Conclusion: Chief Commissioner of Customs was directed to consider whether it should be necessary to cause a vigilance enquiry on the system failure to determine how the consignments were cleared when there were so many mis-declaration in description as well as classification of the imported Point of Sale Devices (POS) and Mobile Point of Sale Devices (MPOS) and evasion of customs duty.
Held: Assessee-importer namely M/s Pax Technologies were engaged in import of goods namely Point of Sale Devices (POS) and Mobile Point of Sale Devices (MPOS). Based on an intelligence that the goods were being imported by suppressing actual value of goods, the department intercepted the consignments imported against two Bills of Entry Nos. 3851878 dated 08/01/2016 and 3851698 dated 08/01/2016. On examination, it was found that the goods were not only undervalued, but were mis-classified and imported in violation of relevant Foreign Trade Policy (FTP) provisions too. In the facts and circumstances of the case at hand, it was noted that the importer – appellant and various clearing agent – appellants and persons were consciously part of the entire conspiracy of willful mis-declarations of the import consignments. It was appropriate to ask the Chief Commissioner of Customs to enquire about the systemic failure with regard to clearances of Mobile Point of Sale equipments under various Bills of Entry. It was found that the clearing agents were aware as to the description that was to be given to a consignment to avoid examination of the cargo from the Risk Management Module (RMS). Also, it was surprised to note that in some of the Bills of Entry, the Risk Management Module (RMS) gave examination of the package of the cargo, but still in these cases also the consignment were cleared in spite of the huge mis-declaration with regard to its description, classification as well as the value of imported items. This indicated that there exist a deep malaise in the system of examination and clearance of the cargo. The Chief Commissioner was advised to revisit the standard operating procedure in this regard to ensure that the system was enabled to take care of the instances where a blatant mis-declaration was avoided by the importers to bye-pass the Risk Management Module. Chief Commissioner of Customs was also directed to consider whether it should be necessary to cause a vigilance enquiry to determine how the consignments were cleared when there were so many mis-declaration in description as well as classification of the imported Mobile Point of Sale equipments.
FULL TEXT OF THE CESTAT JUDGEMENT
This batch of 18 appeals preferred by appellants falling broadly in category of importer, CHA representative, Freight Forwarder, consultant, and individuals un-authorizedly engaged in customs clearance work. These appeals have arisen out of a common order-in-original No. 03/2017-18/V.S./COMMR (IMPORT) read with Corrigendum dated 20/07/2018 passed the Commissioner of Customs, ACC (Import), New Custom House, New Delhi. The status of the Appellants and the corresponding duty or/and penal liability confirmed against them by the impugned order has been tabulated hereunder:-
|Sr. No.||Appeal No.||Appellant||Status||Duty (Rs.)||Penalty (Rs.)|
|1.||C/53447/2018||Pax Techn-ologies Pvt Ltd||Importer||1,85,09,843/-||3,76,49,777/-|
|3.||C/52445/2018||Chinta Haran Ojha||CHA Re-presentative||NIL||5,05,000/-|
|4.||C/52446/2018||Rakesh Kumar||CHA Re-presentative||NIL||5,05,000/-|
|5.||C/53272/2018||Rajender Prasad||CHA Re-presentative||NIL||6,30,000/-|
|8.||C/53492/2018||Kamal Nath Roy||CHA Re-presentative||NIL||5,28,000/-|
|1.||C/53495/2018||Kuldeep Singh||Freight Forwarder||NIL||5,28,000/-|
|2.||C/53688/2018||Prompt Air &Sea Cargo Pvt Ltd||CHA firm||NIL||28,46,000/-|
|13.||C/53689/2 018||Kamal Kumar Sukhramani||CHA Re-presentative||NIL||10,46,000/-|
|14.||C/54011/2018||Shri Rajinder Madhok||Consultant||NIL||7,00000/-|
|15.||C/54040/2018||Kishan Singh Dhapa||CHA Re-presentative||NIL||6,30,000/-|
|16.||C/54041/2018||Exim Cargo Services||CHA firm||NIL||6,30,000/-|
|17.||C/50548/2019||R U Imports Exports P Ltd||CHA firm||NIL||5,14,000/-|
|18.||C/50563/2019||Rajesh Maikhuri||CHA Re-presentative||NIL||5,14,000/-|
2. As all the appeals arose from the same impugned order, the appeals were heard together with the consent of all the appellants and are being disposed of by this common order.
3. The brief facts of the matter are that the Appellant-Importer namely M/s Pax Technologies were engaged in import of goods namely Point of Sale Devices (POS) and Mobile Point of Sale Devices (MPOS). Based on an intelligence that the goods were being imported by suppressing actual value of goods, the department intercepted the consignments imported against two Bills of Entry Nos. 3851878 dated 08/01/2016 and 3851698 dated 08/01/2016. On examination, it was found that the goods were not only undervalued, but were mis-classified and imported in violation of relevant Foreign Trade Policy (FTP) provisions too. The scope of investigations was expanded to the previous consignments cleared by M/s Pax Technologies Pvt. Ltd. and it was detected by the Department that :
(a) The correct import price of the hardware was not declared in respect of various import consignments;
(b) The amount paid or payable to the overseas supplier on account of Licence Fee for use of software was not included in the assessable value in the Bills of Entry filed with the Customs resulting in evasion of Customs Duty;
(c) The point of sale Terminals/ mobile point of sale Terminals i.e. the hardware imported by Appellant importer were Bluetooth/wi-fi/GPRS enabled and hence their import required no objection certificate from WPC Wing of Department of telecommunication, ETA Type Approval Certificate and also BIS certification, but no compliance in respect of these policy provisions were made.
(d) The imported consignments were grossly mis-declared with regard to description and were also mis-classified under different Customs Tariff Heading. The importer – Appellant wrongly described the „dummy‟ or „parts of debit / credit device‟ with intent to undervalue the goods and to avoid BIS certification and ETA from WPC.
4. The Bill of Entry-wise violations i.e. undervaluation, non- inclusion of transfer/licence fee and non-submission of BIS and ETA/WPC licence in respect of all the 14 Bill of Entry are summarized in the table below:
|S. No.||B/E No.||B/E
|Name of CHA||Violations in terms of non submission of BIS certification /ETA Certificate from WPC / undervaluation / using forged invoices/mi-classification /mis-
|1||5994463||02.07.14||Chinta Haran Ojha||Non submission of BIS /
ETA from WPC
|2||5994464||02.07.14||Chinta Haran Ojha||Non submission of BIS / ETA from WPC|
|3||6221058||24.07.14||Chinta Haran Ojha||Non submission of BIS / ETA from WPC|
|4||7817932||26.12.14||R U Imports Exports Pvt. Ltd.||Non submission of BIS / ETA from WPC, mis- classification, mis-declaration of goods as
dummy, undervaluation and non-inclusion of the value of software in the assessable value of goods.
|Non submission of BIS / ETA from WPC, mis-classification, undervaluation and non-inclusion of the value of software in the assessable value of goods.|
|6||2121203||03.08.15||Exim Cargo Service||Non submission of BIS / ETA from WPC, mis- classification, mis-declaration of goods as paper roll and Terminal (parts of payment debit/credit device), forgery of invoice,
undervaluation and non-inclusion of the value of software in the assessable value of goods.
|7||2763917||30.09.15||Exim Cargo Service||Non submission of BIS / ETA from WPC, mis- classification, mis-declaration of goods as paper roll and barcode reader, forgery of invoice, undervaluation and non-inclusion of the value of software in the assessable value of goods.|
|8||3141261||03.11.15||Exim Cargo Service||Non submission of BIS / ETA from WPC, mis- classification, mis-declaration of goods as paper roll and Terminal (parts of payment debit/credit device), forgery of invoice,
undervaluation and non-inclusion of the value of software in the assessable value of goods.
|9||3239991||13.11.15||Rubal Logistics Pvt. Ltd.||Non submission of BIS / ETA from WPC, mis-classification, mis-declaration of goods as “D 180 (D 180 pinpad is used to connect with the laptop to do the transaction – connectivity via USB port only)” and non-inclusion of the value of software in the assessable value of goods.|
|10||3346966||23.11.15||Exim Cargo Service||Non submission of BIS / ETA from WPC, mis- classification, mis-declaration of goods as paper for printing in payment debit/credit device and Terminal (parts of payment debit/credit device), forgery of invoice,
undervaluation and non-inclusion of the value of software in the assessable value of goods.
