CUSTOMS: CESTAT grants Airport Authority Opportunity to file Objection against allegation of callous approach

Airport Authority of India/ AAICLAS Vs Commissioner of Customs (AIR) (CESTAT Chennai)

Brief facts are that the appellant is constituted under the Airports Authority of India Act, 1994 and was granted custodianship inter-alia of the export cargo. They have to comply with the provisions of Customs Act, 1962, Rules, Regulations and instructions issued from time to time, as per the HCCAR, 2009, issued vide Customs Notification No. 26/2009-Cus. (NT) dated 17.3.2009, custodian is duty bound to be diligent in discharging their duties and obligations.

During surprise check conducted by the officers of the department at the Export Shed on 24.8.2019, it was noticed that the goods of various exporters were placed on a single trolley which can lead to mix up of the cargo. Further, there was no proper segregation of the sterile area of the appellant and the other custodian M/s. Air India.

It was time and again noticed that the security personnel were not properly verifying the ID cards of the people entering the customs area and the list of persons who have been issued ID was not furnished to the customs. It was also found that there were several instances where “Yellow ID Cards” issued by the custodian were forged and misused. It was found that there was lax in the security arrangement of movement of people in and out of customs area.

During investigation of a recent case of attempted smuggling of red sanders under the copy of shipping bill dated 13.9.2019, it was noticed that the bond had been closed by the custodian without checking LEO status electronically. Further, on the “Export Location Slip” which was generated after closure of bond, it was mentioned that “LEO not received”. This reflected the callous approach of the custodian towards their responsibilities in following HCCAR, 2009.

Show Cause Notice dated 21.9.2019 was issued to the appellant as well as Shri Muralidharan, General Manager of Airports Authority of India raising inter alia the above allegations. The appellant filed reply on 18.10.2019. An inquiry was conducted by the Assistant Commissioner of Customs, Air Cargo Complex, Chennai and a report was submitted on 30.1.2020. After adjudication, the adjudicating authority held that the appellant has contravened Regulation 5(n), 6(1)(b) and 6(1)(f) of HCCAR, 2009. A penalty of Rs.40,000/- was imposed under Regulation 12(8) of HCCAR, 2009. The adjudicating authority dropped the penalty proposed on Shri D. Muralidharan, Regional Manager of the appellant. Aggrieved by the penalty of Rs.40,000/- imposed, the appellant M/s. Airports Authority of India is now before the Tribunal.

On perusal of records, it is seen that though the appellant has filed a reply to the Show Cause Notice, they have not filed any objections / counter representations after receiving the copy of the inquiry report. Regulation 12 of HCCAR, 2009 provides for the procedure for suspension or revocation of approval and imposition of penalty. The same reads as under:-

“(6) The Principal Commissioner of Customs or Commissioner of Customs, as the case may be shall furnish to the Customs Cargo Service provider a copy of the report of the Assistant Commissioner or Deputy Commissioner of Customs and shall require the Customs Cargo Service provider to submit within the specified period not being less than thirty days any representation that he may wish to make against the findings of the Assistant Commissioner of Customs or Deputy Commissioner of Customs.”

As per Regulation 12(6), the appellant is to file a representation on the inquiry report within 30 days from the receipt of the inquiry report. Though various contentions have been raised in regard to the inquiry report, the appellant has not filed any representation against the inquiry report. It is also seen that the appellant can ask for examination of witnesses, cross-examination of witnesses relied by the inquiry officer. The learned counsel has requested that the appellant be given a further chance to file objections / counter representation to the inquiry report so that they can adduce evidence to establish their defence. After considering the submissions made and the fact that the custodian is Airports Authority of India, which is a legal body, I am of the view that the appellant has to be given a further chance to establish their case.

The impugned order is set aside. The appeal is allowed by way of remand to the Commissioner and he is directed to give a chance to the appellant to file objections / counter representations on the inquiry report under Regulation 12(6) of HCCAR, 2009. The adjudicating authority may conduct denovo adjudication after the representations filed by appellant on the inquiry report.

