Case Law Details
Seaswan Shipping and Logistics Vs CC (CESTAT Chennai)
M/S. Seaswan Shipping (Appellant”) has filed a civil appeal against Order dated October 12, 2017, passed by Commissioner of Customs (Respondent), which was issued against him alleging the violation of Regulation 11 (a) and (n) of the Customs Brokers Licensing Regulations, 2013 (CBLR, 2013) and imposing a penalty of Rupees 50, 000/-.
To substantiate the case, the Appellant contended that he had obtained the authorization required in Regulation 11 (a) of the CBLR, 2013 but did not meet the importer directly instead had obtained it from a middleman. The Appellant contended that all the documentation along with the bill of entry were proper and legitimate.
Furthermore, it was contended that the Respondent has held that the Appellant has violated Regulation 11(n) only on the ground that the person representing the importer-firm did not appear before the customs authorities. There is no case for the department that the importer-firm is a fake firm. When the importer was very much available in the address, which is mentioned in the KYC documents.
As opposed to the Appellant, the Respondent adverted to the Show Cause Notice (SCN) dated May 15, 2017 and argued that the consignment for which the bill of entry was filed by the Appellant contained undeclared goods and since the consignment contained undeclared cargo, it is very much clear that the Appellant has not been sufficiently diligent in obtaining authorization / KYC documents. The penalty imposed is therefore legal and proper.
Considering all the facts and evidence at their perusal, the Honorable Customs, Excise & Service Tax Appellate Tribunal, Chennai (“the CESTAT”) opined that the finding of the Respondent is ultra vires of the principles of natural justice as it requires proper reasons that has to be supplied to the Appellant so that he is able to reply to the charges levelled against him.
Thus, the Respondent is bound to put to notice the Appellant, setting out tentative conclusions. This would facilitate and ensure the right of the Appellant to defend his case.
The finding rendered by the Respondent that the Appellant has violated Regulation 11(a) and 11(n) are without any factual or legal basis and requires to be set aside.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The appellant who is a Customs Broker is aggrieved by the penalty of Rs.50,000/- imposed on him under Rule 18 of the CBLR, 2013.
2. The importer M/s. J.J. Enterprises had imported 423 packages of footwear and scrubber. The appellant who is the Customs Broker had filed the bills of entry in respect of this consignment on 27.12.2016. The bill of entry along with the import documents was presented for examination. During the examination, it was found that the consignment contained some undeclared cargo in the nature of imitation glass beads etc. The appellant was issued summons and statement was recorded. After investigation, the department was of the view that the appellant has violated the provisions of Regulation 11(a), 11(d) and 11(n) of CBLR, 2013. Show Cause Notice dated 15.5.2017 was issued to the appellant alleging the above violations and proposing to revoke the license and also for imposing penalty. Inquiry as per the provisions of CBLR 2013 was conducted and report dated 7.8.2017 was submitted by the inquiry officer to the department. A copy of the same was issued to the appellant. After adjudication, the adjudicating authority dropped charges under Regulation 11(d) but however, held that appellant has violated Regulation 11(a) as well as 11(n) of CBLR, 2013 for which the penalty of Rs.50,000/- was imposed.
2. The learned counsel Shri N. Viswanathan appeared for the appellant. He adverted to the relevant provisions of Regulation 11(a), 11(d) and 11(n) and Regulation 18 of the CBLR, 2013 which are as under:-
“As per Regulation 11(a)
Obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner o f Customs, as the case may be;
As per Regulation 11(d)
Advise his client to comply with the provisions of the Act and in case of noncompliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be;
As per Regulation 11(n)
Verify antecedent, correctness of Importer Exporter Code (IEC) number, identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information.
