Case Law Details
V. Thiruvalagan Vs Commissioner of Customs (CESTAT Chennai)
CESTAT Chennai held that penalty u/s 114(i) of the Customs Act, 1962 imposable as CHA has abetted or facilitated, may be deliberate or negligent, an illegal attempted export of prohibited goods i.e. Red Sanders wood pillars and tops.
Facts- M/s. Artisan’s Welfare Society, Villupuram had filed a free shipping bill through the appellant-CHA viz. M/s. Shalom Forwarders, Tuticorin for export of wooden cupboards, pillar tops, table and book shelf and wooden pillars, without claiming any export incentives.
On the basis of specific intelligence received, the SIIB Officers of the Custom House, Tuticorin have detained the consignment and on detailed examination in the presence of State Government Forest Officer, which resulted in the seizure of the above goods since the pillar tops and wooden pillars were found to be made of Red Sanders wood. ‘Red Sanders’ is a notified item and its export is prohibited under the Customs Act, 1962 read with the Foreign Trade (Development and Regulation) Act, 1992, the Foreign Trade Policy 2009-14 and ITC (HS) Schedule 2.
Under the ITC (HS) notified by the Directorate General of Foreign Trade (DGFT) as per paragraph 2.1 of the Foreign Trade Policy for 200914 formulated under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, export of Red Sanders wood in any form is prohibited.
M/s. Artisan’s Welfare Society, Villupuram have unsuccessfully attempted to export 6.78 MTs of Red Sanders in contravention of the above provisions of the Customs Act, 1962 read with the Foreign Trade Policy 2009-14.
The documents including shipping bill for the above attempted export of Red Sanders wood were filed by M/s. Shalom Forwarders, Tuticorin, and Shri V. Thiruvalagan is the proprietor of M/s. Shalom Forwarders, Custom House Agent. The allegation against the appellant herein is that the CHA has abetted in the illegal export of Red Sanders by accepting the consignment on the basis of documents produced by M/s. Desire Global Logistics, Tuticorin.
Conclusion- Held that the appellant has acted or omitted to do an act, resulting in rendering the exported goods liable for confiscation, thus attracting the provisions of Section 114 (i) of the Customs Act, 1962. So, penalty is imposable for his acts of omission or commission, may be deliberate or negligent. His conduct aided and facilitated the illegal attempted export of Red Sanders wood pillars and tops. However, considering the totality of the circumstances obtaining in this case, the penalty upheld at Rs.1,00,000/- (Rupees One Lakh only) is reduced to Rs.50,000/- (Rupees Fifty Thousand only).
FULL TEXT OF THE CESTAT CHENNAI ORDER
Shri V. Thiruvalagan, Proprietor of M/s. Shalom Forwarders, Custom House Agent (CHA), Tuticorin Customs, has preferred this appeal against the Order-in-Appeal No. 52/2013 (TTN) dated 23.05.2013 of the Commissioner of Customs and Central Excise (Appeals), Tiruchirappalli for upholding the penalty imposed under Sections 114(i) and 114AA of the Customs Act, 1962. The original adjudicating authority i.e., the Additional Commissioner of Customs, Tuticorin, has imposed a penalty of Rs.2,00,000/- (Rupees Two Lakhs only) on the appellant for his acts of omission and commission in relation to the attempted illegal export of Red Sanders by M/s. Artisan’s Welfare Society, Villupuram, which was reduced to Rs.1,00,000/- (Rupees One Lakh only) by the lower appellate authority.
2.1. Briefly stated the facts of the case are that M/s. Artisan’s Welfare Society, Villupuram had filed a free shipping bill No. 6609463 dated 09.12.2011 through the appellant-CHA viz. M/s. Shalom Forwarders, Tuticorin for export of wooden cupboards, pillar tops, table and book shelf and wooden pillars, without claiming any export incentives.