FULL TEXT OF THE CESTAT CHENNAI ORDER

The appellant is aggrieved by the penalty of Rs.40,000/-imposed under Regulation 12(8) of Handling of Cargo in Customs Area Regulation, 2009 (herein after referred to as HCCAR, 2009).

2. Brief facts are that the appellant is constituted under the Airports Authority of India Act, 1994 and was granted custodianship inter-alia of the export cargo. They have to comply with the provisions of Customs Act, 1962, Rules, Regulations and instructions issued from time to time, as per the HCCAR, 2009, issued vide Customs Notification No. 26/2009-Cus. (NT) dated 17.3.2009, custodian is duty bound to be diligent in discharging their duties and obligations.

3. The relevant Regulations under 5 and 6 of HCCAR, 2009 reads as under:-

“Regulation ¹[5. Conditions to be fulfilled by Customs Cargo Service provider –

The Customs Cargo Service provider for custody of imported goods or export goods and for handling of such goods in a customs area shall fulfill the following conditions, namely:-

(1) Provide the following to the satisfaction of the ²[Principal Commissioner of Customs or Commissioner of Customs, as the case may be], namely :

(i) Infrastructure, equipment and adequate manpower for loading, unloading, stacking, handling, stuffing and de-stuffing of containers, storage, dispatch and delivery of containers and cargo etc., including :-

(a) standard pavement for heavy duty equipment for use in the operational and stacking area;

(b) free of cost or rent fully furnished office accommodation for Customs, Customs Electronic Data Interchange (EDI) Service Centre, with required amenities and facilities and residential accommodation and transportation facilities for customs staff;

(c) premises for user agencies with basic amenities and facilities;

(d) storage facility, separately for imported, export and transshipment goods;

(e) gate complex with separate entry and exit;

(f) adequate parking space for vehicles;

(g) boundary wall;

(h) internal service roads;

(i) electronic weigh-bridge and other weighing and measuring devices;

(j) computerized system for location and accountal of goods, and processing of documents;

(k) adequate air-conditioned space and power back up, hardware, networking and other equipment for secure connectivity with the Customs Automated system; and for exchange of information between Customs Community partners;

(l) facilities for auction, including by e-auction, for disposal of uncleared, unclaimed or abandoned cargo;

(m) facilities for installation of scanning equipment;

(n) security and access control to prohibit unauthorized access into the premises, and

³[(o) such other equipment or facilities as the Board or Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may specify having regard to the screening, examination, custody and handling of imported or export goods in a customs area.]

(ii) safe, secure and spacious premises for loading, unloading, handling and storing of the cargo for the projected capacity and for the examination and other operations as may be required in compliance with any law for the time being in force;

(iii) insurance for an amount equal to the average value of goods likely to be stored in the customs area based on the projected capacity, and for an amount as the ²[Principal Commissioner of Customs or Commissioner of Customs, as the case may be] may specify having regard to the goods which have already been insured by the importers or exporters.

(2) Undertake to bear the cost of the Customs officers posted, at such customs area, on cost recovery basis, by the ²[Principal Commissioner or Commissioner] and shall make payments at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance;

(3) Execute a bond equal to the average amount of duty involved on the imported goods and ten per cent of value of export goods likely to be stored in the customs area during a period of thirty days and furnish a bank guarantee or cash deposit equivalent to ten per cent of such duty:

⁴[Provided that the condition of furnishing of bank guarantee or cash deposit shall not be applicable to ports notified under the Major Ports Act, 1962 (38 of 1963) or to the Central government or State Governments or their undertakings or to the Customs Cargo Service provider authorised under Authorised Economic Operator Programme]

(4) Execute a separate bond for an amount equal to ten percent of value of export goods with a bank guarantee for an amount equal to ⁵[ten] percent of the value of the bond, towards the export goods transported from the customs area to any other customs area for export or transshipment, as the case may be;

⁶[Provided that the condition of furnishing of Bank guarantee or cash deposit shall not be applicable to ports notified under the Major Ports Act, 1962 (38 of 1963) or to the Central Government or State Governments or their undertakings or to the Customs Cargo Service provider authorised under Authorised Economic Operator Programme.]