As per Regulation 18 of CBLR, 2013, the Commissioner of Customs may subject to the provisions of Regulation 20 of CBLR, 2013, revoke the license of Customs Broker and order forfeiture of part of whole of the security or impose penalty not exceeding fifty thousand rupees on a Custos Broker on any of the following grounds, namely:
(a) failure of to comply with any of the conditions of the bond executed by him under regulation 8;
(b) failure to comply with any of the provisions of these regulations, within his jurisdiction or anywhere else;
(c) committing any misconduct, whether within his jurisdiction or anywhere else which in the opinion of the Commissioner renders him unfit to transact any business in the Customs Station;
(d) adjudicated as an insolvent;
(e) of unsound mind; and
(f) has been convicted by a competent court for an offence involving moral turpitude
Provided that the imposition of penalty or any action taken under these regulations shall be without prejudice to the action that may be taken against the Customs Broker or his employee under the provisions of the Customs Act, 1962 (52 of 1962) or any other law for the time being in force.”
3. He submitted that as per Regulation 11(a), the appellant has to obtain authorization from the importer viz. M/s. J.J. Enterprises. The appellant had obtained the authorization. However, appellant did not meet the importer directly but had obtained it from the middleman Shri Ramadhurai who is also a person residing near the house of the appellant. The department has taken the view that the appellant ought to have obtained the authorization from the importer directly and should not have taken it from any other person. The department does not dispute the name and address of the importer or IE Code issued to the importer. All the documents presented along with the bill of entry being proper, the adjudicating authority ought to not to have held that appellant guilty of violation of this Regulation for the mere reason that the authorization / KYC documents was obtained from middleman instead of importer directly. It is not always practical to obtain the KYC documents from the importer directly. He relied upon the decision in the case of K.S. Sawant & Co. Vs. Commissioner of Customs (General), Mumbai – 2012(284) ELT 363 (Tri. Mumbai) to argue that when the documents have been signed by the importer, it would amount to authorizing the Customs Broker for doing the necessary activities for filing the bill of entry. That it is not required to obtain it directly from the importer. He also relied upon the decision in the case of Kunal Travels (Cargo) Vs. CC (I&G), IGI Airport, New Delhi – 2017 (354) ELT 447 (Del.). The decision in the case of KVS Cargo Vs. Commissioner of Customs (General), NCH, New Delhi – 2019 (365) ELT 392 (Del.) was also relied.
4. In regard to the allegations of violation under Regulation 11(n), he adverted to para 14 of the impugned order and submitted that the adjudicating authority has held that the appellant has violated Regulation 11(n) only on the ground that the person representing the importer-firm did not appear before the customs authorities. There is no case for the department that the importer-firm is a fake firm. When the importer was very much available in the address, which is mentioned in the KYC documents, the department could have taken coercive steps if it is necessary for him to participate in the investigation. The appellant is not equipped to force the attendance of such a importer or his representative before the customs authorities. The said finding of the adjudicating authority is beyond the scope of Regulation 11(n) of the CBLR, 2013. He added that the adjudicating authority has dropped the charges under Regulation 11(d) holding that the appellant was not aware of the fact that the consignment contained undeclared cargo. When there is such a finding by the adjudicating authority, the penalty imposed merely for the reason that the KYC document was obtained from a middleman and not from the importer directly and also for the reason that the importer did not appear before the customs authorities is without any basis.
5. He referred to the discussions and findings in the inquiry report and submitted that the Inquiry Officer has concluded that there is no violation under Regulation 11(a), 11(d) and 11(n) of CBLR, 2013. The adjudicating authority has merely brushed aside the said facts and conclusions reported by the inquiry officer. When the inquiry officer has reported that the appellant has not violated the alleged provisions of CBLR, 2013, the adjudicating authority ought to have informed the appellant with regard to the deviations made from the line of inquiry conducted by the inquiry officer. In the Show Cause Notice, it is not specifically alleged that the violation committed by the appellant under Regulation 11(a) is that the appellant has obtained the KYC from middleman. So also there is no specific allegation in the Show Cause Notice that the appellant has violated Regulation 11(n) for the reason that the representative of the importer-firm Shri Balaji has not appeared before the customs authorities. If these reasons were to form the ground upon which the penalty is to be imposed, the adjudicating authority ought to have put the appellant to notice and by not doing so, the appellant was not able to defend these facts. He prayed that the penalty may be set aside.
