Case Law Details
NPL Impex Pvt. Ltd Vs Commissioner of Customs (CESTAT Delhi)
CESTAT Delhi held that initiation of proceedings against Customs Broker alleging violation of regulation 10(n) of the Customs Broker Licence Regulations, 2018 unjustified as he is not the party to alleged mis-declaration and undervaluation.
Facts- The officers of Directorate of Revenue Intelligence (hereinafter referred as DRI) based on an information and the evidences collected during the investigation, observed that some importers have imported Vontron make RO Membranes by committing gross mis-declarations through the appellant as their CB. It was also observed that one Shri Sandeep Jain is the mastermind and the beneficial owner for all the imports made by those six firms who have deliberately mis-declared the value and description of goods by willful misstatement and suppression with an intent to evade payment of customs duty of Rs.46,27,001/-, Rs.17,90,550/-, Rs. 24,62,140/-, Rs.1,72,24,974/-, Rs.17,38,341/-, Rs.1,20,80,780/-respectively. They all were served with a Show Cause Notice vide which the aforesaid demand was proposed to be recovered with the proposal of confiscation of the goods. The said show cause notice was served upon all the aforesaid six importers as well as said Shri Sandeep Jain.
The said show cause notice was forwarded to the Office of the Commissioner of Customs (Airport and General) by the Joint Commissioner of Customs, ICD, TKD- Import, New Delhi requesting to initiate an action under the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018) against the CB. Acting upon the same as offence report proceedings against CB/appellant were initiated under Regulation 10(d) and 10(n) of CBLR, 2018. Department observed that CB had committed a grave offence and immediate action was taken under Regulation 16(1) of CBLR to prevent the misuse of the license of appellant by suspending the same vide order dated 29.09.2020. While complying with Regulation 16(2) personal hearing was given to the appellant and the suspension order was revoked vide Order-in-Original. However, the show cause notice dated 29.12.2020 under Regulation 17 of CBLR, 2018 was still served upon the appellant, proposing the revocation of the license. The said proposal has been confirmed vide the Order-in-Orginal No. 66/2021 dated 21.06.2021. Being aggrieved, the appellant is before this Tribunal.
Conclusion- Held that there is an apparent consensual arrangement between Sandeep Jain and the IEC holders which had nowhere been barred under CBLR, 2018. In any circumstance CB/appellant cannot be held responsible for the reason that admittedly he is not the party to the alleged mis-declaration and undervaluation nor department could produce any evidence that the assessee had been a beneficiary of this arrangement.
CB/appellant is admittedly having all the requisite documents of these importing firms which he admittedly produced before the department. Thus, we hold that appellant has not violated Regulation 10 (n) of CBLR, 2018.
FULL TEXT OF THE CESTAT DELHI ORDER
The appellant herein is a Customs Broker (hereinafter referred as CB) who was having a license with a validity up to 18.05.2022. The officers of Directorate of Revenue Intelligence (hereinafter referred as DRI) based on an information and the evidences collected during the investigation, observed that six importers namely:
(i) M/s. Mishika Enterprises,
(ii) M/s. Durga Enterprises,
(iii) M/s. Arvi International,
(iv) M/s. Aahana International,
(v) M/s. Swift Enterprises,
(vi) M/s. Sunshine Enterprises
have imported Vontron make RO Membranes by committing gross mis-declarations through the appellant as their CB. It was also observed that one Shri Sandeep Jain is the mastermind and the beneficial owner for all the imports made by those six firms who have deliberately mis-declared the value and description of goods by willful misstatement and suppression with an intent to evade payment of customs duty of Rs.46,27,001/-, Rs.17,90,550/-, Rs. 24,62,140/-, Rs.1,72,24,974/-, Rs.17,38,341/-, Rs.1,20,80,780/-respectively. They all were served with a Show Cause Notice bearing No. 05/2018 dated 29.07.2020 vide which the aforesaid demand was proposed to be recovered with the proposal of confiscation of the goods. The said show cause notice was served upon all the aforesaid six importers as well as said Shri Sandeep Jain.
