Case Law Details
Sun Sea Shipping Agency Vs The Commissioner of Customs (CESTAT Chennai)
The goods are counterfeit and have been confiscated. However, penalty u/s 112(a) being on higher side is reduced
Facts- The assessee filed a Bill of Entry dated 22.12.2017 through their Customs Broker M/s. Sun Sea Shipping Agency for the clearance of import consignment in which the goods were declared as ‘3B Glass Top Gas Stove (Unbranded)’. On verification it was found that the consignment contained 410 pieces of 3B Glass Top and 341 cartons of shoes bearing brand names Nike, Adidas, Reebok and Puma. The import of such counterfeit goods infringes trademark of the IPR holders and is prohibited goods as per Section 11 of the Customs Act, 1962 read with Section 29, Section 30(3) and Section 102 of the Trade Marks Act, 1999.
The revenue confiscated the 12436 pairs of shoes and imposed a penalty under section 112(a) of the Act. Commissioner (Appeals) upheld the order and accordingly being aggrieved the assessee preferred the present appeal.
Conclusion- I am convinced that steps for filing the Bill-of-Entry would not have taken place unless the documents were handed over by the appellant herein. The goods are counterfeit and have been confiscated. It is also alleged that he has taken back the documents from the Customs Broker. For these reasons, I hold that the findings of the authorities below, that the appellant has acted in relation to improper importation of goods, does not call for interference. However, in the present case, he had no liability to pay duty. The penalty of Rs.7,00,000/-(Rupees Seven Lakhs only) imposed on Shri C. Solomon Selvaraj is on the higher side and requires to be reduced. I hold that a penalty of Rs.1,00,000/- (Rupees One Lakh only) would meet the ends of justice. The appeal is partly allowed, by reducing the penalty from Rs.7,00,000/- to Rs.1,00,000/- only.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The facts involved in both cases being the same, they are heard together and disposed of by this common order.
1. Brief facts are that M/s. Amar Exports filed Bill of Entry dated 22.12.2017 through their Customs Broker M/s. Sun Sea Shipping Agency (appellant in Appeal No. C/40356/2021) for the clearance of import consignment in which the goods were declared as “3B Glass Top Gas Stove (Unbranded)”. The gross weight was declared as 10160 kgs.
2. On specific intelligence that the importer might be involved in concealment and mis-declaration of goods, the consignment was subjected to 100% examination on 10.01.2018. It was found to contain 410 pieces of 3B Glass top gas stoves and 341 cartons which contained shoes bearing brands like Nike, Adidas, Reebok and Puma which were not at all declared in the Bill of Entry. There were 12436 pairs of shoes and 410 pieces of gas stoves.
3. On verification of the shoes imported, it was noticed that all the shoe brands were registered with Customs for the purpose of IPR. Hence, on reasonable belief that M/s. Amar Exports have infringed the Intellectual Property Rights of above mentioned brands, samples were taken for further investigation by SIIB vide Mahazar dated 11.01.2018. The IPR holders / authorized representatives were informed and were asked to join the proceeding and verify the samples. The above said IPR holders joined the proceedings through their authorized representatives and submitted their technical reports. As per these reports, the shoes bearing brand names Nike, Adidas, Reebok and Puma were found to be counterfeit goods. The import of such counterfeit goods infringes trademark of the IPR holders and is prohibited goods as per Section 11 of the Customs Act, 1962 read with Section 29, Section 30(3) and Section 102 of the Trade Marks Act, 1999.
4. The investigation revealed that the appellant Shri. C. Solomon Selvaraj (appellant in Appeal No. C/40855/2021), Shri Ram Kumar, who is an ex-employee of Customer Broker, M/s. Sun Sea Shipping Agency, introduced Shri Solomon to the Customs Broker. Shri Solomon, as the representative of the importer, had handed over the documents for filing the Bill of Entry.