|11||3526607||09.12.15||Prompt Air & Sea Cargo||Non submission of BIS / ETA from WPC, mis- classification, mis-declaration of goods as paper for printing in payment debit/credit device and Terminal (parts of payment debit/credit device), forgery of invoice, undervaluation and non-inclusion of the value of software in the assessable value of goods.|
|12||3650483||19.12.15||Prompt Air & Sea Cargo||Non submission of BIS / ETA from WPC, mis- classification, mis-declaration of goods as paper for printing in payment debit/credit device and Terminal (parts of payment debit/credit device), forgery of invoice, undervaluation and non-inclusion of the value of software in the assessable value of goods.|
|13||3851878||08.01.16||Prompt Air & Sea Cargo||Non submission of BIS / ETA from WPC, mis-classification, mis-declaration of goods as D180 Terminal (parts of payment debit/credit device), undervaluation and non-inclusion of the value of software in the assessable value of goods.|
|14||3851698||08.01.16||Prompt Air & Sea Cargo||Non submission of BIS / ETA from WPC, mis-classification, mis-declaration of goods as D180 Terminal (parts of payment debit/credit device), undervaluation and non-inclusion of the value of software in the assessable value of goods.|
5. The investigation has brought forth a fact that though the goods were supplied by a supplier namely M/s Pax Technology Ltd., Hong Kong but to circumvent the registration of import in Special Valuation Branch (SVB) and examination by SVB branch of whether the buyer and supplier were „related‟, and if so, whether the relationship influenced the transaction value, the appellant – importer mis-declared the facts. It has also been indicated that Ms Latha Priyadarshini, Director of the Importer-Appellant firm actively connived with Shri Kuldeep Singh, Director of the Freight Forwarder firm M/s VSG Shipping and Logistics Pvt. Ltd., Shri Rajinder Madhok, Consultant and CHA M/s Rubal Logistics Pvt. Ltd. in resorting to mis-declaration of value and description as well as other facts of the imports.
6. The Department has alleged that importer appellant indulged in duty evasion by fraud and forgery. Syndicate of S/Shri Randhir Singh, Sanjay Kataria, Sushil Kumar Mishra and Rajendar alias Raju has un-authorizedly handled import documents and in the process has indulged in using/preparing forged/fake documents based on which goods were cleared without payment of appropriate duty.
7. The authorized CHAs (firms and their representatives) failed to verify the genuineness of the importer, correctness of the documents on the basis of which clearances were sought and also to guide the importer about the statutory requirements especially certification from BIS and WPC (in this case). In order to get more business of clearance of import consignments they undermined the provisions of law. Some of the CHAs and their representatives deposited assessed customs duty from their own account and charged the same amount or more from the importer. In some of the cases it has been found by the Department that the CHAs were aware that the fake/forged documents were submitted for clearance of import consignment and thus as per department they became party to the violation of customs procedures as well as duty evasion.
8. After detailed investigation, the Department issued a show cause notice dated 12 July 2016 to all the appellants which got adjudicated by impugned order-in-original No. 3/2017-18/V.S./COMMR./IMPORT dated 28 June 2018 which was subsequently modified by issuing a corrigendum dated 20 July, 2018. The summary of confirmation of the duty and imposition of penalty under various sections which has already been summarized in the preceding para of this order.
9. The arguments submitted by various Advocates appearing on behalf of the appellants are summarized here below :-
(A) Appellant- Importer, namely M/s Pax Technologies Pvt. Ltd.
(i) Mis-declaration of description of goods: That mis-declaration of description of goods could not be attributed to them as they provided all the documents as received from the oversea supplier to the syndicate comprising Shri Sanjay Kataria and associates; that the manipulations in the import documents and Bill of Entry were handiwork of the syndicate; that they were not party to the mis-declaration which was perpetrated by Sanjay Kataria, Sushil Kumar Mishra and Rajendar alias Raju, and in fact they became victim of nefarious designs of the aforesaid persons. It has further been added that had they been a party to the mis-declaration they would not have filed criminal complaints against Sanjay Kataria and others in police station.
(ii) Undervaluation of goods: That they were not a „Related Party‟ to the supplier M/s Pax Technologies Ltd. Hongkong but dealt with the supplier on Principal to Principal basis in as much as they did not ever considered themselves as „Related Parties‟ and hence SVB registration and provisional assessment was not required in their case; that in the Master Distributor Agreement with the Supplier it is nowhere prescribed that purchase of software was a condition of sale of the hardware; that goods covered by initial three consignments only were in operating condition loaded with software and hence the per piece value was declared @ USD 60 and duty was discharged accordingly; that goods covered by subsequent consignments were not loaded with software; that clients were supposed to download the software depending on the operative window they were using for their computers; that except first three consignment, goods imported were hardware only and the value after volume discount was declared as transaction value in the invoice for duty payment; that Sanjay Kataria and his associates mis-declared the transaction value lesser than the invoice value without any knowledge or approval of the Appellants; and finally that they remitted the price at the values indicated in the respective invoices issued by overseas supplier and paid duty to Sanjay Kataria and associates calculated at the actual invoice value .
(iii) Mis-classification of goods: That though the classification entered in the Bills of Entry by the respective CHAs was also not applicable to the goods, the Learned Commissioner also erred in confirming classification of subject goods under CTH 8471 holding the devices are Automatic Data Processing Machines and that classification adopted by the Learned Commissioner was not in conformity with the classification adopted by other customs formations in respect of identical goods; and finally that the impugned goods are classifiable under CTI 84705010 as cash register for which they relied upon the catalogue of D180 MPOS which was submitted during hearing.
(iv) Confiscation and Penalty: That the impugned goods do not require ETA and WPC Certificates for clearance and hence interpretation adopted by the Learned Commissioner for holding that the goods in absence of production of aforesaid certificates were liable to confiscation under Section 111(d) is misconceived; that the finding of the Learned Commissioner is also contrary to uniform practice prevalent at all custom houses of clearance of identical goods without insisting upon BIS, ETA or WPC; that finding of the Learned Commissioner that the goods are liable for confiscation under Section 111(m) for non-submission of SVB orders is incorrect in so far as though supplier and Appellants have identical names, they cannot be construed as related party in terms of provisions of Rule 2 (2) of Customs Valuation Rules (CVR) 2007; that the goods cannot be held liable for confiscation under Section 111(m) of the Customs Act for mis-declaration in the Bills of entry as the description of the goods in Bills of entry was wrongly depicted by the CHAs without their knowledge. Thus, they are not liable for penalty under Section 114A and 114AA as the fraud was perpetrated not by them but by other persons/noticees; that in absence of collusion, willful mis-statement or suppression of facts on their behalf, imposition of penalty under Section 114A was contrary to the language of the provision; that in the facts and circumstances of the instant case imposition of penalty was contrary to settled law that penalty being quasi-criminal is attracted only in cases of contumacious conduct or willful infringement of the statutory provisions which are conspicuously absent on their part; that they rely on the judgment in cases of Hindustan Steel [ 1978 (2) E.L.T. (J 159) (S.C.)] , Prashray Overseas [ 2009 (237) E.L.T. 720 (Tri. Chennai)], Suryakiran International [2010 (259) E.L.T. 745 (Tri. B‟lore)] and Vaz Forwarding [2011 (266) E.L.T. 39 (Guj.)]; and finally that the penalty imposed was highly excessive and does not commensurate with the gravity of offence, if any.
(B) Appellant- CHA against imposition of penalty: That the impugned goods having been assessed by the proper officer under Section 17 after rejecting self-assessment and therefore same cannot be adjudicated/assessed again without filing appeal; that there is no evidence on record to establish that the Appellants had prior knowledge that the impugned goods were mis-declared/undervalued; that the true declaration with regard to description and value of the imported goods has to be given by the importer and not by the CHA; that the bills of entry were prepared and filed by them based on the documents supplied by the importers; that there was no positive evidence on record to show any mala fide intention on the part of them or that they were an accomplice or abettor in the offence of mis-declaration, mis-classification and under invoicing of the goods with an intent to evade customs duty; that in the instant case there is not any evidence to indicate that the they had any prior knowledge about the violation of any provisions of the law, which would have rendered the goods liable to confiscation; that the importer did not implicate them in statement; that they scrupulously followed the KYC norms and other requirements as expected of them; Invocation of Section 112,114A or 114AA is not legally sustainable; that no separate penalty is imposable on them when penalty has already been imposed on the proprietor; that they have already faced proceedings under CBLR 2013; and finally that they rely upon plethora of judgments holding that CHA cannot be penalized for wrongdoings of importers in absence of mens rea on behalf of CHA. (No one appeared and no oral submissions made in respect to Appeal filed by Shri Rajender Prasad figuring at serial no. 5 in table above).