2. The said show cause notice was forwarded to the Office of the Commissioner of Customs (Airport and General) vide letter No. 77/2017 dated 04.09.2020 by the Joint Commissioner of Customs, ICD, TKD- Import, New Delhi requesting to initiate an action under the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018) against the CB. Acting upon the same as offence report proceedings against CB/appellant were initiated under Regulation 10(d) and 10(n) of CBLR, 2018. Department observed that CB had committed a grave offence and immediate action was taken under Regulation 16(1) of CBLR to prevent the misuse of the license of appellant by suspending the same vide order dated 29.09.2020. While complying with Regulation 16(2) personal hearing was given to the appellant and the suspension order was revoked vide Order-in-Original No. 88/2020 dated 20.10.2020. However, the show cause notice dated 29.12.2020 under Regulation 17 of CBLR, 2018 was still served upon the appellant, proposing the revocation of the license. The said proposal has been confirmed vide the Order-in-Orginal No. 66/2021 dated 21.06.2021. Being aggrieved, the appellant is before this Tribunal.
3. We have heard Shri A.K. Seth, Ms. Chinmaya Seth and Ms. Khushboo Seth, learned Advocates for the appellant and Shri Nagendra Yadav, learned Authorized Representative for the department.
4. Learned counsel for the appellant submitted that the order under challenge is liable to be set aside on the sole ground of violation of principles of natural justice as no proper notice about the show cause notice dated 29.07.2020 which was issued by DRI which was the basis for these proceedings was given to the appellant. It is impressed upon that the appellant was not made a noticee in the said show cause notice where the mis-declaration and gross undervaluation are alleged to have been committed by the six importers and by the beneficial owner of these imports namely Shri Sandeep Jain. However, the license of the appellant was suspended vide order dated 29.09.2020 without giving any cogent reason for such immediate action. It is subsequent to that order that the personal hearing was given to the appellant, and the order revoking suspension of license was passed. Subsequent thereto, the issue of Show Cause Notice dated 29.12.2020 proposing revocation of license was therefore not warranted.
4.1 Learned counsel further mentioned that there is no violation of provisions of Regulation 10(d) and 10(n) of CBLR, 2018 as alleged. He submitted that all the IEC holders were very much in existence. DRI show cause notice dated 29.07.2020 was duly served upon six of the importers. Not only this, six of them had joined the investigation even Shri Sandeep Jain also did appear before the investigation authorities. Statements of all concerned were recorded. All those documents were duly verified by the appellant. Six of the importers had introduced Shri Sandeep Jain to the appellant, in person, and informed him to be their representative to deal with the appellant. Hence, there was nothing to be advised to the importers or to be brought to the notice of the authorities. The violation of both these provisions has wrongly been alleged. All the findings in the order under challenge are alleged either to be wrong or to be based on surmises and assumptions. It has wrongly been alleged that CHA/CB was aware that the IEC have been misused. The entire case law as has been relied upon by the adjudicating authority to confirm the violation is denied to be applicable in case of the appellant. With these submissions the order under challenge is prayed to be set aside and the appeal is prayed to be allowed.
5. While rebutting these submissions, learned DR has mentioned that during investigation by DRI, four IEC addresses were found to be untraceable whose import consignments were handled by the appellant. None of the proprietors of six of the importing firms appeared before DRI Enquiry Officer. Shri Sandeep Jain also did not cooperate in the investigation as he failed to appear in response to the summons issued to him. It is alleged that said Shri Sandeep Jain was in constant touch with appellant/CB and was actual master mind behind imports made on the basis of fake IECs. This was very much known to the appellant. Hence, it was the incumbent duty of the appellant to advise the six importers to not to import for Shri Sandeep Jain. It was also his duty to bring these facts to the notice of the department. It is impressed upon that the proprietors of the IEC holders in their respective statements (Shri Anil Ahuja of M/s. Durga Enterprises vide is statement dated 24.07.2018) and even Shri Sandeep Jain whose friend and sister of whose mother were proprietors of M/s. Arvi International and M/s. Aahana International respectively in his statement dated 19.06.2018 had stated that though on papers someone else were the importers but actually Shri Sandeep Jain was importing the consignments using the names of these firms whose IEC addresses were non-existent. Even the Director of the appellant, Shri Hoshiar Singh, in his statement dated 04.07.2018 has acknowledged that Shri Sandeep Jain looked after all the activities of all the four importing firms whose IEC address is non-existent. Learned DR has relied upon the decision of Hon’ble High Court of Patna in the case of M/s. Bhaskar Logistic Services Pvt. Ltd. Vs. Union of India reported as 2016 (340) ELT 17 (Pat.) and the decision of Hon’ble Supreme Court in the case of Commissioner of Customs Vs. K.M. Ganatra & Co. reported as 2016 (332) E.L.T. 15 (S.C.) to impress upon the responsibility of CHA/CB and the revocation of license as a consequence in case of non-observance of the obligations under Section 10 of CBLR, 2018. The statements are sufficient to prove that CB has failed to comply with the obligation cast upon him under Regulation 10(d) of CBLR. Since CB has failed to exercise due diligence and has grossly violated the KYC guidelines, he has failed to fulfill his obligation under Regulation 10(n). Impressing upon no infirmity in the order challenge, appeal is prayed to be dismissed.