(5) Undertake to comply with the provisions and abide by all the provisions of the Act and the rules, regulations, notifications and orders issued thereunder.

(6) Undertake to indemnify the ²[Principal Commissioner of Customs or Commissioner of Customs, as the case may be] from any liability arising on account of damages caused or loss suffered on imported or export goods, due to accident, damage, deterioration, destruction or any other unnatural cause during their receipt, storage, delivery, dispatch or otherwise handling.

Regulation 6. Responsibilities of Customs Cargo Service provider:

(1) The Customs Cargo Service provider shall –

(a) keep a record of imported goods, goods brought for export or transshipment, as the case may be, and produce the same to the ¹[Inspector of Customs or Preventive Officer or Examining officer] as and when required;

²[(aa) Provide information regarding arrival of the imported goods to the Deputy Commissioner or Assistant Commissioner of Customs immediately on arrival of said goods in the customs area and also information about their departure after the clearance thereof].

(b) keep a record of each activity or action taken in relation to the movement or handling of imported or export goods and goods brought for transhipment;

(c) display or make available in any other manner, information of process or movement or handling of imported or export goods and goods brought for transhipment;

(d) demarcate separate areas for unloading of imported goods for their storage with respect to the category of importers, nature of goods, place of destination, mode of transportation or any other criterion as the ³[Principal Commissioner of Customs or Commissioner of Customs, as the case may be] may specify having regard to the custody and handling of imported goods in a customs area;

(e) demarcate separate areas for loading of export goods for their storage with respect to categories of exporters, nature of goods, examined and sealed containers or other criterion as the ³[Principal Commissioner of Customs or Commissioner of Customs, as the case may be] may specify having regard to the custody and handling of export goods in a customs area;

(f) not permit goods to be removed from the customs area, or otherwise dealt with, except under and in accordance with the permission in writing of the ¹[Superintendent of Customs or Appraiser];

(g) not permit any export cargo to enter the customs area without a shipping bill or a bill of export having been filed with the ¹[Deputy Commissioner or Assistant Commissioner of Customs];

(h) not permit any import cargo to enter the customs area or be unloaded therein without the import report or the import manifest having been filed with the ¹[Deputy Commissioner or Assistant Commissioner of Customs];

(i) be responsible for the safety and security of imported and export goods under its custody;

(j) be liable to pay duty on goods pilfered after entry thereof in the customs area;

(k) be responsible for the secure transit of the goods from the said customs area to any other customs area at the same or any other customs station in accordance with the permission granted by the ¹[Deputy Commissioner or Assistant Commissioner of Customs];

(l) subject to any other law for the time being in force, shall not charge any rent or demurrage on the goods seized or detained or confiscated by the ¹[Superintendent of Customs or Appraiser or Inspector of Customs or Preventive officer or examining officer, as the case may be];

(m) dispose off in the manner specified and within a time limit of ninety days, the imported or export goods lying unclaimed, uncleared or abandoned:

Provided that the period of ninety days may be extended by the ³[Principal Commissioner of Customs or Commissioner of Customs, as the case may be] by such further period as may be allowed, on sufficient cause being shown for delay in the disposal;

(n) not make any alteration in the entry or exit points or boundary wall without the permission of the Commissioner of Customs;

(o) shall bear the cost of the customs officers posted by the ³[Principal Commissioner of Customs or Commissioner of Customs, as the case may be] on cost recovery basis and shall make payments at such rates and in the manner specified by the Government of India in the Ministry of Finance unless specifically exempted by an order of the said Ministry;