(C) Appellant- Shri Sushit Kumar Mishra against imposition of penalty: The investigations have indicated that Shri Mishra was working as one of the members of the syndicate manipulating the import documents and forging certain documents for obtaining the clearance of import consignments. It is contended on his behalf that he was not physically involved in forging/faking of import documents, no penalty can be imposed on him. He relied upon certain judgments to impress that no penalty can be imposed on Middle man/Facilitator/Coordinator invoking Sections 112,114A or 114AA.
(D) Appellant- Shri Kuldeep Singh – a Freight Forwarder against imposition of penalty: That the Appellant had a very limited role of moving the goods from the Air Cargo Area to the importer’s place for a limited period as an authorized representative of the importer; that he didn’t have authority either to verify genuineness of the import documents or competency to deal with customs procedure; that he acted on the declaration, information and documents provided by the importer; that he didn’t receive any consideration except agency fee; that neither he was involved in any manipulations of the documents nor defaulted in forwarding a revised invoice to the CHA for clearance of impugned goods; that he was not competent to verify or know the technicalities pertaining to the requirements of BIS/ETA certificates, classification or valuation of impugned goods; that no mens rea has been proved against him for invoking Section 112 and 114AA of the Customs Act; and finally that he seeks support from judgments in the case of Sneha Sales Corporation [ 2000(121) E.L.T. 577 (S.C.) ], Sampat Raj Dugar, Taparia Overseas, K. Uttamlal to advance his cause.
(E) Appellant- Shri Rajinder Madhok – a Consultant against imposition of penalty: That the Appellant did not commit/omit that led to confiscation of impugned goods; that only importer can be penalized for rendering goods liable for confiscation; that he cannot be penalized for wrongdoings of importers in absence of mens rea on his behalf; that he tendered only his opinion in capacity of a consultant; that no positive evidence was adduced against him by the Department on the issue of abetment/collusion; and finally that no penalty can be imposed on Middle man/Facilitator/ Coordinator invoking Sections 112,114A or 114AA.
10. Summary of arguments on behalf of the Revenue: The Departmental Representative (DR), at the outset, contended that this is a case wherein forgery/fraud has been perpetrated on revenue by the importer, its executive, clearing agents and some other persons with an intent to evade customs duty. The learned Departmental Representative impressed upon as follows :–
(i) It is contended that it is a fraud in law if a party makes a presentations, which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. It is also well settled that misrepresentation itself amounts to fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by wilfully or recklessly causing him to believe and act on falsehood. Of course,innocent misrepresentation may give reason to claim relief against fraud.
(ii) An act of fraud on Revenue is always viewed seriously. “Fraud” and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. It is a concept descriptive of human conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter.
(iii) It has been held by Apex Court in the case of Commissioner of Customs, Kandla v. Essar Oil Ltd. – 2004 (172) E.L.T. 433 (S.C.) that by “fraud” is meant an intention to deceive; whether it is from any expectation of advantage to the party himself or from the ill-will towards the other is immaterial. The expression “fraud” involves two elements, deceit and injury to the deceived. Undue advantage obtained by the deceiver, will almost always cause loss or detriment to the deceived. Similarly a “fraud” is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another‟s loss. It is a cheating intended to get an advantage as held in P. Chenga!varaya Naidu v. Jagannath [1994 (1) SCC 1].
(iv) In a leading English case i.e. Derry and Ors. Peek (1886-90) All ER-1 what constitutes “fraud” was described thus : (All ER p. 22 B-C) “fraud” is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, carelessly whether it be true or false”. This aspect of the matter has been considered by Apex Court in Roshan Deen v. Preeti La! [(2002) 1 SCC 100], Ram Preeti Yadav v. U.P. Board of High School and Intermediate Education [(2003) 8 SCC 311], Ram Chandra Singh‟s case (supra) and Ashok Leyland Ltd. v. State of T.N. and Another [(2004) 3 SCC 1]. Suppression of a material document would also amount to a fraud on the court, as held in Gowrishankar v. Joshi Amha Shankar Family Trust, [(1996) 3 SCC 310] and S.P. Chengalvaraya Naidu’s case (AIR 1994 SC 853). No judgment of a Court can be allowed to stand if it has been obtained by fraud. Fraud unravels everything and fraud vitiates all transactions known to the law of however high a degree of solemnity.
11. Thus it has been contended by learned Departmental Representative that all the appeals in this case merit dismissal in view of the proven fact that all the relevant persons/firms mis-declared the description and value of the goods with an intention to evade customs duty and to circumvent the provisions of import – export policy of India and therefore the impugned order-in-original does not deserve any interference. The learned Departmental Representative has made following submission on the individual role played by various persons/firms.
(A) On the Appellant- Importer
(i) Mis-declaration of description of goods: The goods covered by 2 live Bill of Entry were attempted to be cleared on the strength of forged invoices shown to be issued by M/s Wang Technologies Limited, whereas the two consignments were shipped by M/s Pax Technology Limited, Hong Kong; that mis-declaration about supplier of the goods was resorted to circumvent registration of import in Special Valuation Branch (SVB) and avoid verification to the effect whether the buyer and supplier were „related‟ party, and if so, whether the relationship influenced the transaction value; that the impugned goods were Point of Sale (POS) Terminals/devices and required certification from BIS for their clearance and this fact was in the knowledge of the importer, however, to circumvent this requirement, the impugned goods in some of the Bills of entry were mis-declared as „Paper Rolls‟, „Paper for printing in payment Debit/Credit Device‟, Dummy and „D 180 Terminal (Part of Payment Debit/Credit Device)‟; that during the examination of goods covered by live Bills of entry, they had also tried to deceive the investigating officers by purposefully stating that the two shipments containing D-180 Terminal did not have necessary software as well as GPRS and that those were not operatable on wi-fi/GPRS/Bluetooth, that D180 Terminal could be connected via USB cable to Laptop/Desktop and hence neither NOC from WPC was required nor any ETA type approval certificate was required for the two consignments. It is a matter of record that when the goods were put to test by the investigating officers that bluetooth was installed in the goods and those goods were bluetooth enabled, then only the appellant-Importer accepted that the device D-180 was Bluetooth enabled, the import of which required NOC from WPC and ETA Type Approval Certificate. This fact establishes an attempt of wilful mis-declaration of description of goods and mens rea on behalf of appellants to evade duty and circumvent Foreign Trade Policy provisions applicable to impugned goods. It is also a matter of fact that even the Master Distribution Agreement mentioned „transfer prices offered by the Company to the Master Distributor for the main POS models. Inbuilt contactless is included on models where available‟, despite this the appellant chose not to declare this fact and rather attempted to suppress the actual description for obvious reasons.
(ii) Undervaluation of goods: That the Master Distribution Agreement prescribed that the appellant-importer was required to pay an amount of USD 15 towards Transfer Price of Hardware (D 180) per unit plus USD 45 per unit on account of Licence Fee; that similarly in respect to terminals S-90, SP-30 and D 200 terminals, the importer was required to pay an amount of USD 39, USD 75 and USD 25 respectively towards Transfer Price of Hardware per unit plus USD 60 for S Series and USD 45 for D Series respectively on account of Licence Fee; that the director of the appellant firm categorically admitted that the Software Licence was an integral part of these devices without which POS machines could not be operated; that she had also agreed that she paid the Licence Fee to M/s PAX, Hongkong once the customer/bank injected the licence key into the device and that that the value of those devices was a total of the value of devices plus the value of software licence fee; that it was also admitted fact that the Software Licence Fee was an integral part of the hardware imported by the Appellant and they were mandatorily required to pay the Licence Fee to the overseas supplier; that it was categorically admitted that the licence fee was required to be paid to the overseas supplier to have Euro Master Visa encryption, which was mandatory for the devices; that the Software Licence was an integral part of the devices, without which the MPOS machines could not be operated; that according to Agreement the software was not present at the time of import of goods and the key was injected by the end customer/banks but the Appellant were paying the licence fee to M/s Pax Technology Ltd., Hongkong once the customer/bank injected the licence key into the device; the licence fee was required to be paid to the overseas supplier to have Euro Master Visa encryption so as to make the hardware under import operational and that the licence fee was required to be paid to the overseas supplier only and not to any other person or entity; that hence the payment of licence fee to M/s Pax Technology Ltd., Hongkong was an essential element of the hardware under import and also the condition of sale of the hardware as per Master Distribution Agreement and hence the element of licence fee paid or payable to the overseas supplier was required to be included in the assessable value of the import of hardware for the purpose of determination of true assessable value of the goods under import and payment of duty of Customs thereon in terms of provisions of Rule 10(1)(c) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 for the imports made by the Appellant-Importer .