6. Having heard the rival contentions and perusing the entire records, we observe and hold as follows:
The appellant’s license was suspended with immediate effect vide Order dated 29.09.2020 without giving any cogent reason of such immediate action. The said order was passed as per Regulation 16(1) of the CBLR, 2018. However, Commissioner of Customs (Airport & General) as per provisions of Regulations 16(2) supra granted personal hearing to the appellant on 07.10.2020, which was duly attended by the appellant. In compliance of the Regulation 16(2) OIO No. 88/2020 dated 20.10.2020 was passed revoking the suspension of the appellant’s license. The relevant para is reproduced below:
“Whereas the adjudicating authority further found that continuation of suspension of CB License will not only deprive the notice of its bread and butter but will also jeopardize the future of its employees, who also earn their livelihood from the activities undertaken by the CB, especially, during the current situation of COVID-19 pandemic & its adverse impact on global economy and accordingly taken a lenient view in the matter and revoked the suspension of the Customs Broker License No. R-25/DEL/DUS/2012 (PAN: AACCN9502H) vide OIO No. 88/2020 dated 20.10.2020.”
7. Hence the appellant’s submission is that further show cause notice dated 29.12.2020 under Regulation 17 of the CBLR, 2018 should not have been issued after the suspension order was revoked. We are not in agreement of this submission as CBLR, 2018 are unambiguous. Regulation 17 prescribes the procedure to be followed when Principal Commissioner or Commissioner of Customs to revoke the license of the CB. Regulation 16 empowers the commissioner to instantly suspend the license during the period to be taken by the procedure mentioned in Regulation 17 of CBLR so as to avoid the consequences as have been foreseen in Regulation 16 of CBLR, 2018. Similar is the intent of legislature under Regulation 16(2). Thus, to our opinion, if Regulation 14 of CBLR is invoked against the CB, he has to be tried in terms of Regulation 17 of CBLR, Regulation 16 of CBLR is just like the order of bail or order of revocation thereof passed during a criminal trial. The proviso of Regulation 16 of CBLR intends for the compliance of timeline as per Regulation 17 of CBLR. Hence, we are not inclined to accept this argument of appellant to set aside the order under challenge.
8. Further, we observe that in the present case, initially DRI initiated an investigation against six importers who were engaged in importing Vontron RO Membranes. A show cause notice dated 29.07.2020 was served upon these importers along with one Shri Sandeep jain alleging that the latter is the mastermind and the beneficial owner of the imports made by six of these firms which were otherwise grossly mis-declared and undervalued. Admittedly and apparently, the CB was not made a co-noticee in the said show cause notice. This particular observation and the admitted fact is sufficient for us to hold that the present appellant had no intent nor even any knowledge to facilitate the clearance of mis-declared and undervalued import consignment. Hence the narrow scope of the present appeal is with respect to the obligations of CB under CBLR, 2018 and the alleged violation of two of such obligations i.e. the obligation under 10(d) and 10(n).
