Conclusion: CESTAT had deleted the penalty imposed by the Customs Department and held that no penalty could be levied under section 117 if there was no willful intention / wrongful mind for violating the law and such violation occurred was only due to inadvertent omission / system error.
Held: The issue arose for consideration was violation of Section 41 of the Customs Act, 1962 as penalty was imposed under Section 117 and it was the responsibility of assessee to file the EGM to the proper officer before departure of the conveyance from the Customs station and therefore, the penalty should be sustained. It was held that on receiving the notice from the department, assessee-company had immediately rectified the defect. There was no allegation of continued non-compliance. The facts brought to light established that the error was only due to inadvertent omission / system error etc. Penalty was a form of punishment by recovery of an amount from the offender. It was a form of pecuniary punishment inflicted by law for its violation. If there was no willful intention / wrongful mind for violating the law and such violation occurred was only due to inadvertent omission / system error, imposition of penalty was unwarranted. If there was continued non-compliance even after the errors being pointed out by the department, the circumstances would have been different and penalty might be imposable. After the amendment to Section 41, the section itself provides for penalty not exceeding Rs.50,000/-. That too only if proper officer was satisfied that there was no sufficient cause for delay in filing EGM. This being so, the invocation of Section 117 was not legal or proper. Thus, the penalties imposed under Section 117 of Customs Act were unwarranted and could not be sustained.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The facts are that in respect of 7 Shipping Bills as referred in the table below the appellants failed to file Export General Manifest (EGM). Show cause notices were issued alleging violation of Section 41 of Customs Act, 1962 and proposing to impose penalty under Section 117 of the Act ibid. After due process of law, the original authority imposed penalty of Rs.1 lakh against each shipping bill. Aggrieved by such order, the appellants preferred appeals before the Commissioner (Appeals) who reduced the penalty to Rs.30,000/- against each shipping bills :
|Sl.No.||Appeal No.||OIO No.||Shipping Bill No./Date||Imposed
Hence these appeals.
2. On behalf of the appellants Shri D. Balaji, Manager (Documentation) appeared and argued the matter. He submitted that appellant is a vessel operator and has taken all care to furnish necessary documents in regard to the exports. After receiving the show cause notice, the appellant examined the error pointed out in the show cause notices and rectified the same. Most of the times such errors/omissions happened as the appellants found difficulties with the documents received from CHAs which were not precise. Unfortunately, the shipping bills referred in the show cause notice were declared under the code of other shipping lines namely MAERSK / TRANSWORLD / SEAHORSE SHIPPING. With the help of officers who pointed out the errors, the defect was sorted out by the appellant. Had the error been pointed out earlier, the errors would have been rectified and cleared in the month of November 2018 itself. As a vessel operator appellants face various challenges. They sometimes get illegible copies from CHAs, Consolidators which delay the entire process and makes it tedious for filing the documents. It is sometimes not possible to get the precise list of shipping bill from the customer. Though Circular No.18/2019 states that Custodians/CFS/ICDs have to share copy of e-mail evidencing the tally sheet with the list but it does not practically work. The basis of filing pre-EGM without clear copy of shipping bill and tally sheets was the reason for the omission in these cases. When appellant received the clear copy, it was submitted in time and filed perfectly. After these SCNs, the appellant has been very careful and cautious to check with the ICE GATE image so that no errors are committed. He prayed that penalties maybe set aside.
3. On behalf of the department, Ld. A.R Shri S. Balakumar supported the findings in the impugned order. He adverted to Section 41 of Customs Ac, 1962 and submitted that it is the responsibility of the appellant to file the EGM to the proper officer before departure of the conveyance from the Customs station. It is argued by him that the penalties imposed require no interference.
4. Heard both sides.
5. The allegation is violation of Section 41 of the Customs Act, 1962. For violation of the said provision, penalty is imposed under Section 117 of the Act ibid.
6. For better appreciation, relevant sections are reproduced as under :
Section 41. Delivery of export manifest or export report. – The person-in-charge of a conveyance carrying export goods shall, before departure of the conveyance from a customs station, deliver to the proper officer in the case of vessel or aircraft, an export manifest, and in the case of a vehicle, an export report, in the prescribed form.
After amendment w.e.f 1.8.2019, Section 41 reads as under :
41. Delivery of departure manifest, export manifest or export report.
(1) The person-in-charge of a conveyance carrying export goods or imported goods or any other person as may be specified by the Central Government, by notification, shall, before departure of the conveyance from a customs station, deliver to the proper officer in the case of a vessel or aircraft, a departure manifest or an export manifest by presenting electronically, and in the case of a vehicle, an export report, in such form and manner as may be prescribed and in case, such person-in-charge or other person fails to deliver the departure manifest or export manifest or the export report or any part thereof within such time, and the proper officer is satisfied that there is no sufficient cause for such delay, such person-in-charge or other person shall be liable to pay penalty not exceeding fifty thousand rupees.