(iii) Mis-classification of goods: That MPOS specially D-180 is undisputably a wireless Automatic Data Processing Machines (ADPM) which facilitate payments and hence the same merit classification under Chapter Heading No. 84713090; that even the catalogue of D180 MPOS produced during the argument mentions in the specifications that that machine incorporates, inter alia, Memory, Processor, Display, Keypad, Magnetic Card reader and Smart Card reader; that Memory and, Processor forms Central Processing Unit( CPU), Display forms the Output device and Keypad/Magnetic Card reader/Smart Card reader forms the input device and hence the Machine has the configuration of a full fledged ADPM; that the principle function of the device is automatic data processing and hence despite having some other alternative/complimentary functions like facilitating payments, the goods merit classification under Customs Tariff Heading 84713090 as ADPM in terms of Note 3 of Section XVI of Schedule I appended to Customs Tariff Act 1975; that the identical goods have been classified under Customs Tariff Heading 8471 holding the devices as Automatic Data Processing Machine in US Ruling NY E81686 dated 10.05.1999 an internet downloaded copy of which was submitted; that the said Ruling has persuasive value in view of the fact that India and USA are signatory to WTO and both countries follow HSN for Tariff classification .
(iv) Confiscation and Penalty: That the goods in question were Mobile Point of Sale Devices (MPOS), and the clearance of which was subject to production of Registration Certificate from the Bureau of Indian Standards (BIS) and Equipment Type Approval (ETA) from Wireless Planning & Coordination (WPC), which the Appellant-Importer neither submitted at the time of filing Bill of Entry, nor have applied to the same with the concerned Departments and did not possess the same at the time of Import. That as per evidences placed on record, it is proven that the Appellants were well aware about the mandatory requirements of WPC and BIS certification as early as in July, 2014 when one consignment covered under Bill of Entry No. 6221058 dated 24.07.2014 pertaining to M/s Pax Technologies Pvt. Ltd. was not allowed clearance by the Deputy Commissioner for want of WPC and SVB order; That rather than obtaining the mandatory statutory certification from WPC and BIS, the Appellants indulged themselves to seek clearance of consignments through unscrupulous persons, who not only forged the documents but also resorted to mis-declaration before Customs to secure clearance of the goods; Though the Appellants pleaded wrong supply of goods on behalf of supplier, they failed to provide any written communication from the supplier on this aspect and only argued that they went to China and gave verbal directions for the modifications to be made in the devices; that Shri Randhir Singh in his statements has categorically admitted that the Appellant – importer themselves handed over to him the documents for filing Bills of Entry Nos. 3851878 and 3851698, both dated 08.01.2016, in respect of which the invoices submitted were issued by M/s Wang Technologies Limited, whereas the fact remained that the said two live consignments were shipped by M/s Pax Technology Limited, Hong Kong, because, they knew that filing of the said Bills of Entry on the basis of invoices issued by M/s Pax Technology Limited, Hong Kong would have attracted special valuation provisions; that consignment covered under Bill of Entry No. 6221058 dated 24.07.2014 was also stopped clearance for want of WPC and SVB Order; that the Appellant-Importers were not in possession of any such ETA from WPC at the time of filing the said two Bills of Entry and hence the imports were in contravention of the provisions of EXIM Policy to this effect; that as provisioned under Para 2.2 of the Foreign Trade Policy, all imported goods were also be subject to domestic laws, acts, rules, orders, regulations, technical specifications, environmental and safety norms as applicable to domestically produced goods; that according to General Notes to the Import Policy, the import of Point of Sale devices were subject to BIS certification, however, the Appellant-importers did not have the mandatory BIS certification for the goods imported; that the BIS subsequently produced were not relevant for the goods; that their various acts of omission and commission rendered the impugned goods liable for confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962 and they rendered themselves liable to penalty under Section 112(a)/114A of the Customs Act, 1962; that, though the Deputy Commissioner, Import Shed instructed them to produce the catalogue, clarification and evidence to prove that the product declared as Dummy devices were indeed so and not Point of Sale devices, the appellants brought the catalogue and informed the Deputy Commissioner, Import Shed that the goods were meant for exhibition purpose only and also gave an undertaking on Rs. 50 Indian Non-Judicial stamp paper duly notarized that the same would be re-exported within thirty days and a sample each of D-200 and SP-30 would be submitted for BIS & WPC for certification/type approval, however, afterwards the clearance of this consignment covered under Bill of Entry No. 7817932 dated 26.12.2014 was secured by mis-representing the facts as during the course of investigation the Appellants did not submit anything to the effect that the goods cleared under Bill of Entry No. 7817932 dated 26.12.2014 had been reexported or that BIS & WPC certification for the imported goods were obtained by them; that this way the Appellants also violated the undertaking executed by them; that the goods covered by many Bills of Entry were allowed clearance by the EDI System under RMS where the consignments were neither subjected to assessment nor any examination thereof was conducted by the Customs; that the Appellants had also rendered themselves liable to penalty under Section 114AA of the Customs Act, 1962 to the extent that they did not pay appropriate Customs duty and they knowingly and consciously made and used incorrect and fabricated invoices, declarations and other documents/records before the concerned customs authorities in order to secure the clearance of the impugned goods; that the Appellant Ms. Latha Priyadarshini failed to establish that she was unaware of the unlawful activities being carried out on her behest; that it is established that she was the architect of the mis-declaration of value as well as the description of the goods under import in as much as she in her statement dated 18.01.2016 categorically admitted that she and her mother-in-law were the two Directors of M/s Pax Technologies Pvt. Ltd. but she was the one who was managing the operations and all other activities of the company and her mother-in-law Ms. Dhanamma was a sleeping Director holding only 10% shares; that from the records, it is clearly evident that she had misled the investigations and to hoodwink her role in the whole conspiracy and hence she was the brain behind the conspiracy and therefore, was liable for penal action under Sections 112, 114A and 114AA of the Customs Act, 1962.
(B) Appellant- CHAs : It is mandated on the part of the CHAs to verify the genuineness of the importer, correctness of the documents on the basis of which clearances were sought and also to guide the importer about the statutory requirements especially certification from BIS and WPC; that they filed the Bills of Entry on the basis of documents handed over not by importer but by an unauthorised person Shri Randhir Singh; that they did not take the catalogue from the importer and filed the Bills of Entry on the basis of information provided by Shri Randhir Singh classifying the goods under wrong classification; In case of live Bills of Entry the Appellant-CHA stated that they received the documents from Shri Randhir Singh and filed the documents on the basis of invoice submitted by him and regarding the chapter heading 39269099 under which the goods had been classified in two live Bills of Entry, they stated that they had done it by mistake as they thought that the goods were plastic parts of the device; that in case of the two live Bill of Entry item description was declared as „Paper for printing in payment Debit/Credit Device‟and„D-180 MPOS Terminal (Part of payment Debit/Credit Device)‟ whereas the actual goods under import in these two consignments were complete D 180 Terminals; that they didn‟t guide/advise the importer about the mandatory requirement for importation of the impugned goods of which name and description could have alerted them to seek more information for the purpose of classification, importability and duty incidence ; that the documentary description of impugned goods itself suggested to be operatable on GPRS, they could have asked the details/specification of the goods and in case of any difficulty, they had option to bring about the matter to the knowledge of department; they chose otherwise and secured clearance of the subject consignment without BIS and WPC certification; that they were supposed to be well aware about the statutory obligations required to be fulfilled for the imported goods; that in respect of some consignment the Appellant- CHA were well aware about the fact and had admitted during the investigations that the original invoice of the consignment showed that the supplier was M/s Pax Technology Ltd., Hongkong and buyer was M/s Pax Technologies Pvt. Ltd. whereas the Bills of Entry were filed against the revised invoice on the basis of High Sea Sale agreement to circumvent the related party issue in consultation with Shri Rajinder Madhok; that in respect of one consignment the CHA along with importer had undertaken before the Deputy Commissioner, Import Shed that the goods were not Dummy and were imported for exhibition purpose only, they further undertook that the impugned goods would be reexported within 30 days and a sample of each of D-200 and SP-30 would be submitted for BIS & WPC Certification and on the basis of the undertaking/declaration made by them, goods under import in the Bill of Entry No. 7817932 dated 26.12.2014 were got cleared, however, they failed to produce any evidence to prove that the said goods got the required certification or that they were reexported.; that in case of impugned Bill of Entry No. 3239991 dated 13.11.2015 for the goods declared as D180 Terminal MPOS, the CHA filed the Bill of Entry on the basis of documents from Shri Kuldeep Singh, Director of M/s VSG Shipping and Logistics Pvt. Ltd.; that they filed Bill of Entry without going through the veracity of the documents and statutory requirement for importation of goods. Thus they acted upon the advice of Shri Kuldeep Singh (Who was working on the direction of Ms. Latha Priyadarshini) without applying their mind and mandatory obligation required for CHA/CB; that it was imperative on their part to guide the importer about the statutory obligation, however, instead of fulfilling the statutory certification for the goods handled by them, they secured clearance thereof; that they acted to help the importer to secure clearance of the impugned goods without statutory WPC and BIS certification for monetary benefits; that by their above-mentioned act of omission and commission, the Appellants-CHAs have rendered the impugned goods liable for confiscation under Sections 111(d) & (m) of the Customs Act, 1962 and thereby they have rendered themselves liable to penalty under Sections 112 and Section 114AA of the Customs Act, 1962; that all the Appellant-CHAs instead of handling the documents/goods/duty payment themselves have knowingly allowed unauthorized persons namely Shri Randhir Singh ,Shri Sanjay Kataria, Shri Sushil Kumar Mishra and Shri Rajender alias Raju to deal with consignments for monetary benefit; that such being the fact, the case is squarely covered by the decision of Hon‟ble Madras High Court in the case of K.V.Prabhakaran 2019 (365) E.L.T. 877 (Mad.) wherein the penalty imposed on CHA in similar circumstances was upheld. Further, DR placed reliance on the decision in Noble Agency v. Commissioner of Customs, Mumbai [2002 (142) E.L.T. 84 (Tri. –Mumbai)] wherein a Division Bench of the CEGAT, West Zonal Bench, and Mumbai has observed:-
“The CHA occupies a very important position in the Customs House. The Customs procedures are complicated. The importers have to deal with a multiplicity of agencies viz. carriers, custodians like BPT as well as the Customs. The importer would find it impossible to clear his goods through these agencies without wasting valuable energy and time. The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/exporters as well as by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed. Regulation 14 of the CHA Licensing Regulations lists out obligations of the CHA. Any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulations….”