9. We observe that the statements as have been relied upon while passing the order under Regulation 17 of CBLR, 2018 are those which were recorded by the DRI while investigating the show cause notice issued by them. Those statements have to be seen only as far as they are with respect to the obligation of appellant CB. We proceed the regulation wise as follows:
10. For alleged violation of Regulation 10(d) of CBLR, the regulation reads as follows:
“(d) advise the client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be”
11. We observe that the adjudicating authority below has confirmed the violation of the above said provision on the basis that none of the IEC holders responded to the summons as were issued to them. Even Shri Sandeep Jain also did not cooperate the investigation as he repeatedly failed to appear before the enquiry officers in response to the summons issued to him. Thus, it is apparent that CB has failed to advice his clients to comply with the provisions of the Customs Act, 1962 and the other allied acts and rules and regulations. Based on these observations the adjudicating authority below has held that appellant violated Regulation 10(d) of CBLR, 2018.
12. We observe, from the record that Shri Sandeep Jain did appear before the investigating authorities. His statement was also got recorded even prior the issuance of show cause notice by DRI i.e. on 19.06.2018. Otherwise also, we do not find any provision either in the Customs Act or under CBLR, 2018 regulations which fixes a responsibility upon CB for ensuring the attendance of importers and associated people before the investigation authorities. We also observe that the impugned show cause notice in Para 23 thereof records the fact that Shri Sandeep Jain was present and that he even had filed Writ Petition in Hon’ble Delhi High Court against the investigating authorities. We observe that these facts are mentioned in the Order-in-Original being reproduced verbatim, but the adjudicating authority has ignored the same. Thus we hold that the absence of the importers and Shri Sandeep Jain has been wrongly observed in the order under challenge and CB has wrongly been held responsible for the said absence.
13. The same otherwise cannot be a ground to allege violation of 10(d) CBLR, 2018. We draw our support from the decision of this Tribunal in the case of Parvath Shipping Agency Vs. Commissioner of Customs (Gen.), Mumbai, reported as 2017 (357) E.L.T 296 (Tri.-Mum). It is also apparent on record of order under challenge Para 7 thereof that appellant had provided all the requisite documents to the investigating authorities as and when those were asked initially in October, 2018. This statement was even prior dated 04.07.2018 when he disclosed all the facts to the investigating agencies. In the light of these observations, we hold that appellant has not violated Regulation 10 (d) of CBLR, 2018.
14. For allegations about 10(n). The regulation reads as follows:
“A Customs Brokers shall –
verify correctness of Importer Exporter Code (IEC) number, Goods and Service Tax identification Number (GSTIN), identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information;”
15. We observe that the adjudicating authority had concluded that all the importers in the instant case were untraceable during investigation. Further inquiry from the respective persons of the area revealed that no such firms existed in the respective areas. Accordingly, it was held that the CB has failed to comply with Regulation 10(n) of CBLR, 2018. Appellant/CB is held to have accepted his liability to verify correctness of IEC, GSTIN identity of his client and the functioning of his client at the declared address but that he has failed to do the same. Board’s Circular No. 09/2010 dated 08.04.2010 has also been relied upon holding that a detailed guideline about the list of documents to be verified and to be obtained from the client or customer is duly provided in the said circular. But the CB is held to have failed to exercise due diligence and thus has grossly violated the KYC guidelines of the said circular.
16. From the perusal of statements on record, we observe that all the six importing firms herein had duly applied for IEC and the Directorate General of Foreign Trade issued IEC. Though Shri Sandeep Jain was taking care of the transactions of these firms. These statements have been the sole basis for the order under challenge. We observe from the statement of Shri Anil Ahuja, Proprietor of M/s. Durga Enterprises that he has deposed about the impugned imports to have been made at the instance of Shri Sandeep Jain who only had interacted with the exporters, negotiated the prices and had done everything required for importing the Vontron RO machines. However, he simultaneously has deposed that the IEC is obtained in the name of his firm with his consent as he got convinced with the offer given to him by Shri Sandeep Jain that he has not to take any troubles and pains and efforts of importing things except allowing the goods to have been imported on his IEC code against receiving 5% of the profits. This deposition of Shri Anil Ahuja of M/s. Durga Enterprises has fully been corroborated by Shri Sandeep Jain himself.