2.2. On the basis of specific intelligence received, the SIIB Officers of the Custom House, Tuticorin have detained the consignment and on detailed examination in the presence of State Government Forest Officer, which resulted in the seizure of the above goods since the pillar tops and wooden pillars were found to be made of Red Sanders wood. ‘Red Sanders’ is a notified item and its export is prohibited under the Customs Act, 1962 read with the Foreign Trade (Development and Regulation) Act, 1992, the Foreign Trade Policy 2009-14 and ITC (HS) Schedule 2. As per Section 3(3) of the Foreign Trade (Development and Regulation) Act, 1992, all goods to which sub-section (2) applies shall be deemed to be goods, the import or export of which has been prohibited under Section 11 of the Customs Act, 1962. Under the ITC (HS) notified by the Directorate General of Foreign Trade (DGFT) as per paragraph 2.1 of the Foreign Trade Policy for 200914 formulated under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, export of Red Sanders wood in any form is prohibited. In terms of Section 2 (33) of the Customs Act, 1962, ‘prohibited goods’ means any goods, the import or export of which is subject to any prohibition under this Act or under any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be exported have been complied with. According to Section 113(d) of the Customs Act, 1962, any goods attempted to be exported or brought within the limits of any Customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act, or any other law for the time being in force, shall be liable to confiscation. Further, as per Section 2(39) of the Customs Act, 1962, smuggling in relation to any goods means any act or omission which will render such goods liable to confiscation under Section 111 or Section 113 of the Customs Act, 1962.
2.3. M/s. Artisan’s Welfare Society, Villupuram have unsuccessfully attempted to export 6.78 MTs of Red Sanders in contravention of the above provisions of the Customs Act, 1962 read with the Foreign Trade Policy 2009-14.
2.4. The documents including shipping bill for the above attempted export of Red Sanders wood were filed by M/s. Shalom Forwarders, Tuticorin, and Shri V. Thiruvalagan is the proprietor of M/s. Shalom Forwarders, Custom House Agent. The allegation against the appellant herein is that the CHA has abetted in the illegal export of Red Sanders by accepting the consignment on the basis of documents produced by M/s. Desire Global Logistics, Tuticorin. In the statement recorded from him on 06.06.2012, the appellant has stated that he received the documents through Shri Prabhu, one of the partners of M/s. Desire Global Logistics.
3.1. The appellant has contended that he has not abetted the export of Red Sanders wood in any way; that he has accepted the clearance work for the above said export shipment at the request of M/s. Desire Global Logistics who did not have C&F Licence and also that the exporter viz. M/s. Artisan’s Welfare Society was a registered society, which led him to believe that it was a genuine business without violating any Customs Rules and Regulations.
3.2 He has contended that he has acted truthfully and has not done anything knowingly or intentionally; that he was not aware of the quality or quantity of the cargo being exported; based on the declaration on the invoice and packing list by the exporter, the shipping bill was filed; that mere acceptance for doing clearance work for the above impugned shipment could not be inferred as abetment in the attempted illegal export.
3.3. Thus, he has argued that he has not done any act or omitted to do any act to abet illegal export of the said shipment in order to attract penalty under the provisions of Section 114(i) of the Customs Act, 1962; that no mis-declaration was made knowingly or intentionally and he has wilfully violated neither the provisions of the Customs Act nor the Customs House Agents Licensing Regulations. He has also accepted that in the past, he had handled two consignments for M/s. Artisan’s Welfare Society, contending that it was not possible to be aware that the export goods were made from Red Sanders.
4.1. Ld. Advocate Shri A.K. Jayaraj has vehemently argued that the appellant could not be penalized in the absence of ingredients of any offence and that the Show Cause Notice or the orders of the lower authorities had not disclosed any contumacious conduct warranting imposition of penalty. He submitted that there was a failure to take into consideration the decision rendered in the case of Sri Ram v. The State of Uttar Pradesh [AIR 1975 SC 175] which reads: “in order to constitute abetment, the abettor must be shown to have “intentionally” aided the commission of the crime. Mere proof that the crime charged could not have been committed without the interposition of the alleged abettor is not enough compliance with the requirements of section 107.”