It would be pertinent to mention that the aforesaid observations of the CEGAT, West Zonal Bench, Mumbai was approved by Hon‟ble Apex Court in the case of K.M. Ganatra & Co [ 2016(332) E.L.T. 15 (S.C.)] and it was held that misconduct on behalf of CHA had to be viewed seriously.
(C) Appellant- Individual: that the Appellant Shri Sushil Kumar Mishra actively participated with Shri Sanjay kataria and Shri Rajender alias Raju in forging/faking of import documents for monetary gain; that though he pleaded that he himself was not involved in forging/faking documents, he admittedly played active role in the clearance of goods of M/s Pax in coordination with different people viz. Sanjay Kataria, Rajender alias Raju or Randhir and also one Shri Sandeep for pecuniary gains; that he not only associated himself in creation of forged invoices and other documents for the erroneous import of the impugned goods on the behest of the director of the import firm, but also personally concerned himself in the clearance of the said goods ; that the Appellants‟ working partner Shri Rajinder admitted of having generated the forged copies of invoices where he not only lowered the value of the goods under import but also changed the description of the goods in as much as „Paper Rolls‟ were added as description in Bills of Entry No. 3526607 dated 09.12.2015, 3346966 dated 23.11.2015, 3141261 dated 03.11.2015, 2763917 dated 30.09.2015, 2121203 dated 03.08.2015 and 2094937 dated 31.07.2015, with an intention that the EDI System would facilitate clearance of the consignments under RMS, where no assessment or examination is generally required by Customs; that the Appellant was aware that even though lesser duty was paid to be paid/and to deposited with the Department, he with his accomplice-partners charged normal duty amount from the importer by creating forged documents and the extra money earned was distributed by the three – the Appellant , Shri Sanjay Kataria and Shri Rajender alias Raju; that he intentionally and maliciously associated himself with the impugned goods, which he knew were liable for confiscation under Section 111 of the Customs Act, 1962; that he was very much aware about the act of forging the invoices and other documents. He aggressively assisted the director of import firm to secure clearance of the impugned goods dodging inspection/examination of the said consignments by the Department. There are enough evidences to establish that the Appellant was intentionally and purposely associated himself with the impugned goods in the greed of financial benefits, which he knew were liable for confiscation under Section 111 of the Customs Act, 1962; that by his above-mentioned act of omission and commission, the Appellant have rendered the impugned goods liable for confiscation under Sections 111(d) & (m) of the Customs Act, 1962 and also rendered himself liable to penalty under Sections 112 and Section 114AA of the Customs Act, 1962.
(D) Appellant- Freight Forwarder : That the Appellant Shri Kuldeep Singh was a freight forwarder and he took the work related to consignment covered under Bill of Entry No. 3239991 dated 13.11.2015 on turnkey basis and assigned the work of the customs clearance to the CHA firm M/s Rubal Logistics on the basis of the documents provided by the appellant – importer; that the Appellant forwarded all the documents related to the import of the goods viz. D 180 Terminals to the CHA firm M/s Rubal Logistic Pvt. Ltd. as per the direction of Ms. Latha without going through the veracity and genuineness of the import documents on the basis of which clearance was sought; that the said documents were sent through e-mail to the said firm as received from Ms. Latha; that he came across two invoices bearing same reference „IN15-10857 dated 04.11.2015‟ and duplicacy of the invoice was very much evident, he did not bring this fact to the notice of the customs authorities; that not only he forwarded the revised invoice (wherein the name of foreign supplier was manipulated as M/s Wang Technology to circumvent SVB investigation) to the CHA firm for clearance of goods, but he also toed the line of unscrupulous importer that the previous invoice ( which mentioned correct name of foreign supplier M/s Pax Technology , Hongkong) was sent by mistake and thus, the Appellant played the role of facilitator between the importing firm and the CHA firm M/s Rubal Logistics Pvt. Ltd. and secured clearance of the goods which were grossly undervalued, mis-declared to its description and circumvented the mandatory certification from BIS and WPC; that by his above-mentioned act of omission and commission, Appellant Shri Kuldeep Singh rendered the impugned goods liable for confiscation under Sections 111(d) & (m) of the Customs Act, 1962 and rendered himself liable to penalty under Sections 112 and Section 114AA of the Customs Act, 1962.
(E) Appellant- Consultant: That the Appellant Shri Rajinder Madhok is a consultant by his experience in the field and he advises the importer/exporter on the issue of related party transaction and SVB matters; that he facilitated the clearance of goods imported vide Bill of Entry No. 7817932 dated 26.12.2014 wherein the goods were mis-declared as „dummy units‟. He admitted that he guided Ms. Latha Priyadarshini to circumvent the issue of „related party‟ transactions and SVB registration by suggesting her to show imports on High Sea Sale basis and as he had large cliental, he offered to arrange High Sea Sale of the aforesaid goods; that the importer had agreed to pay Rs. 34,000/- for his services in respect of advising her on executing a High Sea Sale agreement with an Indian Firm, however, Ms. Latha did not pay the said amount till date because she approached Shri Sanjay Kataria for clearance of the impugned goods imported by the said Bill of Entry. It has been established categorically that Appellant played a vital role by advising Ms. Latha Priyadarshini to circumvent related party transaction valuation of the impugned goods imported vide Bill of Entry No. 7817932 dated 26.12.2014. The consignment was thus mis-declared to its value, and the requirement BIS and WPC certification. He used his expertise to circumvent the provisions related to assessment and clearance of imported goods ; that by his above-mentioned act of omission and commission, the Appellant rendered the impugned goods liable for confiscation under Sections 111(d) & (m) of the Customs Act, 1962 and rendered himself liable to penalty under Section 112 and Section 114AA of the Customs Act, 1962.
12. We have considered rival submissions in detail as well as the record of the appeal. It is a matter of record that the appellant namely M/s Pax Technologies Pvt. Ltd. has imported consignments of Mobile Point of Sale (MPOS) Devices under various Bills of entry, the detail of 12 Bills of Entries are given below :-
Apart from these 12 Bills of entry the appellant has imported two more consignments covered by Bill of Entry No. 3851878 dated 8 January 2016 and Bill of Entry No. 3851698 also dated 08 January 2016.