Provided that the Principal Commissioner of Customs or Commissioner of Customs] may, in cases where it is not feasible to deliver the departure manifest or export manifest by presenting electronically, allow the same to be delivered in any other manner.
(2) The person delivering the departure manifest, export manifest] or export report shall at the foot thereof make and subscribe to a declaration as to the truth of its contents.
(3) If the proper officer is satisfied that the departure manifest, export manifest] or export report is in any way incorrect or incomplete and that there was no fraudulent intention, he may permit such manifest or report to be amended or supplemented.
Section 117. Penalties for contravention, etc., not expressly mentioned. – Any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to penalty not exceeding one lakh rupees.
7. Firstly, Section 41 casts the duty upon the person-in-charge of the conveyance to file the EGM before proper officer. As per Section 41, the duty is on the person-in-charge to file EGM. Of the Section 2 (31) of the Customs Act defines “the person-in-charge” as under :
“person-in-charge” means, –
(a) in relation to a vessel, the master of the vessel;
(b) in relation to an aircraft, the commander or pilot-in-charge of the aircraft;
(c) in relation to a railway train, the conductor, guard or other person having the chief direction of the train;
(d) in relation to any other conveyance, the driver or other person-in-charge of the conveyance;
The appellant is not master of the vessel but only vessel operator / shipping line who has filed the EGM on behalf of the master of the vessel.
8. The definitions of „Authorized Sea Carrier‟ and „Departure Manifest‟ as given in the Sea Cargo Manifest and Transhipment Regulations 2018 (hereinafter referred to as SCMT Regulations) reads as under :
(d) “authorised sea carrier” means the master of the vessel carrying imported goods, export goods and coastal goods or his agent, or any other person notified by the Central Government;
(g) “departure manifest” means an integrated declaration required to be delivered by an authorised carrier before departure of :
(i) a vessel carrying imported goods, export goods or coastal goods; or
(ii) a train or truck carrying imported goods or export goods;
The SCMT Regulations have been introduced vide Notification No.38/2018-Cus.(NT) dt. 11.05.2018. These regulations are brought forth in supersession of Import Manifest (Vessels) Regulations, 1971 and Export Manifest (Vessels) Regulations, 1976. Section 3 of the SCMT Regulations provides for Registration. Vide this new Regulations of 2018, any person who is required to deliver arrival manifest or departure manifest shall apply to the jurisdictional Commissioner of Customs for registration. Sub-Section (1A) of Section 3 in regard to such registration was inserted vide Notification No.54/2019-Cus. dt. 01.08.2019 w.e.f. 01.08.2019. The Regulation 3A of the said Regulation reads as under :
“(1A) Any other person notified by the Central Government for the purposes of filing arrival or departure manifest, shall be required to enter into a bond of rupees ten lakhs in Form-XI and furnish a bank guarantee, or a postal security or National Saving Certificate or a fixed deposit receipt issued by a Nationalised bank, in the name of the Commissioner of Customs, for an amount of rupees ten lakhs alongwith Form-I”
9. Regulation 5 speaks about the delivery of departure manifest which reads as under :
Regulation 5. Delivery of a Departure Manifest. — (1) An authorised sea carrier carrying imported goods, export goods or coastal goods, shall before the departure of the vessel from the port, deliver the departure manifest to the proper officer electronically :
Provided that where it is not practicable to deliver the departure manifest or any part thereof electronically, then the manifest or any part thereof shall be submitted manually in duplicate with the approval of the Commissioner of Customs or any other officer authorised by him.
10. If we read Section 41 as it stood prior to the amendment, it can be seen that it mandates the person-in-charge to file EGM and it does not speak any other person. After amendment “any other person as may be specified, by notification” is also included with the duty to file the export manifest. A registered Shipping Liner shall also file EGM. The occurrences of non-filing of EGM in regard to these shipping bills are all prior to 1.8.2019 i.e., prior to the amendment of Section 41.
11. Apart from this, though it is stated in Section 41 that the EGM has to be filed before departure of the conveyance from the Customs station, it was not so earlier. In practice it was usually also filed within 7 days from the date of sailing of the vessel. Prior to the SCMT Regulations, the Export Manifest (Vessels) Regulations, 1976 on delivery of Export Manifest (EGM) provided as under :
“The export manifest for all the goods shipped and transshipped, shall be delivered to the proper officer in the Export Department, before the departure of the vessel or within seven days from the date of departure of the vessel.