4.2 He submitted that there is no evidence that the appellant had acted in deliberate defiance of law or conscious disregard of their obligations and so, no penalty could be imposed; that penal provisions are required to be strictly construed and it is the well-settled position of law that penal proceedings are quasi-criminal proceedings and penalty cannot be imposed without mens rea, and also that there is no evidence shown in the Order-in-Original to prove any culpability of the appellant in the above export.
4.3. In support of his contentions, the Ld. Advocate has relied upon the order of the CESTAT, South Zonal Bench, Chennai in the case of M/s. Hera Shipping Solutions Pvt. Ltd. v. Commissioner of Customs, Chennai-IV [2022 (382) E.L.T. 552 (Tri. – Chennai)] wherein it was held that penalty on a Customs Broker, who filed shipping bills on behalf of an exporter for export of Red Sanders which were allegedly attempted to be smuggled out of India, was not imposable under Section 114 and Section 114AA of the Customs Act, 1962 in the absence of mens rea on its part though he has failed to verify the IEC and take authorization from the exporter.
4.4. He has also drawn a reference to the decision of the Hon’ble High Court of Judicature at Madras in the case of Commissioner of Customs (Exports), Chennai v. I. Sahaya Edin Prabhu [2015 (320) E.L.T. 264 (Mad.)] wherein it was held that when there is no finding against the Custom House Agent having a positive role in the smuggling, the Custom House Agent could not be penalized under the provisions of the Customs Act, 1962 for failure to discharge its functions when penalty for the same are provided under the Custom House Agents Licensing Regulations, 2004.
4.5. Reliance was also placed on the decision rendered in the case of M/s. Kunal Travels (Cargo) v. Commissioner of Customs (I&G), IGI Airport, New Delhi [2017 (354) E.L.T. 447 (Del.)] by the Hon’ble Delhi High Court which has held that a CHA or its proprietor cannot be attributed with mens rea in the absence of knowledge that the goods mentioned in the shipping bill did not reflect the truth of consignment sought to be exported.
5.1 Per contra, Ld. Authorized Representative Shri R. Rajaraman (Assistant Commissioner) has submitted that the appellant has not only filed the shipping bill on behalf of M/s. Artisan’s Welfare Society, Villupuram, but also filed shipping bills twice for past exports for the same person and has also filed shipping bills for M/s. Sree Ragav Exports, Pachampalayam and M/s. R.J. Associates, Coimbatore, which were involved in export of Red Sanders and also mis-declaration and over-valuation of garments and that the appellant-CHA used to sign documents without verifying the exporter or its credentials; even in the present case of attempted illegal export of Red Sanders wood, the appellant has accepted the documents from M/s. Desire Global Logistics without knowing about the exporter and without verifying its credentials or the goods being exported.
5.2. He has supported the findings in the orders of the lower authorities and stated that by his acts of omission and commission rendering these goods liable for confiscation, penalty is imposable on the appellant under the provisions of Section 114 of the Customs Act, 1962.