13. It is also a matter of record that two Bills of Entry both dated 8 January 2016 are live Bills of Entry which are pending for clearance. It is an admitted fact that M/s Pax Technologies Pvt. Ltd. appellant – importer has been appointed sole distributors of MPOS (Mobile Point of Sale) devices and POS (Point of Sale) devices by Pax Technology Ltd., Hongkong in India. Ms. Latha Priyadarshini one of the appellant in these appeals, is an active director of M/s Pax Technologies India and looks after the entire work of importation, marketing of the imported products, etc. It has come out very categorically from the investigations conducted by the Department that Ms. Latha Priyadarshini was fully aware about the nature of the goods being imported by her in the name of her company. She was also well aware as to how much was the value of the hardware of the machine and how much was the value of the software required for the purpose of successful operation and functioning of these machines. She was also aware that the type of the equipments imported by their company required ETA (Equipment Type Approval) from Wireless Planning and Coordination Wing of Ministry of Communication and Information Technology‟s as per the prevailing Import Export Policy. These machines/equipments also needed approval and registration from Bureau of Indian Standards (BIS). The appellant namely Ms. Latha Priyadarshini was also aware that since the imports are being made from their related company based in Hongkong, the imports needed registration/clearance from Special Valuation Branch of Customs Department for their legitimate importation. Ms. Latha Priyadarshini with the help of certain other persons made plan to circumvent the provisions of Import Export Policy requirements as well as scrutiny from Special Valuation Branch of the Customs by resorting to mis-declaration of the import consignment of MPOS/POS in connivance of the various persons. These persons are also appellant before us in this matter. We have taken note of the fact that Shri Rajinder Madhok in his statement has categorically mentioned that Ms. Latha Priyadarshini alongwith Shri Sanjeev Sharma has met him and made certain enquiries with regard to formalities pertaining to Special Valuation Branch and in the discussion she has also asked as to how the provisions of Special Valuation Branch can be bye-passed. Thereafter with connivance of several other persons she has mis-declared the basic details of the import consignments including the description of the import consignments.
14. A glance at the table mentioned in the preceding para No. 11 reveals that the MPOS machines were mis-declared as paper rolls/bar code reader and in some of the Bills of Entry the description of import consignment has been given as “S-90 model and paper with printing and payment debit/credit device”. We find that a Master Distributor Agreement has been signed between M/s Pax Technologies, Hongkong and M/s Pax Technologies, India which makes the Indian arm a sole master distributor of Hongkong based companies products namely various models of „Mobile Point of Sale/Point of Sale devices‟. The master distributor agreement has an Appendix I which provides the transfer prices of various models of MPOS alongwith the prices of software, which is essential component for functioning of the MPOS devices. When the prices as given in the Appendix A to the master distributor agreement are compared with the declared import prices of the import consignments, we find that the declared prices of imported consignments of the various models of MPOS/POS have drastically been mis-declared. The only defence which has been taken by the appellant – importer and its director Ms. Latha Priyadarshini is that they have been cheated by various Customs House Agents and for which a First Information Report (FIR) has been lodged by the importing company in a Police Station. We do not find any leg to this defence as it has come out very categorically that she was fully aware about the statutory requirements of the Customs Act, Import Export Policy for legitimate import of MPOS consignments as well as the price structure (various models of the MPOS/POS). She was aware about the correct prices of MPOS/POS imported by her and her company as the agreement of distribution between the company and the foreign supplier has been signed by her. We find that the appellant – importer has given varied description for the import item namely Mobile Point of Sale (MPOS)/Point of Sale (POS). The descriptions of the import goods which we find in the Bills of Entry are actually in utter disregard to the provisions of Customs Act and indicate that the import consignments were being described to the whim and fancy as well as convenience of the appellant – importer, its active Director and clearing agents. It can be seen from the table given in the preceding para that in some of the Bills of Entry the consignment has been described as “S-90 GPRS + ID BAR CODE TERMINAL” classified under 84709010 of the Customs Tariff Act, 1975; in two Bills of Entry the consignment has been described as D-200 Terminal (Mobile payment terminal – Dummy sample) classified under Customs Tariff Heading 90230050; in one Bills of Entry No. 2094937 dated 31/07/2015 goods have been described only as “S-90” and classified under Customs Tariff Heading 48237090 (which pertains to articles of paper). In the other Bills of Entry also goods have similarly been mis-declared as “paper for printing in payment debit/credit device, paper rolls, parts of plastic (the description given in the live Bills of Entry).
15. The appellant – importer and its Executive Director Ms. Latha Priyadarshini cannot pretend ignorance of such a blatant wrong description of the import consignments of MPOS/POS. We find that the consignments of MPOS were not described correctly even in a single Bill of Entry filed by this importer. Of course the wrong description was adopted as a modus operandi to bye-pass the provisions of the Customs Act, 1962 readwith import-export policy of relevant time which required that consignment of MPOS/POS a No Objection Certificate in the form of ETA (Equipment Type Approval) from the WPC Wing of Department of Telecommunication and registration with Bureau of Indian Standards (BIS) and above all to evade customs duty.
16. Now, we undertake to analyze the findings given in the impugned order-in-original regarding mis-classification of import consignment under the Customs Tariff Act 1975 with an intend to evade the customs duty. We find that the import consignments of MPOS/POS have been classified as follows :
In 3 Bills of Entry having No. 5994463 dated 02/07/2014, 5994464 dated 04/07/2014 and 6221058 dated 24/07/2014, the import consignments of MPOS have been described and classified as follows :
“S-90 GPRS + ID BARCODE TERMINAL CTH 84709010”
We find that Customs Tariff Heading 8470 primarily covers goods such as calculating machines and pocket size data recording device, cash registers etc., while the classification of the subject MPOS machines have been confirmed by the Adjudicating Authority under Customs Tariff Heading 84713090. The Customs Tariff Heading 8471 primarily covers the products such as “Portable Automatic Data processing machines, weighing not more than 10 kg. consisting of at least a central processing unit, a keyboard and display”. The impugned goods namely MPOS are admittedly Automatic Data processing machines which facilitate payments. We have perused the catalogue of D-180 Model of MPOS and find that it had Memory, CPU, display, keypad, magnetic card reader and smart card reader. It is a matter of fact that the device has a Central Processing Unit (CPU), display serum as an output device and keypad/card reader constitute as input device, hence we can safely conclude that the device is a full fledged ADPM (Automatic Data Processing Machine). Thus, we hold that the import consignments of MPOS/POS merit classification under Customs Tariff Heading 84713090. We also find that US Ruling NY3 81686 dated 10/05/1999, a downloaded copy of which was placed on record by the Departmental Representative, also supports classification of subject goods under Chapter Heading 84713090.
17. We find that the consignments of MPOS/POS in the other Bills of Entry had been mis-classified as follows :
(i) In two Bills of Entry Customs Tariff Heading 90230090 which pertains to instruments; apparatus and Models etc. for demonstrational purpose ;
(ii) In the six Bills of Entry under Customs Tariff Heading 48237090 which pertains to “other paper, paper board cellulose wadding etc.”
(iii) Other live Bills of Entry have been classified under Customs Tariff Heading 39269099 which pertains to “other articles of plastic”.
18. Thus, we find that the importer/appellant and its Executive Director Ms. Latha Priyadarshini were mis-classifying MPOS/POS consignments in utter disregard to the provisions of Customs Tariff Act and at their own free will and thus they have certainly resorted to mis-declaration and mis-classification of the import consignments with an intent to evade duty and to avoid compliance of other allied Acts as mentioned in preceding paras and thereby making all the import consignments liable for confiscation on this count under Section 111 of the Customs Act, 1962.
19. With regard to the valuation of the import consignments of MPOS/POS, the per unit price declared under various Bills of Entry have varied between U.S. $ 97 per unit to as low as U.S. $ 1.45 per unit for D-180 Model of MPOS. It has been established by the investigations that a „Master Distribution Agreement‟ has been signed by the appellant – importer and its Executive Director Ms. Latha Priyadarshini with Pax Technology Ltd. Hongkong on 1 November 2014. Some of the relevant paras of agreement read as follow :
“Appendix A shows current transfer prices agreed between the company and the master distributor of the company main products. The transfer prices may change with time in line with specific business deals or due to situation of the competitive nature. The commission due to the master distributor is defined as the % specified in Appendix A, calculated on the difference between the price paid to the company by the customers and the transfer price applied by the company to the master distributor”.