6. The learned AR Shri R.Rajaram appeared for the department. He adverted to the Show Cause Notice dated 15.5.2017 and argued that the consignment for which the bill of entry was filed by the appellant contained undeclared goods. On investigation it revealed that appellant has obtained KYC documents from one Shri Ramadhurai of M/s. Kesavaan Logistics. The said person has given statement that he did not know M/s. J.J. Enterprises and that Shri Karthi on behalf of M/s. J.J. Enterprises contacted him for clearance of two bills of entry earlier and then he mediated between Shri Karthi and the appellant for which he was paid Rs.1,000/-. That for the particular bill of entry dated 27.12.2016, Shri Karthi has directly approached the appellant and that the whereabouts of Karthi is not known to him. It is pointed out by learned AR that though the appellant contends that the KYC documents were obtained from Ramadhurai, the said person has denied any part of the transaction and has stated that the appellant has directly dealt with Shri Karthi. Since the consignment contained undeclared cargo, it is very much clear that the appellant has not been sufficiently diligent in obtaining authorization / KYC documents. The penalty imposed is therefore legal and proper.
7. Heard both sides.
8. The relevant provisions have already been reproduced above. Under Regulation 11(a), the Customs Broker has to obtain authorization from the firm / individual by whom he is being employed as a Customs Broker. In the present case, there is no dispute with the address of the importer or his IE Code. The only allegation put forward under Regulation 11(a) is that the appellant had not obtained the KYC documents from the importer directly but through a middleman, be it Shri Ramadhurai or Shri Karthi. When the necessary authorization and KYC documents have been obtained and when these documents are proper, merely because the said documents were not obtained directly from the importer, the appellant cannot be said to have violated provisions of Regulation 11(a). It may not always be practical for a Customs Broker to obtain the documents directly from the importer. In the case of K.S. Sawant & Co. (supra) in para 5.1, the Tribunal has discussed that “obtaining authorization from the importer does not mean that the same should be obtained directly; so long as the concerned import documents were signed by the importer, it amounts to authorization by the importer and therefore it cannot be said that there has been violation of Regulation 13(a)”. The above decision was under CHALR, 2004 wherein the provisions of Regulation 13(a) are similar to Regulation 11(a) of CBLR, 2013.
9. In para 14 of the impugned order, the adjudicating authority has discussed as under:-
“The CB in his statement dated 28.2.2017 recorded by DIU has stated that Balaji of the importer firm is not traceable and is trying to bring the owner of the importer JJ Enterprises. If the CB had verified the antecedents as expected under regulation 11(n) of CBLR, 2013, this searching for person would not happen. I therefore, find that the CB has violated the provisions of Regulation 11(n) of CBLR, 2013 and thus charges on this counter are sustainable and proved against them”.
10. It is seen from the above para that because the representative of the importer-firm did not appear before the customs authorities, the appellant has been held to be liable for violation of Regulation 11(n) of CBLR, 2013. The department has the necessary wherewithal to issue summons and procure the attendance of any person during the investigation. When the proper address of the importer-firm as well as the details given while issuing the IE Code is available with the department, merely because the person (Balaji) who purportedly is representing the firm did not appear before the customs authorities, the appellant cannot be held to have violated Regulation 11(n) of CBLR, 2013.
11. This apart, it is also necessary to say that the report of the Inquiry Officer dated 7.8.2017 has concluded stating that all the regulations 11(a), 11(d) and 11(n) were not violated by the appellant. This being so, I cannot find how the adjudicating authority has relied upon extraneous circumstances to conclude that the appellant has violated 11(a) and 11(n) of CBLR, 2013.
12. Regulation 20 of the CBLR, 2013 reads as under:-
“20. Procedure for revoking licence or imposing penalty. —
(1) The Commissioner of Customs shall issue a notice in writing to the Customs Broker within a period of ninety days from the date o f receipt of an offence report, stating the grounds on which it is proposed to revoke the licence or impose penalty requiring the said Customs Broker to submit within thirty days to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by him, a written statement of defense and also to specify in the said statement whether the Customs Broker desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs.