5.3. He prayed for dismissal of the appeal.
6. We have heard both sides and considered the submissions made.
7. Shri V. Thiruvalagan, Proprietor of M/s. Shalom Forwarders, Tuticorin, who filed the shipping bill and packing list after receipt of documents from M/s. Desire Global Logistics and not from the exporter, was penalized by imposition of penalty of Rs.2,00,000/- by the original adjudicating authority, which was reduced by the lower appellate authority to Rs.1,00,000/-.The allegation against the appellant is that by his acts of omission and commission, he has abetted the illegal export of Red Sanders by M/s. Artisan’s Welfare Society, Villupuram, rendering them liable for confiscation, thus attracting the provisions of Section 114 (i) of the Customs Act, which read as under: –
“Section 114. Penalty for attempt to export goods improperly, etc. —
Any person 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 113, or abets the doing or omission of such an act, shall be liable, –
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding three times the value of the goods as declared by the exporter or the value as determined under this Act], whichever is the greater;”
8. So, it is important to understand the meaning and scope of ‘attempt’ in importing or exporting any prohibited goods or in contravention of the provisions of the Customs Law. An ‘attempt’ ordinarily means an intent combined with an act falling short of the thing intended. It is an effort or endeavour to accomplish a crime, amounting to more than mere preparation or planning for it, which, if not prevented, would have resulted in the full consummation of the act attempted, but which, in fact, does not bring to pass the party’s ultimate design. In order to constitute an act of attempt, the act must possess four characteristics: First, it must be a step toward a punishable offence; second, it must be apparently (but not necessarily in reality) adapted to the purpose intended; third, it must come dangerously near to success; fourth, it must not succeed. In this appeal, M/s. Artisan’s Welfare Society, by its unsuccessful attempt to export prohibited Red Sanders wood pillars and pillar tops, have rendered these goods liable for confiscation under Section 113 (d) of the Customs Act, 1962.
9.1. In terms of provisions of Section 114 (i), any person who in relation to any goods has done or omitted to do any act which renders such goods liable to confiscation, or abets the doing or omission of such an act, shall be liable to a penalty not exceeding three times the value of the goods involved. In this case, it is conclusively proved that the exporter, M/s. Artisan’s Welfare Society, has made an unsuccessful attempt to export Red Sanders wood pillar tops / pillars in contravention of the customs Act, 1962, the Foreign Trade (Development and Regulation) Act, 1992, the ITC (HS) Schedule 2 and also in contravention of the provisions of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
9.2. It is on record that the appellant filed the impugned shipping bill without knowing and verifying the credentials of the exporter or the consignment while obtaining documents from M/s. Desire Global Logistics and has thus facilitated the unsuccessful attempted export of Red Sanders wood in the form of pillar tops / wooden pillars. As explained above, regarding the attempt here, the attempt, though unsuccessful, is complete. The words used in Section 114 of the Customs Act are “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 113, or abets the doing or omission of such an act”, which has a wide amplitude.
9.3. The appellant, by accepting documents from a third party without verifying the genuineness of the exporter or the goods being exported, has facilitated the unsuccessful attempt of export of prohibited goods. Whether the above acts or omissions have been done intentionally or otherwise would not materially alter his position as an abettor in rendering these goods liable for confiscation. It is also significant to note that the CHA was also involved in filing documents involving export of Red Sanders and mis-declaration and over-valuation of goods contravening the provisions of the Customs Act, as evident from the orders of the lower authorities.
10. The decisions rendered in the cases of M/s. Hera Shipping Solutions Pvt. Ltd. (supra), I. Sahaya Edin Prabhu (supra) and M/s. Kunal Travels (Cargo) (supra), which have been relied upon by the appellant, are distinguishable from the facts of this case. The appellant has filed the documents as received from a third-party and not from the exporter. A Custom House Agent is an important link between the Customs administration and the importers / exporters. Deliberate actions or negligent omissions on the part of a CHA, to manipulate or exploit this connection, needs to be dealt with sternly.
11. It is not correct position of law to say that penalty cannot be imposed under the provisions of Section 114 of the Customs Act when penalties are imposed / imposable for contravention of the Custom House Agents Licensing Regulations (CHALR). For contravention of the CHALR, the licence of the CHA may be suspended or revoked apart from forfeiture of the security deposit. However, it does not mean that penalty is not imposable under Section 114 of the Customs Act where the CHA has abetted or facilitated an illegal export or import contravening various provisions of the Customs Act, 1962.