(p) shall observe the Central Government holidays as followed by the jurisdictional Customs formations and in case of any variation in the working days, intimate the same to ³[Principal Commissioner of Customs or Commissioner of Customs, as the case may be] and the trade, at least seven days in advance, and

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

(2) The Customs Cargo Service provider approved for custody of imported or export goods and for handling of such goods shall not lease, gift, sell or sublet or in any other manner transfer any of the premises in a customs area; or sub contract or outsource functions permitted or required to be carried out by him in terms of these regulations to any other person, without the written permission of the ³[Principal Commissioner of Customs or Commissioner of Customs, as the case may be].

(3) The Customs Cargo Service provider shall publish and display ⁴[at prominent places including website or webpage of the Customs Cargo Service provider] the schedule of charges for the various services provided by him in relation to the imported goods or export goods in the customs area.”

4. During surprise check conducted by the officers of the department at the Export Shed on 24.8.2019, it was noticed that the goods of various exporters were placed on a single trolley which can lead to mix up of the cargo. Further, there was no proper segregation of the sterile area of the appellant and the other custodian M/s. Air India.

5. It was time and again noticed that the security personnel were not properly verifying the ID cards of the people entering the customs area and the list of persons who have been issued ID was not furnished to the customs. It was also found that there were several instances where “Yellow ID Cards” issued by the custodian were forged and misused. It was found that there was lax in the security arrangement of movement of people in and out of customs area.

6. During investigation of a recent case of attempted smuggling of red sanders under the copy of shipping bill dated 13.9.2019, it was noticed that the bond had been closed by the custodian without checking LEO status electronically. Further, on the “Export Location Slip” which was generated after closure of bond, it was mentioned that “LEO not received”. This reflected the callous approach of the custodian towards their responsibilities in following HCCAR, 2009.

7. Show Cause Notice dated 21.9.2019 was issued to the appellant as well as Shri Muralidharan, General Manager of Airports Authority of India raising inter alia the above allegations. The appellant filed reply on 18.10.2019. An inquiry was conducted by the Assistant Commissioner of Customs, Air Cargo Complex, Chennai and a report was submitted on 30.1.2020. After adjudication, the adjudicating authority held that the appellant has contravened Regulation 5(n), 6(1)(b) and 6(1)(f) of HCCAR, 2009. A penalty of Rs.40,000/- was imposed under Regulation 12(8) of HCCAR, 2009. The adjudicating authority dropped the penalty proposed on Shri D. Muralidharan, Regional Manager of the appellant. Aggrieved by the penalty of Rs.40,000/- imposed, the appellant M/s. Airports Authority of India is now before the Tribunal.

8. The learned counsel Shri A. Ganesh appeared and argued on behalf of the appellant. He submitted that the appellant had filed a reply against the Show Cause Notice denying the allegations raised in the Show Cause Notice. However, the appellant could not file any objection on the inquiry report. The adjudicating authority has heavily relied upon the inquiry report to impose the penalty. There is no evidence produced to support the observations reported in the inquiry report. He submitted that the inquiry officer did not examine any witness or receive any authentic document to prove the security lapses and access of unauthorized people into the cargo area. There is no examination of any independent witness or any electronic record such as CCTV footage or any document by the inquiry officer to prove the charge raised under Regulation 5(n) of HCCAR, 2009. The inquiry officer simply sated that during the visit of customs officers to the export shed, it had been time and again noticed that the security personnel are not properly verifying ID cards of the people entering the customs area to prevent access of unauthorized people. The report of the inquiry officer does not show that he had examined any witness to prove such allegation.