Provided that where the export manifest is delivered within seven days from the date of departure of the vessel, the agent of the person in charge of the vessel shall furnish such security as the proper officer deems sufficient”
12. This is also clear from Public Notice No.39/2017 issued by the department which reads as under :
“PUBLIC NOTICE NO.39/2017
Sub :- Customs-Discrepancies in filing and closure of EGM-Regarding.
Attention to the Shipping Lines / Steamer Agents / Consol Agents / Custom House Agents and all other concerned are invited to the various instructions issued by the Department from time to time regarding filing and closure of Export General Manifest (EGM).
2. It is noticed that, EGMs pertaining to the earlier periods are pending for closure for various reasons. This affects the updating of the Export figures in EDI data, which in turn, hampers the statistical analysis of the Government apart from Export benefits like Drawback and Refund of IGST.
3. As per Section 41 of the Customs Act 1962, either the Master of the Vessel or his Authorised Agents should file the EGM with the proper officer of Customs within Seven days from the date of sailing of the Vessel. However, it is noticed that many shipping bills are pending for the closure of EGM even after expiry of the mandatory period i.e., 7 days from sailing of the vessel. Further gateway EGMs in respect of ICD Shipping Bills were not filed electronically despite the facility being available in EDI. It is also learnt that the practice of manual filing and acceptance of EGMs at Gateway Ports still continues. Filing of manual EGM will not allowed in future except in rare cases where it is absolutely necessary.
4. With a view to overcome the above problem, it has been decided that, all EGMs pending with ICES Version 2 [Indian Customs EDI system], are required to be closed by the Steamer Agents by 31.10.2017 and get it updated in the ICES Version 2 [Indian Customs EDI system]. Also the shipping lines are advised to use this opportunity and file Supplementary EGMs/EGM Amendments without fail against all the pending Shipping Bills where export was completed. For ICD shipping Bills, the exporters are advised to ensure that the Train Summary / Truck Summary report for Local EGM to be filed at ICD properly in EDI without error and these shipping Bills are then mentioned by the Shipping Lines while filing the EGM in EDI at the gateway Port.
5. Failing which a penalty shall be imposed on the responsible person against this lapse under Section 117 of Customs Act, 1962. Because of the belated filing of documents / EGM, many EGM files are pending with this office for closure and the penal action has to be initiated against such agencies.
6. It is hoped that, the Trade concerned will take advantage of the relaxation and extend their co-operation in the matter of immediate closure of the pending EGMs.
(Issued from file C.No.viii/48/170/2015-MCD)”
13. Later, by Public Notice No.17/2018, the said facility of allowing 7 days time to file the EGM from the date of sailing of the vessel has been withdrawn by the department. By this Public Notice No.17/2018, the department started insisting on filing the EGM before departure of the conveyance itself in consonance with the SCMT Regulations. The said Public Notice is reproduced as under :
“PUBLIC NOTICE NO.17/2018
SUB : Filing of EGM – Compliance of the provisions of Section 41 of the Customs Act, 1962 – Reg.
Attention of the Shipping Agents / Liners / Steamer Agents / Custom Brokers / Exporters / Importers and all concerned is invited to the provisions of Section 41, 42 and 148 of the Customs Act, 1962.
2. Section 41 of the Customs Act 1962 provides for statutory filing of Export General Manifest and as per sub-section 1 of Section 41 (as amended vide section 74 of Finance Act’ 2018) „the person in charge of a conveyance carrying export goods or import goods shall, before departure of the conveyance from a customs station, deliver to the proper officer in the case of a vessel or aircraft, an export manifest by presenting electronically and in the case of a vehicle an export report in such form and manner as may be prescribed and in case, the person-in charge fails to deliver the departure manifest or export manifest or the export report or any part thereof within such time, and the proper officer is satisfied that there is no sufficient cause for such delay, such person-in-charge shall be liable to pay penalty not exceeding fifty thousand rupees”.
3. As per Section 42 (1), “the person in charge of a conveyance which has brought any imported goods or has loaded any export goods at a customs station shall not cause or permit the conveyance to depart from that customs station until a written order to that effect has been given by the proper officer”. Further, as per Section 42 (2)(b), No such order shall be given until the provisions of Section 41 have been complied with.