12. As clear from various judicial precedents, mens rea is not an ingredient of Section 114 of the Customs Act. Mere contravention of the provisions of the Customs Act and the regulations thereunder justifies the imposition of penalty under Section 114
12.1 In the case of Nandu Raghunath Shinde v. Commissioner of Customs (Exports), Nhava Sheva [2015 (317) E.L.T. 525 (Tri. – Mum.)], the co-ordinate Bench of the CESTAT at Mumbai had an occasion to analyse a similar case, wherein it was held as under: –
“8. The appellants have relied on the case of P.D. “Manjrekar (supra) as well as other cases to justify their contention that for imposition of penalty under Section 114, Revenue has to prove knowledge on the part of the assessee regarding the incident of export of banned goods. Section 114 is reproduced below for ready reference :
“114. Penalty for attempt to export goods improperly, etc. – Any person 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 113, or abets the doing or omission of such an act, shall be liable”.
It is seen that the Section has two components. The first component deals with commission of an act or omission to do any act which would render the goods liable to confiscation. The second component is abetting the omission or commission. The first part does not depend on mens rea on the part of the person who omitted to do any act. Therefore mere contravention of the provisions of the Act and Regulations justifies the imposition of penalty under Section 114 of the Act. The Apex Court in the case of Raghuveer Metal Industries Ltd. v. Commissioner – 2012 (284) E.L.T. A93 (S.C.) was dealing with the case where penalty was leviable for violation of Rules relating to compounded levy framed under Section 3A of the Central Excise Act. It was held that “mens rea is not a necessary ingredient and there is no scope for any discretion in imposition of any penalty”. In the present case mens rea is not an ingredient as explained above. Therefore penalty is imposable.”
12.2 The Hon’ble High Court of Judicature at Madras in the case of M/s. Sanco Trans Ltd. v. CESTAT, Chennai [2017 (350) E.L.T. 521 (Mad.)] has held that the custodian is responsible for all aspects of a transaction and provisions of Section 114 of the Customs Act, 1962 will stand automatically attracted in the event of violations by way of omission or commission of acts stated therein. In the above judgement, it was held that custody is a dynamic process commencing with the receipt of cargo, movement of goods by the custodian and concluding with the presentation of shipping documents by the representative of the custodian at the gateway ports/airports and including all events in between. Any attempt to dilute the responsibility of the custodian in this sequence would clearly be contrary to the apparent intention. The custodian is, but one link in the chain of events relating to the movement of goods in the course of import and export and that accepting the argument of the appellant would weaken one link of the chain, thus compromising the entire network. The relevant observation of the Hon’ble High Court is extracted below: –
“8. The scheme and purport of the arrangement thus indicates clearly that a custodian has, as the name suggests, full custody of the goods entrusted to it from the time of storage till the time the goods are moved, arrive at the gateway port or other Customs areas/equivalent and are cleared for export. The submission of the learned counsel for the appellant is to the effect that mens rea is necessary to attract the provisions of Section 114 to the transaction. The Tribunal, on the other hand, proceeds on the basis that the existence of mens rea is not an essential ingredient to establish contravention of a civil law, placing reliance on the judgments of the Supreme Court in the case of Chairman, SEBI v. Shriram Mutual Fund – 2006 (5) S.C.C. 361 and Pine Chemicals Suppliers v. Collector of Customs, followed and applied by this Court in Commissioner of Customs (Export), Chennai-I v. Bansal Industries [2007 (207) E.L.T. 346].”
13. In view of the above, we hold that the appellant has acted or omitted to do an act, resulting in rendering the exported goods liable for confiscation, thus attracting the provisions of Section 114 (i) of the Customs Act, 1962. So, penalty is imposable for his acts of omission or commission, may be deliberate or negligent. His conduct aided and facilitated the illegal attempted export of Red Sanders wood pillars and tops. However, considering the totality of the circumstances obtaining in this case, the penalty upheld at Rs.1,00,000/- (Rupees One Lakh only) is reduced to Rs.50,000/- (Rupees Fifty Thousand only).
14. Thus, the appeal is partly allowed.
(Order pronounced in the open court on 24.08.2023)
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