9. The ingredients of Regulation 6(1)(b) and (f) are not at all attracted or established in this case. The inquiry officer has reported that a recent attempt to smuggle red sanders under cover of the copy of shipping bill dated 13.9.2019 had happened and that the bond had been closed by the custodian without checking the LEO status electronically. In this regard, the appellant submits that after introduction of EDI system, the export and import activities are fully dependent on the message exchanged from customs to appellant and vice versa which is in tune with the Government of India Notification to achieve paperless transactions. As the EDI concept is yet to be synchronized fully with the Integrated Cargo Management System, there are several hitches in the free flow of the shipping bills which is the basic document for generation of Terminal Storage Processing Charges receipt and to allow the cargo into the terminal for further process. Similarly, the LEO is also delayed. In such circumstances, there is no other option for the custodian but to restore manual mode of operation. This noted deficiency has been already regularly taken with DG (System), New Delhi to resolve the issue. On 13.9.2019, there was interruption in availability of Customs EDI system and on that day, they had not received the export order through Customs ICEGATE but received manually for more than 500 consignments which can be established by documentary proof.

10. It is not the duty of the custodian to verify the contents of the packages. They have to verify the number of packages as stated in AWB and shipping bill. The appellant as a custodian has verified the number of packages as per the check list and submitted along with the shipping bill. During investigation by SIIB, they found out that the shipping was lying pending registration. However, a forged copy of the said shipping bill bearing the same number printed at 17.01 hours of 13.9.2019 purporting to show that the shipping bill had already been given let export order was prepared and produced to the appellant for bond closure. The custodian in this case had received the shipping bill along with LEO and did not know that the shipping bill was forged. All these facts were brought out to the inquiry officer and also stated in their reply. However, the appellant could not file objections to the report filed by the inquiry officer. He prayed that the appellant be given a further chance to file objections to the inquiry report so that evidence can be adduced by the appellant to establish their case.

11. The learned AR Ms. Sridevi Taritla appeared for the department. She adverted to page 40 of the appeal paper book. It is argued by her that the inquiry report submitted by Shri V.Ethirajan, Assistant Commissioner of Customs, New Custom House, Meenambakkam, Chennai was furnished to the appellant and also requested to file any representations on the inquiry report within30 days from the date of receipt in accordance with Regulation 12(6) of HCCAR, 2009. The appellant did not file any objection / representation to the inquiry report. The Commissioner has taken up the matter for adjudication on the basis of the Show Cause Notice, reply to the Show Cause Notice as well as the inquiry report. The penalty imposed is legal and proper and does not require any interference.

12. Heard both sides and perused the records.

13. On perusal of records, it is seen that though the appellant has filed a reply to the Show Cause Notice, they have not filed any objections / counter representations after receiving the copy of the inquiry report. Regulation 12 of HCCAR, 2009 provides for the procedure for suspension or revocation of approval and imposition of penalty. The same reads as under:-

“(6) The Principal Commissioner of Customs or Commissioner of Customs, as the case may be shall furnish to the Customs Cargo Service provider a copy of the report of the Assistant Commissioner or Deputy Commissioner of Customs and shall require the Customs Cargo Service provider to submit within the specified period not being less than thirty days any representation that he may wish to make against the findings of the Assistant Commissioner of Customs or Deputy Commissioner of Customs.”

14. As per Regulation 12(6), the appellant is to file a representation on the inquiry report within 30 days from the receipt of the inquiry report. Though various contentions have been raised in regard to the inquiry report, the appellant has not filed any representation against the inquiry report. It is also seen that the appellant can ask for examination of witnesses, cross-examination of witnesses relied by the inquiry officer. The learned counsel has requested that the appellant be given a further chance to file objections / counter representation to the inquiry report so that they can adduce evidence to establish their defence. After considering the submissions made and the fact that the custodian is Airports Authority of India, which is a legal body, I am of the view that the appellant has to be given a further chance to establish their case.

15. The impugned order is set aside. The appeal is allowed by way of remand to the Commissioner and he is directed to give a chance to the appellant to file objections / counter representations on the inquiry report under Regulation 12(6) of HCCAR, 2009. The adjudicating authority may conduct denovo adjudication after the representations filed by appellant on the inquiry report.

(Pronounced in open court on 10.2.2022)