4. In terms of Section 148 (2) of the Customs Act, 1962, “An agent appointed by the person in charge of a conveyance and any person who represents himself to any officer of customs as an agent of any such person in charge and is accepted as such by that officer shall be liable for the fulfilment in respect of the matter in question of all obligations imposed on such person in charge by or under this Act or any law for the time being in force and to penalties and confiscations which may be incurred in respect of that matter”.
5. In view of the above legal provisions, the Export General Manifest (EGM) should be mandatorily filed before departure of the Vessel from the customs station by the person in charge of a conveyance carrying export goods or his agent, as the case may be, failing which, Penal Provisions shall be invoked under the provisions of Section 41 of Customs Act, 1962 as amended. Only after compliance of the above legal provisions by the concerned shipping agents/liners, the vessel shall be allowed to sail.
6. The facility of allowing seven days time to file EGM from the date of sailing of vessel vide para 3 of Public Notice.39/2017 dated 31.10.2017 issued by this office is withdrawn with immediate effect.
7. Difficulty, if any, in the implementation of this Public Notice may be bought to the notice of this Office immediately.”
The said Public Notice No.17/2018 is dated 14.06.2018. The shipping bills in all these appeals are prior to 14.06.2018. From the two public notices, it is seen that there was a sudden shift from the practice of filing the EGM within 7 days from the date of sailing of the vessel to the requirement of filing EGM before departure of the vessel. The period involved in these shipping bills are during this transition period.
14. Be that as it may, prior to introduction of SCMT Regulations as well as after, there is provision to amend or supplement the EGM. On reading of sub-section (3) of Section 41 of the Customs Act, it is seen that an incomplete EGM can be corrected. Sub-section 3 of Section 41 reads as under :
“If the proper officer is satisfied that the departure manifest of export manifest or export report is in any way incorrect or incomplete and that there was no fraudulent intention, he may permit such manifest or report to be amended or supplemented.”
If necessary documents are not filed and that the EGM is incomplete, the proper officer can permit to amend or supplement the EGM. The law thus foresees that errors/omissions can occur while filing the EGM. The appellant in this case has rectified errors/omissions when pointed out by the department. There is no allegation made against them that they had omitted to file the EGM with malicious intention of making any wrongful gain. The absence of such allegations along with the fact that the appellant rectified the same on being pointed out would lead to the strong inference that they had no intention to evade duty / smuggle any goods or violate any provision of law. In such circumstances, non-filing of EGM is only an omission which is a condonable lapse.
15. As per Rule 96 of the CGST Rules, 2017, the shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported, out of India, once both EGM and valid return in Form GSTR-3/GSTRB are furnished by the applicant. The IGST Refund module for exports has an inbuilt procedure to automatically grant refund after validating the Shipping Bill date against the GST Returns. The common errors and combination of errors hinders the problem of refund of IGST paid against exports. In Circular No.1/2019-Cus., F.No.450/119/2017-Cus-IV, dated 02.01.2019, the department has put forward resolutions to solve the problem of EGM errors which hamper IGST refund processing. In sub-para(iv) of Para 2 of the above circular, the Board has stated that penal provisions for violation of Section 41 is not to be invoked till 31.01.2019. The said para reads as under:-
“Board expects its jurisdictional officers to take all necessary steps to ensure that all EGMs of cargo-related to past cases are filed before 31st January, 2019. As a measure of facilitation, penal provisions may not be invoked for EGMs filled till 31st January, 2019. However, continued noncompliance beyond 1st February,2019 may be dealt strictly by taking recourse to penal provisions in accordance with the law.”
From the above, it can be seen that only for continued noncompliance beyond 1.4.2019 the penalty is required to be imposed. In the present case, on receiving the notice from the department, the appellant has immediately rectified the defect. There is no allegation of continued non-compliance. The facts brought to light established that the error was only due to inadvertent omission / system error etc. Penalty is a form of punishment by recovery of an amount from the offender. It is a form of pecuniary punishment inflicted by law for its violation. If there was no willful intention / wrongful mind for violating the law and such violation occurred was only due to inadvertent omission / system error, imposition of penalty is unwarranted. If there was continued non-compliance even after the errors being pointed out by the department, the circumstances would have been different and penalty may be imposable. It is also to be stated that after the amendment to Section 41, the section itself provides for penalty not exceeding Rs.50,000/-. That too only if proper officer is satisfied that there is no sufficient cause for delay in filing EGM. This being so, the invocation of Section 117 is not legal or proper.
16. From the discussions made above, I am of the view that the penalties imposed under Section 117 of Customs Act are unwarranted and cannot sustain. Impugned orders are set aside. Appeals are allowed with consequential relief, if any, as per law.
(Operative portion pronounced in open Court)