5. It appeared the IPR infringing items were imported in the guise of 3B Glasss top gas stoves. Therefore, these glass stoves were also liable for confiscation along with the shoes. Show Cause Notice was issued to the appellants along with others proposing confiscation of the goods, and proposing to impose penalties. After due process of law, the original authority passed the following order:-
“
ORDER
i. I hold that 12436 pairs of imported Shoes bearing the brand names Nike, Adidas and Reebok, Puma with a total Value of Rs. 30,97,636/- covered under Bill of Entry No. 4525203 dated 22.12.2017 bearing the Registered Trademark of M/s. Nike Innovate C.V., M/s. Adidas international B W, M/s. Adidas AG & M/s. Reebok International Limited, M/s. Puma SE are prohibited goods under Section 11 of the Customs Act, 1962 read with Trade Marks Act, 1999 and Intellectual Property (Imported Goods) Enforcement Rules, 2007 and Section 3(3) of Foreign Trade (Development and Regulation) Act, 1992.
ii. I confiscate the 12436 pairs of imported Shoes bearing the brand names Nike, Adidas, Puma and Reebok under Section 111(d) and 111(l) of Customs Act, 1962 and be dealt with in manner prescribed under IPR Rules, 2007 notified vide Notification No. 47/2007-Cus., dated 08.05.2007 read with Circular No. 41/2007-Cus., dated 29.10.2007.
iii. I confiscate the 410 pieces of non-IPR infringing 3B glass top gas stoves having assessable value Rs. 2,12,872/- under Section 111 (m) and 119 of Customs Act, 1962. However, I give option to the importer to release the goods on payment of redemption fine of Rs. 30,000/- (Rupees Thirty Thousand only) under Section 125(1) of the Customs Act, 1962 and the importer shall pay applicable duty and interest as per Section 25(2) of Customs Act, 1962.
iv. I impose a penalty of Rs.7,00,000/- (Rupees Seven Lakh only) on importer “M/s. Amar Exports” under section 112(a) of the Customs Act, 1962.
v. I impose a penalty of Rs.3,00,000/- (Rupees Three Lakh only) on importer “M/s. Amar Exports” under section 114AA of the Customs Act, 1962.
vi. I impose a penalty of Rs.2,00,000/- (Rupees Two Lakh only) on “M/s. Sunsea Shipping Agency” under section 112(a) of the Customs Act, 1962.
vii. I impose a penalty of Rs.7,00,000/- (Rupees Seven Lakh only) on Shri Solomon under section 112(a) of the Customs Act, 1962.
This order is issued without prejudice to any action that may be initiated or contemplated under Customs Act, 1962 or any other act that may be in force.”
6. Aggrieved, the appellants herein filed appeals before the Commissioner (Appeals), who vide separate orders upheld the order passed by the Adjudicating Authority. Hence, these appeals.
Appeal No.: C/40356/2021
7. The Learned Counsel Dr. S. Krishnanandh appeared and argued for the appellant. He adverted to the Show Cause Notice and submitted that there is no specific allegation raised in the Show Cause Notice that the appellant herein, Customs Broker, viz. M/s. Sun Sea Shipping Agency has, in some manner, abetted the mis-declaration of goods. In paragraph 21(ix) of Show Cause Notice it is merely alleged that the Customs Broker did not verify the Bill of Entry. It is alleged that Customs Broker did not verify the identity and functioning of their client at the given address. Further, that Customs Broker has violated Regulation 10(n) of Customer Brokers Licensing Regulations (CBLR), 2018 and Regulation 11(n) of the CBLR, 2013. There is no whisper of any allegation that would constitute an offence for attracting section 112(a) of the Customs Act 1962.
8. It is submitted by the Learned Counsel for the appellant that in respect of the very same investigation and on the same set of allegations, the appellant was issued Show Cause Notice under the CBLR, 2018. The said Show Cause Notice culminated in the passing of Order-in-Original No. 68337/2019 dated 03.04.2019 where in the Adjudicating Authority held that there is no evidence that the appellant and importer were sharing benefits out of fraudulent imports. The Adjudicating Authority refrained from revoking the licence and also lifted the order of suspension issued under Regulation 14 of the CBLR, 2018. A penalty of Rs. 50,000/- was imposed.