17. Shri Sandeep Jain acknowledged that M/s. Arvi Interntional and M/s. Aahana International are also validly existing with IEC in the name of his friend Shri Shiv Mohan and in the name of Smt. Sneh Lata, the sister of his mother, respectively. He duly acknowledged that the imports were being made by him in the name of six of these importing firms that he only used to look after all day to day activities in those firms including procurement to sales etc. and used to share profits with the proprietors thereof. He only was making payments through the respective accounts of these firms. He also deposed that he only was interacting with the appellant and M/s. Saraa Logistics for the imports being undertaken in all these firms and the communications for the purpose with the representatives of these Customs Brokers were mostly over the mobile.
18. Further perusal of statement of appellant himself reveals that he had met the proprietors/IEC holders of four impugned importing firms M/s. Arvi International, M/s. Sunshine Enterprises, M/s. Swift Enterprises and M/s. Durga Enterprises. He deposed that KYC of four of these firms was done by him. For completing the said procedure, he met four of the IEC holders at his office, verified all original documents i.e. IEC, GST, Aadhaar Card, PAN Card, cancelled checks and bank statements. He stated that he met all these IEC holders once in presence of Shri Sandeep Jain at his office itself who was introduced by the importers themselves to be their representative. Shri Sandeep Jain takes care of all the activities with respect of these firms and as far as he knows these firms were in the name of the employees or relatives of Shri Sandeep Jain.
19. We hold that the statement of appellant proves the compliance of obligation 10(n). We, however, observe that this deposition of appellant has been wrongly interpreted by the adjudicating authority to confirm violation of 10(n) of CBLR against him. We observe that the adjudicating authority has picked up the statements in parts to confirm to the allegations despite that all statements as got recorded during investigation, when are read as a whole and in the light of the other statements so recorded, it comes as a clear corroborative deposition that the appellant had met the IEC holders, in person. They handed over to him all such documents as are required under KYC guidelines circular and they acknowledged Shri Sandeep Jain to be their representative for all dealings with appellant/CB with respect to the imports to be made by these IEC horder. Once this is the fact then mere knowledge that Shri Sandeep Jain was the representative of the importing firms does not amount to the violation of 10(n) especially when the IEC holders were found available.
20. Further, we are of the opinion that from the statements on record there is apparent consensual arrangement between Shri Sandeep Jain and the IEC holders which has nowhere been barred under CBLR, 2018. In any circumstance CB/appellant cannot be held responsible for the reason that admittedly he is not the party to the alleged mis-declaration and undervaluation nor department could produce any evidence that the appellant had been a beneficiary of this arrangement.
21. Though with respect to M/s. Swift Enterprises and M/s. Sunshine Enterprises, Shri Sandeep Jain has denied any association but it is apparent in the statement of the appellant that all the transactions with respect to M/s. Sunshine Enterprises as well as M/s. Swift Enterprises were being taken care by Shri Sandeep Jain only. The export documents with respect to these two firms also, Shri Sandeep Jain only used to mail to the appellant, in the same way he used to mail it for the other importing firms. The payment also used to go to the respective accounts as were disclosed by Shri Sandeep Jain / the IEC holders. Goods for both these firms also were coming from the same exporters i.e. Mr. Tony Pan and Ms. Samanta of China through their firm M/s. CixiKochin Water Filtration Inc, China. The exports for these two firms also have been made during the same proximity of time and imported goods have been transported through the same transporter Vijay Transport Company to the same godown at Paschim Vihar and Mundka Village in Delhi where used to go the imported goods of remaining importing firms. These godowns have been acknowledged by Shri Sandeep Jain. In the given circumstances irrespective Shri Sandeep Jain is admittedly the beneficiary of imports made by six importers but the fact remains is that all importers have requisite documents, all of them are actually existing and it was a consensual arrangement between them and said Shri Sandeep Jain with no benefit to the appellant out of the said arrangement. Appellant otherwise was admittedly having all the requisite documents of these importing firms which he admittedly produced before the department. Thus, we hold that appellant has not violated Regulation 10 (n) of CBLR, 2018.
22. In light of the entire above discussion, we hold that adjudicating authority has failed to appreciate the statements on record as a whole as discussed above. As observed above, if the statements would have been read as a whole, apparently there is no violation of 10(d) and 10(n) of CBLR, 2018 is observed to have been committed by the appellant. For the above reasons, the order under challenge is hereby set aside. Consequent thereto the appeal stands allowed.
[Order pronounced in the open court on 04.10.2023]
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