing business because it has built its more business model on violators, who it does not want to upset by reporting to the department. Therefore we find no reason to show any leniency to as the appellant. At any rate, once violation is noticed, it is not for the Tribunal to interfere with the punishment meted out by the disciplinary authority, viz., the Commissioner unless it shocks our conscience. In this case, it does not.”

14. We agree with the submissions of the learned AR that forgery nullifies everything. It is an admitted fact that the documents such as the invoice and the packing list was prepared by the appellant in his office. This is corroborated by Sh Shubham Garg, the IEC holder. The export consignment was packed and stuffed in the presence of the representative of the appellant. This has been corroborated by others in their respective statements. The appellant was aware that the IEC of Shubham Garg of M/s Navrang Jewel and Export was being used by Salim Dola for export of Gutka, which is a prohibited item. It has to be concluded that the appellant was very much aware of the nature of the consignment and aware of the fact that the IEC did not belong to the actual exporter of the consignment. He had indulged in this offence for monetary gains. The Apex Court in Commissioner of Customs Vs Aafloat Textiles (P) Ltd., [2000 (235) ELT 587] held on principle that fraud and collusion vitiated even the most solemn proceedings in any civilized system of jurisprudence. We note that similar views have been expressed by the Supreme Court in Munjal Showa Ltd Vs Commissioner of Customs and Central Excise wherein it held,

“16. In that view of the matter and on principle that fraud vitiates everything in such forged or fake DEPB licenses/Scrips are void ab initio, it cannot be said that the department acted illegally in invoking the extended period of limitation. In the facts and circumstances, the department was absolutely justified in invoking the extended period of limitation.”

15. In view of the aforesaid facts and circumstances, we find no reason to interfere with the findings in the impugned order. The appeal is accordingly dismissed.

(Pronounced in open Court on 5.9.2023)