Case Law Details
SKH Freight Logistics Pvt. Ltd. Vs Commissioner of Customs (CESTAT Delhi)
CESTAT Delhi upheld revocation of Customs Broker license on failure to make appropriate enquiries of their client and for facilitating fraudulent highly under-valued exports.
Facts- Department formed the opinion that M/s Linwood Sales Pvt. Ltd. was involved in fraudulent export under drawback scheme to avail huge undue drawback amount. The Customs Broker who facilitated the fraudulent export is M/s. SKH Freight Logistics Pvt. Ltd. Show Cause Notice was issued by DRI after completion of inquiry into the matter. This SCN has been adjudicated by the Order- in-Original. Treating the said order as offence report that the license of the appellant was suspended vide order dated 06.07.2018. The said proposal has been confirmed vide order in original No.75/2018 dated 30.11.2018. Being aggrieved, the present appeal is filed.
Conclusion- Held that it is very much on record that one Mr. Sumit Aggarwal was the mastermind behind the fraudulent highly under-valued exports. The G Card Holder of the appellant was aware about Shri Guha Sarkar to transact the fraudulent exports. Since the custom broker is responsible for all acts and means of his employees during their employment as per Regulation 13 (12) of CBLR of 2018, it was mandatory for the appellant to advice the exporter to comply with the provisions of the Customs Act, else to have brought to the notice of the Dy. Commissioner Customs about the non-compliance. But neither the appellant nor his G card holder has ever brought the impugned fraud to the notice of the competent authorities. We have no reason to differ from the findings arrived at against the appellant.
Held that the appellant has failed to make the appropriate enquiries of their clients prior transacting the business in customhouse station. Hence, the findings confirming the violation of Regulation 10 (k) and 10 (n) are held sustainable.
FULL TEXT OF THE CESTAT DELHI ORDER
Facts in brief relevant for present adjudication are:-
Intelligence was received by DRI that a syndicate of unscrupulous persons was engaged in exporting inferior quality of readymade garments by overpricing the same to earn undue amount of Drawback. It was found that M/s Linwood Sales Pvt. Ltd., (IEC No. 0216914418), 12, Sovaram Basak Street, 2nd floor, Kolkata-700007 filed six Shipping Bills for export of Women’s Leggings of MMF to Dubai, UAE at a declared FOB value of Rs 5.22 crore under claim of Drawback amounting to Rs.51.19 lakh. The Shipping Bills were filed by Customs Broker, M/s. SKH Freight Logistics Pvt. Ltd. DRI intercepted the consignment of two containers bearing Nos. TGHU 24041549 and FSCU 3539037. The declared FOB value of these two containers was Rs 5,22,33,258( Five crore twenty two lakh thirty three thousand two hundred fifty eight) and total drawback claimed was Rs.51,18,864 (Fifty one lakh eighteen thousand eight hundred sixty four).
2. The goods under these containers were examined in the presence of Shri Souvik Guha Sarkar, representative of M/s Linwood Sales Pvt. Ltd., Shri Chandra Sekhar Hore, ‘G’ card license holder, M/s SKH Freight Logistics Pvt. Ltd., Customs Officers and two independent witnesses. The FOB value of 1,14,480 pieces of ‘Women’s Leggings’ attempted for exports under 6 Shipping Bills was reassessed and ascertained at Rs.81,60,134/- and Rs.7,99,693/- only.
3. DRI intercepted another three containers bearing Nos. EISU 3799380, EISU 3759475 and EMCU 3684964 which said to contain “Readymade Garments Babies Inner”. Nine Shipping Bills were filed by M/S SKH Freight Logistics Pvt. Ltd. on behalf of the exporter M/s Linwood Sales Pvt. Ltd. against these three containers. The total declared FOB value was Rs.5,78,09,000/- (Five crore seventy eight lakh nine thousand). The total drawback claimed was Rs 54, 96, 615/- (Fifty four lakh ninety six thousand six hundred Fifteen). The goods were attempted to be exported through Kolkata Port. The goods were found to of inferior quality and were reassessed under Rule 6 of Customs Valuation Rules, 2007 at Rs 1,26,02,304/- (Rupees One crore twenty six lakh two thousand three hundred and four) and the admissible drawback amount was found to be Rs.12,35,206/-only.