9. The Learned Counsel for the appellant argued that when penalty has been imposed under the Regulations for the violations of CBLR, a further penalty cannot sustain on the very same allegations under Section 112(a) of Customs Act. 1962. In various decisions it has been held that a Customs House Agent / Customs Broker are only processing agents of documents for clearance of goods and they are not inspectors to weigh the genuineness of transactions and therefore, has no obligations to look into the information from the exporter/importer. He relied upon the following decisions:-
i) M/s. Ashiana Cargo Service v. Commissioner of Customs (I&G) – (Del) [2014 (302) E.L.T. 161]
ii) M/s. Kunal Travels (Cargo) vs C.C. (I&G), IGI Airport, New Delhi [2017 (354) E.L.T. 447 (Del.)]
iii) Commissioner of Customs vs Shiva. Khurana [2019 (367) E.L.T. 550 (Del.)]
10. He argued that it is not alleged in the Show Cause Notice that there has been any omissions or commission on the part of the appellant in abetting the importers. The allegations are merely that the appellant committed violation of the CBLR, 2018 for which penalty has already been imposed. He prayed to set aside the penalty and allow the appeal.
11. The Learned Authorized Representative Shri R. Rajaraman appeared for the Department. He supported the finding in the impugned order. He stated that the appellant had not done any verification of the importer. The Importer-Exporter Code (IEC) of M/s. Amar Exports was misused by the importer who is a fictitious person. The goods undeclared are IPR infringing items. M/s. Amar Exports have stated that they have not imported such goods. The appellant has obtained the documents for filing the Bill of Entry from one Shri Solomon, who feigns ignorance of the entire transaction. The appellant ought to have verified the KYC documents and antecedents of the importer. The penalty imposed is just and proper.
12. Heard both sides.
13. The main contention raised by the Learned Counsel for the appellant, Dr. S. Krishnanandh, appearing for the Customs Broker, is that there is no allegation in the Show Cause Notice attracting ingredient of Sec 112(a) and that the allegation would fall within the purview of the CBLR, 2018 (2013) for which penalty has already been imposed.
14. On perusal of the Show Cause Notice, sub-clause (ix) of paragraph 21 gives the allegation against the Customs Broker, reads as under:-
“(ix) Further, Authorized Customs Broker M/s. Sun Sea Shipping Agency has not verified the antecedents of the importer before filing of Bill of Entry. Further they did not verify the identity & functioning of their client at the given address. Hence, they violated the Regulation 10(n) of Customs Brokers Licensing Regulations, 2018 (Regulation 11(n) of Customs Brokers licensing Regulations, 2013).”
15. As seen from the above, the allegation is in the nature of violations falling under the Customs Brokers Licensing Regulations. The Adjudicating Authority vide Order No. 68337/2019 dated 03.04.2019 (proceedings in respect of Show Cause Notice issued under the CBLR, 2018) has observed in paragraph 33, as under:-
“33. However though contravention of the provisions of Regulation 10 (a), 10 (b) and 10 (n) of Customs Brokers Licensing Regulations, 2018 (read with Regulation 11(a), 11(b), 11(n) of CBLR, 2013), by the CB stand proved and CB is definitely liable for penalty for their omissions & commissions. But considering only two Bills of Entry in the case, and Customs Broker License is under suspension for more than 7 months, they are jobless since then along with their staff and main case not yet adjudicated. In my opinion, revocation of License will be very harsh on the Customs Broker. There is as such no evidence that they were sharing the benefits of the fraudulent imports.”
(Emphasis supplied)
- It has been categorically held that there is no evidence that the appellant had any arrangement of sharing benefits of fraudulent exports. On such score, I have to say that the Department has failed to establish the ingredients under Section 112(a) of the Customs Act, 1962 against the appellant. The penalty imposed under Section 112(a) on the appellant, in my view, is not justified and requires to be set aside, which I hereby do.
