Sanco Trans Ltd Vs Commissioner of Customs (CESTAT Chennai)
Conclusion: DRI had jurisdiction and was empowered under Section 4 of the Customs Act, 1962 to issue show cause notices (SCN) proceedings for recovery of drawback amounts peculiarly cases involving fraudulent or erroneous grant of drawback.
Held: The appeals arose from multiple orders imposing penalties on M/s. Sanco Trans Ltd., company functioning as a Customs House Agent/Customs Broker (CHA/CB) under CHALR, 2004. Based on intelligence from DRI, investigations revealed large-scale frauds involving fictitious exporters, misuse of Importer Exporter Codes (IEC), inflated export values, manipulation of Bills of Lading after grant of Let Export Order (LEO), mis-declaration of port of discharge, and fraudulent availing of duty drawback without realization of foreign exchange. Sanco Trans Ltd., as CHA, had filed the shipping bills in all these cases. While individual employees of the CHA were found to have facilitated exports by filing documents without proper verification and, in some cases, accepting illegal gratification, penalties were imposed on the CHA-company under section 114(i) of the Customs Act, 1962. Appellant contended that DRI lacked jurisdiction to issue show cause notices in drawback matters; subsequent manipulation of Bills of Lading after grant of LEO did not amount to mis-declaration in shipping bills; company could not be treated as a “person” under section 114 of the Customs Act; any lapse by a CHA ought to be dealt with only under CHALR, 2004, and not under the Customs Act; and CHA-employer could not be held liable for fraudulent acts of its employees carried out without its knowledge or authorization. Revenue argued that DRI was competent to issue SCNs in drawback cases; that manipulation of Bills of Lading amounted to fraud and mis-declaration; that a company was clearly covered within the meaning of “person”; and that the CHA’s failure to discharge statutory duties facilitated the fraud, justifying penalties under the Customs Act. Tribunal held that DRI officers were legally competent to issue show cause notices in duty drawback matters, in view of statutory notifications and binding judicial precedents; Manipulation of Bills of Lading after grant of LEO, when done to perpetuate fraud and suppress material facts, constituted mis-declaration in shipping bills. There was no legal bar to initiating action against a CHA under the Customs Act in appropriate cases; however, mere failure to discharge obligations under CHALR, without evidence of abetment or collusion, would not automatically attract penal provisions of the Customs Act; Employer liability for acts of employees depend on whether such acts were committed in the course of employment and for the benefit or with the knowledge of the employer. On facts, the Tribunal found that while individual employees of Sanco Trans Ltd. were involved in serious misconduct and were rightly proceeded against, there was no evidence to establish that the CHA-company itself had abetted, conspired, or knowingly facilitated the fraudulent exports or wrongful availment of drawback. At best, the lapses amounted to failure to exercise due diligence, which could attract action under CHALR, 2004, but not penalties under section 114(i) of the Customs Act.