20. On perusal of Appendix A of the master distributor agreement it reflects that the price of hardware of various models of the MPOS and POS have been provided by the Hongkong based company and it has very specially been provided that apart from the hardware price the licence fee for software for D series equipments of MPOS will be U.S. $ 45 per unit, for S series the licence fee was fixed at U.S. $ 60 per unit and for R series it was fixed at U.S. $ 40 per unit. This very fact indicates that the importing firm and its Executive Director were fully aware about the import value of the imported equipments. However, in a blatant violation of the customs provisions and with sole motive of evading customs duty they chose to mis-declare the import price of the consignment of MPOS which sometimes was as low as U.S. $ 0.25 per unit. We are in agreement with the finding in the impugned order-in-original that since the import prices declared by the appellant – importer are not the actual transaction value of the import consignments and the value declared in the Bills of Entry was on the basis of forged/fake invoices, the same needed to be rejected as per the provisions of Rule 12 read with Rule 4 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and readwith Section 14 of the Customs Act, 1962. It is also an admitted fact that the Mobile Point of Sale (MPOS) device and Point of Sale (POS) device imported by the importer – appellant needed a certification from the Bureau of Indian Standards. They also needed a No Objection Certificate from the WP&C Wing of Department of Tele-communication for their legitimate importation. These requirements have been circumvented by the importing company and its Executive Director by hatching a conspiracy with various other persons and therefore have violated the provisions of Customs Act, 1962 as well as provisions of Import Export Policy prevalent at the relevant time. The arguments advanced by Ms. Latha Priyadarshini and the company are not acceptable in the facts and circumstances as well as legally as per the provision of Section 46 of the Customs Act, 1962 of sub-Section (iv) the importer presenting the Bill of Entry is required to subscribe to a declaration as to the truth and contents of Bills of Entry. Since the declarations made by the importer – appellant and its director have been found grossly mis-declared on the counts of description, classification and value of the consignments. Ms. Latha Priyadarshini in her statement dated 19/01/2016 and other statement has admitted the facts of mis-declaration.
21. Thus, we do not find any illegality in the conclusions reached in the impugned order-in-original regarding confiscation of the import consignments, confiscation of customs duty and with regard to imposition of penalty under various Sections of the Customs Act on the appellant importer and its Director Mrs. Latha Priyadarshini.
22. Coming to the role of various Customs House Clearing Agents, we find it appropriate to mention before analyzing the role of individual CHA firms and persons, that every Customs House Agent plays a crucial role in ensuring compliance of provisions of Customs Act as well as various other allied laws of the country with regard to import/export of goods. They are also required to advice and assist the importers and exporters so that correct compliance of the provisions of statutes as well as correct payment of customs duty is ensured. In the present case, we find that the customs house agents (clearing agents) have not done their work in the spirit in which they have been appointed to work as the Customs House Agents. We find that appellants M/s Chinta Haran Ojha – Customs House Agent and Shri Rakesh Kumar – G Card Holder of same firm have filed two Bills of Entries having No. 5994463 and 5994464 both dated 2 July 2014 and Bill of Entry No. 6221058 dated 24/07/2014 where the consignments of Mobile Point of Sale (MPOS) equipments of S-90 model have been mis-declared as GPRS + ID Bard Code Terminal. We also find that the consignment have also been mis-classified (as discussed in preceding para) and by resorting to mis-declaration and mis-classification of impugned goods, the provision pertaining registration and certification requirements from the Bureau of Indian Standards as well as the ETA from the WPC Wing of Department of Telecommunication have been bye-passed. We find that it is the duty of the Customs House Agents that wherever it is found that the description given in the invoice does not explain and facilitate the correct classification of the import consignment, Custom House Agent should ask for the product catalogue/treatment literature for reaching at the right classification of the import goods and also to ensure the compliance of provisions of other allied statutes such as Import Export Policy, Bureau of Indian Standards Act etc. We find a complacency on the part of the CHA to have made classification of the import consignment without getting the veracity of the nature of the import goods verified from the technical literature etc. and to resort to a classification which resulted in evasion of the customs duty and violation of other provisions regarding compliance of Bureau of Indian Standards and WPC Wing of the Department of tele-communication as was the requirement under Import Export Policy and therefore we agree with the findings of the Adjudicating Authority with regard to their role in rendering the import goods liable for confiscation and thereby attracting the penal provisions of Section 112 and Section 114AA of the Customs Act, 1962.
23. With regard to the appellant Shri Rajesh Kumar Maikhuri – Managing Director of M/s R.U. Imports Exports Pvt. Ltd. and M/s R.U. Imports Exports Pvt. Ltd., a Customs House Agent (CB firm), it is a matter of record that they have filed one Bill of Entry No. 7817932 dated 26 December 2014 wherein the description of the goods was given as D-200 Terminal (Mobile payment terminal dummy), sample and SP-30 terminal (Mobile payment terminal dummy). The classification of the goods have been done under Chapter 90230090 which covers instruments, apparatus and model designated for demonstration purposes or exhibition, education purpose and unsuitable for its other uses. It is matter of record that during course of examination of subject consignment, the goods were found as not dummy or samples but the same were fully functional MPOS. It is therefore clear that goods were classified by Shri Maikhuri and the importing firm without going into detail about their true nature by referring to the relevant catalogue or product literature and without any documentary evidences. The CHA classified the goods as of dummy nature for exhibition/demonstration purpose to evade customs duty and other provisions of import-export policy. It has also come out from the investigations that the CHA firm and its Director have not interacted with the importer while taking the work of clearance work of the import consignment but all the documents such as invoice, airway bill etc. were taken from Shri Rajinder Madhok and thus have not shown due diligence in undertaking the work of clearance and have become part of the conspiracy to get the MPOS devices cleared without following the due requirements of Customs Act and Import-export policy. The investigation has also revealed that the clearing agent has filed the bill of entry showing the name of supplier as M/s VXCESS Solutions on the basis of some high-sea sale agreement though the invoice covering the import consignment was from M/s Pax Technology Ltd., Hongkong to M/s Pax Technology Pvt. Ltd., India and no local invoice was presented to him after entering into the high-sea sale agreement between Pax Technologies Pvt. Ltd., India and M/s VXCESS Solutions. It has also emerged that when certain objections were raised by the customs officer at the time of clearance of the goods, the importer – appellant has given an undertaking to export back the goods after demonstration however the undertaking was never honoured and CHA was fully aware that the undertaking was being given only to get the clearance of the import consignment these omissions and commissions on the part of the CHA and its Director convince us that no due diligence has been exercised while classifying the goods and entering other details at the time of the import of the consignment. In view of these facts, we agree with the findings of the Original Adjudicating Authority and refrain from interfering with the same.
24. Coming to the appeals filed by the appellant Shri Kishan Singh Dhapa, Shri Rajender Prasad and M/s Exim Cargo Services – Customs House Agent (Customs broker), the records indicate that Shri Kishan Singh Dhapa is working as a Proprietor of CHA firm namely M/s Exim Cargo Services having F Card No. 169/96 issued by the Customs House and Shri Rajender Prasad has been working as a G Card Holder for this CHA firm namely M/s Exim Cargo Services. The CHA firm and its Executive namely Shri Kishan Singh Dhapa and Shri Rajender Prasad has filed following 4 Bills of Entries for clearance of MPOS on behalf of the main appellant namely M/s Pax Technologies Pvt. Ltd. The details of the description of the import consignment, their classification and per unit price, as declared in the respective Bills of Entries are given here below :-
25. A glance at the details given above, makes a revelation of the extent of the mis-declaration which have been resorted to by the importer and its clearing agent M/s Exim Cargo. We are at pains to note that a sophisticated electronic equipments such as Mobile Point of Sale (MPOS) are being described only as S-90, paper rolls, D-180 (parts of payment debit/credit device), bar code reader etc. and has been classified under Customs Tariff Heading 48237090 which pertains to “other paper/paper board” cellulose wedding and webs of cellulose fibers, cut to size for sale, other articles of paper pulp, paper, paper board etc.” It appears from the description given for clearance of consignment of the MPOS equipments declaring them as the products of the paper by the importer, its Executive Director, and especially the clearing agent namely M/s Exim Cargo Services and its Executive Shri Kishan Singh Dhapa and Shri Rajender Prasad that they have blatantly made mockery of customs provisions. As stated in the preceding paras that it is a sacred duty of clearing agent to ensure compliance of the provisions of customs law and advice the importer for correct compliance of Customs Act as well as other Allied Acts and their provisions while undertaking clearance of the import cargo. However here we find that in utter disregard to the provisions of the relevant statues the description, classification thereof and valuation has been done as per their own whims and fancies. For example for the Bill of Entry No. 209437 dated 31 July 2015, the only description of the goods in the Bill of Entry has been given as S-90 classifying the same under Chapter sub-Heading 48237090 of the Customs Tariff Act, 1986. It is beyond our imagination that any prudent person can decide the classification of an imported item only on the description as “S-90”. This clearly indicates that the clearing firm and its proprietor Shri Kishan Singh Dhapa and G Card Holder Shri Rajender Prasad have acted with ulterior motives and have misclassified the sophisticated electronic equipments, such as, MPOS under the product classification of the paper and paper products and the value of such sophisticated items has surprisingly been mis-declared as low as U.S. $ 0.25 per unit under Bill of Entry No. 2121203 dated 03/08/2015. This could not have been done without CHA firms and its workers being part of a conspiracy to evade the customs duty but also to circumvent the provisions of the Export Import Policy which included the BIS and WP&C certification.