Appeal No.: C/40855/2021
17. The Learned Counsel for the appellant Smt. L. Maithili appeared and argued for the appellant Shri C. Solomon Selvaraj. The Bill-of-Entry for clearance of the goods was filed on behalf of M/s. Amar Exports. However, they filed written submission dated 23.11.2018 stating that they did not wish to represent their case as the entire issue happened without their knowledge. The investigation showed that the IEC of M/s. Amar Exports was used without their knowledge. The allegation against the appellant is that the KYC documents were handed over to Mr. Ravichandran (ex-employee of M/s. Sun Sea Shipping Agency) and that the appellant later took them back. It is thus alleged that the appellant falsely introduced himself as the representative of the importer. The appellant did not file the Bill-of-Entry and has not done any act in respect of clearance of goods. The appellant states that the appellant acted on behalf of one Vishal @ Jitendar Jain who had handed over the documents for transmitting to the Customs Broker. However, the Show Cause Notice does not mention the name of Vishal. She argued that the Department has not conducted any verification in regard to Vishal. None of the ingredients of Section 112(a) have been established against the appellant. In any case, the penalty imposed is very high. She prayed that the appeal may be allowed.
18. The Learned Authorized Representative for the Revenue, Shri R. Rajaraman, supported the findings in the impugned order.
19. Heard both sides.
20. On perusal of the Show Cause Notice, in paragraph 21(x), the allegation against the appellant reads as under:-
“(x) Further, Shri Solomon, who represented importer and submitted the documents to Customs Broker for filing the subject Bill of Entry are also liable for penalty under Section 112(a) of the Customs Act, 1962 as the goods are liable for confiscation under Section 111(d), 111(l), 111(m) and 119 of the Customs Act, 1962.”
21. The appellant Shri C. Solomon Selvaraj has filed reply to the Show Cause Notice on 15.10.2018. In paragraph 29 of the Order-in-Original, the relevant discussions are made. It is stated by the appellant that he acted only as an intermediary who presented the documents to the Customs Broker. That he had no knowledge that the consignment contained counterfeit goods. Learned Counsel for the appellant stressed that the appellant has not done any act related to the goods and therefore, penalty under Section 112(a) will not lie.
22. It is brought out from facts that Shri Solomon is the person who had acted as an intermediary for handing over the documents to the Customs Broker. His case is that some Vishal has given him the documents. He has not taken any steps to establish this. He could have cited Vishal as a witness on his side and requested to issue summons for examination of such person. Section 112(a) of the Customs Act, 1962 reads as under:
“Section 112. Penalty for improper importation of goods, etc. —
Any person, –
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or …”
23. After appreciating the facts and evidence placed before me, I am convinced that steps for filing the Bill-of-Entry would not have taken place unless the documents were handed over by the appellant herein. The goods are counterfeit and have been confiscated. It is also alleged that he has taken back the documents from the Customs Broker. For these reasons, I hold that the findings of the authorities below, that the appellant has acted in relation to improper importation of goods, does not call for interference. However, in the present case, he had no liability to pay duty. The penalty of Rs.7,00,000/-(Rupees Seven Lakhs only) imposed on Shri C. Solomon Selvaraj is on the higher side and requires to be reduced. I hold that a penalty of Rs.1,00,000/- (Rupees One Lakh only) would meet the ends of justice. The appeal is partly allowed, by reducing the penalty from Rs.7,00,000/- to Rs.1,00,000/- only.
24. In the result:-
(i) Customs Appeal No. 40356/2021 is allowed with consequential reliefs, if any.
(ii) Customs Appeal No. 40855/2021 is partly allowed by reducing the penalty from Rs.7,00,000/-(Rupees Seven Lakhs only) to Rs.1,00,000/-(Rupees One Lakh only), with consequential reliefs, if any.
(Order pronounced in the open court on 19.05.2022)
Author Bio