(2) The Commissioner of Customs may, on receipt of the written statement from the Customs Broker, or where no such statement has been received within the timelimit specified in the notice referred to in sub-regulation (1), direct the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, to inquire into the grounds which are not admitted by the Customs Broker.
(3) The Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall, in the course of inquiry, consider such documentary evidence and take such ora l evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings, and he may also put any question to any person tendering evidence for or against the Customs Broker, for the purpose of ascertaining the correct position.
(4) The Customs Broker shall be entitled to cross-examine the persons examined in support of the grounds forming the basis of the proceedings, and where the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing.
(5) At the conclusion of the inquiry, the Deputy Commissioner o f Customs or Assistant Commissioner of Customs, as the case may be, shall prepare a report of the inquiry and after recording his findings thereon submit the report within a period of ninety days from the date of issue of a notice under sub-regulation (1).
(6) The Commissioner of Customs shall furnish to the Customs Broker a copy of the report of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, and shall require the Customs Broker to submit, within the specified period not being less than thirty days, any representation that he may wish to make against the said report.
(7) The Commissioner of Customs shall, after considering the report of the inquiry and the representation thereon, if any, made by the Customs Broker, pass such orders as he deems fit either revoking the suspension of the license or revoking the licence of the Customs Broker or imposing penalty not exceeding the amount mentioned in regulation 22 within ninety days from the date of submission of the report by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, under sub-regulation (5)
Provided that no order for revoking the license shall be passed unless an opportunity is given to the Customs Broker to be heard in person by the Commissioner of Customs.”
13. These Regulations are in the nature of disciplinary rules for a Customs Broker. Revocation of license is a major punishment which affects the livelihood of not only the Customs Broker but also those persons who are employed under him. The punishment being of such major nature, Regulation provides for the conduct of inquiry before adjudication of the Show Cause Notice issued to the Customs Broker. The inquiry proceedings is a measure to be cautious and to give sufficient opportunity to the person whose conduct is the subject matter of the Show Cause Notice. The purpose of such inquiry is to help the adjudicating authority to derive at proper conclusion based on all materials and facts that have been collected during the inquiry. The first stage of such inquiry as laid down in the Regulation is to collect material / statements so as to give opportunity to those persons who are required or relevant to be heard. In the second stage, the Regulation provides for giving opportunity to the Customs Broker to cross-examine those persons whose statements have been recorded. The Inquiry Officer should support his conclusion with reason. As per sub-clause (6) of Regulation 20, a copy of the inquiry report is to be served to the Customs Broker. This is to ensure that the Customs Broker is to be equipped to defend his case at the time of adjudication as the inquiry report would play a vital role in the adjudication proceedings. If the adjudicating authority proposes not to accept the conclusion arrived in the inquiry report, he has to record reasons for disagreeing with the findings of the Inquiry Officer. The principles of natural justice requires that a copy thereof recording the reasons of disagreement has to be supplied to the Customs Broker so that he is able to reply to the charges levelled against him as against the conclusions arrived by the Inquiry Officer. Thus, the adjudicating authority is bound to put to notice the Customs Broker, setting out tentative conclusions or the points on which he differs from the Inquiry Officer. This would facilitate and ensure the right of Customs Broker to defend his case. In the instant case, though the Inquiry Officer has reported that there is no violation under Regulation 11(a), (d) and (n) of the CBLR, 2013 the adjudicating authority has proceeded to conclude that there is violation of 11(a) and 11(n), without informing the Customs Broker on the ground of disagreement with the inquiry report. In doing so, I find that there is violation of principles of natural justice.
14. From the above discussions, I hold that the finding rendered by the adjudicating authority that the appellant has violated Regulation 11(a) and 11(n) are without any factual or legal basis and requires to be set aside, which I hereby do. The impugned order imposing penalty of Rs.50,000/- is set aside. The appeal is allowed with consequential relief, if any.
(Pronounced in open court on 02.09.2021)
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