26. We are in full agreement with the findings of the Original Adjudicating Authority and, therefore, uphold the imposition of penalty under various sections of the Customs Act on CHA firm M/s Exim Cargo services, Shri Kishan Singh Dhapa and Rajindra Prasad. We also recommend to the Commissioner of Customs (Licencing Authority) to take appropriate action against all the three above-mentioned appellants under the Customs Broker Licence Regulations.
27. Coming to the appellants Shri Rajiv Kumar Sharma, Shri Hari Kishan, Shri Kamal Nath Roy and M/s Rubal Logistics Pvt. Ltd. – Customs House Agent (Customs broker), it is a matter of record that M/s Rubal Logistics Pvt. Ltd. has filed a Bill of Entry No. 3239991 dated 13 November 2015 wherein the description of the goods has been declared as D-180 (D-180 pinpad is used to connect with the laptop to do the transaction – connectivity via USB port only). The value of the goods has been declared as U.S. $ 15 per unit. The investigations revealed that under the Bill of Entry No. 3239991 dated 13 November 2015 a consignment of D-180 MPOS was imported by the importer – appellant and the description of the same has been mis-declared as „pinpad used to connect with the laptop‟ via USB port and the transaction value has also been suppressed to a large extent. Here also, we find that the clearing agent had not taken any pain in verifying the true nature of the import item by asking for any catalogue or technical literature. The goods have been mis-classified under Chapter 84702900 in utter disregard to the provisions of the Customs Tariff Act. In the clearance of this particular consignment we find that the clearing agent never interacted directly with the importer, but accepted the import document from one freight forwarder namely Shri Kuldeep Singh of M/s VSG Shipping and Logistics Pvt. Ltd. Here also we find that the clearing agent and his executives/workers, namely G Card Holder has not bothered to see the catalogue of the imported goods for reaching at the correct classification and to determine whether the requirement of BIS and WPC were needed or not. They have just gone and filed the Bill of Entry on the basis of documents provided by Shri Kuldeep Singh which had resulted in mis-declaring, misclassifying the description and value and thereby becoming instrumental in evasion of customs duty and in circumventing the provisions of the Import Export Policy with regard to requirement of the BIS and WPC certification. We find that the order-in-original has brought out their role very specifically and the conclusion reached by the Adjudicating Authority does not suffer from illegality. Therefore, it is not necessary to interfere with the findings of the Authority.
28. Now, coming to the appellant namely Shri Kamal Kumar Sukhramani and M/s Prompt Air & Sea Cargo Pvt. Ltd. a Customs House Agent (Customs broker), we find that following two Bills of Entries have been filed by appellant M/s Prompt Air & Sea Cargo Pvt. Ltd. :-
29. A perusal of the above-mentioned details makes an interesting revelation that the D-180 Model of Mobile Point of Sale (MPOS) equipment has been classified as a product of paper by classifying the same under sub-heading 48237090 of the Customs Tariff Act and declaring the value as U.S. $ 1.5 per unit and U.S. $ 1.45 per unit. We are of the opinion that this has been done deliberately for uterior motives. The facts here are also same that the Customs House Agent and its Executive Shri Kamal Kumar Sukhramani had filed the Bills of Entry without referring to the necessary product catalogue and technical literature. It has also been admitted by Shri Kamal Kumar Sukhramani, a F Card Holder of Customs Clearing firm M/s Prompt Air & Sea Cargo Pvt. Ltd., in his statement dated 26 February 2016 that he has not referred to any catalogue or produced literature and he never met the importer and filed the Bill of Entry on the basis of documents handed over to him by Shri Randhir Singh. We find that the classification and valuation of the products have been mis-declared blatantly by the importer in connivance with the CHA firm namely M/s Prompt Air & Sea Cargo Pvt. Ltd. and its Executive Shri Kamal Kumar Sukhramani. It pains to note that sophisticated electronic goods namely MPOS equipment have been declared as a product of paper and the value declared is low as U.S. $ 1.5 per unit with utter disregard to the provisions of the Customs law. We are not impressed with the arguments advanced for taking a lenient view in this matter. We feel that CHA and its executive Shri K.K. Sukhramani knowingly have connived with the importer and its Director for resorting to such mis-declaration of description and value of the import consignments of MPOS and have thus evaded customs duty and violated the provisions of Allied Acts. Here also, we are in agreement with the findings of the learned Adjudicating Authority and refrain from interfering with the same.
30. Now coming to appeals filed by Shri Rajinder Madhok – Consultant, Shri Kuldeep Singh and Shri Sushil Kumar Mishra, it is an admitted fact that Shri Rajinder Madhok worked as a consultant on the issues pertaining to special valuation branch. He was fully aware that the goods were being imported by the importer – appellant from their related firm based in Hongkong and only for the monetary gains he had advised Ms. Latha Priyadarshini as to how to circumvent the provisions of Customs and Allied Acts with regard to Bill of Entry No. 7817932 dated 26/12/2014. He played a crucial role in mis-declaring the goods as the dummy equipments just to bye-pass the provisions of certification required under BIS and WPC. Thus here also, we do not find any legal infirmity in the findings of the Adjudicating Authority. So far as the appellant Shri Kuldeep Singh Director of M/s VSG Shipping and Logistics Pvt. Ltd. with regard to Bill of Entry No. 3239991 dated 13 November 2015, he arranged clearance of the consignment through CHA M/s Rubal Logistics Pvt. Ltd. and Shri Rajeev Sharma where he was instrumental in providing two sets of invoices for the same consignment to the clearing agent and ensured the clearances of the consignment on behalf of importer – appellant by mis-declaring the value and without submitting the certification from BIS and WPC. The Adjudicating Authority has rightly found him liable for penalty and as per the provisions of the Customs Act under Section 112 and 114AA and we are in agreement with the findings of the Adjudicating Authority also.
31. So far as the role of Shri Sushil Kumar Mishra is concerned, it is an admitted fact that he associated himself in creation of forged documents, such as, invoices etc. and was involved in arranging the clearance of the goods on the basis of the mis-declared facts. Shri Sushil Kumar Mishra in his statement dated 16 January 2016 has admitted that he was fully aware about lot of manipulations with regard to clearance of consignment of M/s Pax Technologies as generally the customs clearance agency charges are in the range of 2000 to 2500 per consignment, however, in case of M/s Pax Technology an amount of Rs. 60,000/- to Rs. 70,000/- was being paid to them. He was working in connivance with Shri Sanjay Kataria and one Shri Raju and all of them were forging invoice and other documents. The investigations have brought out the categorical role played by Shri Sushil Kumar Mishra that he was aware and participated in mis-declaration of description as well as the value of import consignment for and on behalf of the importer – appellant. We do not find any ground to take a lenient view so far as imposition of penalty on him under the provisions of Customs Act is concerned.
32. We have also considered the case laws cited by learned Counsels. We find that the case laws relied by the appellants may be having some relevance in normal cases of mis-declaration where either the importer has made an inadvertent mistake in providing description and classification of the product under import or where the clearing agent in such mis-declarations in not found involved. In the facts and circumstances of the case at hand, as it has come out in the preceding paras, that the importer – appellant and various clearing agent – appellants and persons were consciously part of the entire conspiracy of willful mis-declarations of the import consignments. These decisions would not help the appellant.
33. In view of the entire above discussions, we also find it appropriate to ask the Chief Commissioner of Customs to enquire about the systemic failure with regard to clearances of Mobile Point of Sale equipments under various Bills of Entry, as mentioned in the preceding paras. We find that the clearing agents were aware as to the description that was to be given to a consignment to avoid examination of the cargo from the Risk Management Module (RMS). We are also surprised to note that in some of the Bills of Entry, the Risk Management Module (RMS) gave examination of the package of the cargo, but still in these cases also the consignment were cleared in spite of the huge mis-declaration with regard to its description, classification as well as the value of imported items. This indicate that there exist a deep malaise in the system of examination and clearance of the cargo. We advice the Chief Commissioner to revisit the standard operating procedure in this regard to ensure that the system is enabled to take care of the instances where a blatant mis-declaration is avoided by the importers to bye-pass the Risk Management Module. We also direct the Chief Commissioner of Customs to consider whether it should be necessary to cause a vigilance enquiry to determine how the consignments were cleared when there were so many mis-declaration in description as well as classification of the imported Mobile Point of Sale equipments.
34. In view of the entire above discussions, there is no infirmity in the order-in-original. Accordingly, all the appeals are dismissed.
(Order pronounced in open court on 12/03/2020)