4. Statements of all concerned including the G Card Holder of appellant, Shri Chandra Shekhar, the Representative of exporter, namely, M/s. Linwood Sales Pvt. Ltd., Director of the exporter, namely Shri Pradeep Singh alias Anil the supplier of garments namely Murari Ganpat were recorded. It was found that Guha Sarkar was also a Customs Broker whose license was already revoked but he was working as agent for importers/exporters through different customs brokers including the appellants One Mr. Sumit Aggarwal alias Ranjit Agarwal was found to be the master mind of the offence of availing undue drawback by means of fraudulent exports. Department formed the opinion that M/s Linwood Sales Pvt. Ltd., (IEC No. 0216914418), 12, Sovaram Basak Street, 2nd floor, Kolkata – 700007 was involved in fraudulent export under drawback scheme to avail huge undue drawback amount. The Customs Broker who facilitated the fraudulent export is M/s. SKH Freight Logistics Pvt. Ltd. Show Cause Notice No. DRI/KZU/CFPENQ-01(INT-59)/2017 dated 08.07.2016 was issued by DRI after completion of inquiry into the matter. This SCN has been adjudicated by the Order- in-Original. KOL/ CUS/ COMMISSIONER/ PORT/ 29/ 2018 dated 22.03.2018. Treating the said order as offence report that the license of the appellant was suspended vide order dated 06.07.2018. It is thereafter that the impugned Show Cause Notice No.13/261/2013 dated 27.08.2018 was served upon the appellant proposing that:
(a) CB should be held responsible for contravention of various provisions under the Regulations 1(4), 10(a), 10(b), 10(d), 10(k) 10(n) and 13(12) of Custom Broker Licensing Regulation, 2018 (hereinafter referred as CBLR, 2018) erstwhile Regulation 10, 11(a), 11(b), 11(d), 11(k), 11(n) and 17(9) of CBLR, 2013.
(b) Their CB license should be revoked and part or whole of the security submitted at the time of issue of their license, should be forfeited from them in terms of Regulation 18 of CBLR, 2018.
5. The said proposal has been confirmed vide order in original No.75/2018 dated 30.11.2018.
6. We have heard Shri Vedprakash Batra, ld Consultant for the appellant and Shri Rakesh Kumar, Authorised Representative for the respondent –
7. Consultant for the appellant has submitted that:
The Appellant was granted Custom Broker license by the Commissioner of Customs (General), New Custom House, New Delhi under regulation 7(1) of CBLR, 2013 on 06.09.2013 bearing No. R-46-DEL/CUS/2013(PAN: AASCS5286K) which was valid upto 05.09.2023 to transact business at Delhi Customs. The Appellant was permitted to transact the business in Kolkata Customs also from 27.10.2016. The DRI after receiving the impugned intelligence recorded the statement of Mr. Chander Sekhar Hore having „G‟ Card holder of the appellant. Based thereupon the action has been taken against the appellant. It is submitted that the said statement is neither made the RUD to SCN nor the copy of the same was ever supplied to the appellant. Furthermore it is not coming out from the text of the OIO that under which Act and Section it has been recorded.
8. It is further submitted that M/s. Guha Sarkar & Co. was not in operation and he was working as agent for importers/ exporters through different Customs broker including M/s. SKH Freight Logistics Pvt. Ltd. It is very much clear from the statement of Mr. Pradip Singh that the signature appearing on six invoices cum packing lists of M/s. Linwood Sales Pvt. Ltd., was not his signatures. He does not know about the alleged fraudulent export with reference to shipping bills Nos. 2800712 and 2088715 both dated 14.12.2016. Letter of Authorisation of M/s. Linwood Sales Pvt. Ltd. issue in favour of Shri Souvik Guha Sarkar was not signed by him.”
9. Ld. Counsel further brought to notice that the Appellant closed the operations in Kolkata vide application dated 11.04.2017. The Order- in- Original No. KOL/ CUS/ COMMOSSIONER/ PORT/29/2018 dated 22.03.2018 passed by the Commissioner of Customs (Port), Custom House, Kolkata has been received in the office of the Commissioner of Customs (A&G), New Custom House, New Delhi on 22.03.2018. Copy of said order dated 22.03.2018 is not received by the appellant till date. However, copy got provided during submissions.
10. It was also mentioned that Appellant appeared before the enquiry officer on 31.08.2018 for the personal hearing submitted the detailed reply on 31.08.2018 and requested to allow the cross examination of Sh. Chander Sekhar Hore (G-Card Holder), Sh. Souvik Guva Sarkar and all the exporters who were found engaged in the alleged fraudulent exports. The Deputy Commissioner of Customs i.e. the Inquiry Officer without proper appreciation of the reply of the appellants filed to the SCN and without any proper application of mind seconded the allegations made in the show cause notice.
11. Ld. Counsel finally submitted that there is no evidence against appellant having any role in customs clearance of subject goods or that he had any knowledge about the exporters or that the appellant was aware of impugned exports. Also there is no allegation that CB received any consideration in lieu of alleged overvaluation. With these submissions the order under challenge is prayed to be set aside and appeal is prayed to be allowed.
12. Ld. Authorised Representative while rebutting the above submissions has mentioned that present is a case of apparent fraud committed to fraudulently obtain the illeligible duty drawbacks. The duty of CHA while facilitating exports/imports is quite important. It acquires more relevance in case of such fraudulent transactions. It is impressed upon that the custom procedures are complicated and the CB/CHA occupies a very important position in the Custom House. He is not only the agent of importer/exporter but also the agent of the Department. Hence, he is liable to safeguard the interest of both the importers as well as the customs department. The Department, therefore, poses a lot of trust in the CHA who in turn is responsible to ensure appropriate discharge of such trust.
13. It is impressed upon that in the present case of proven fraud the CHA has not even opted to come forward. Apparently he has allowed his license to be used by someone else at the behest of yet another person. Resultantly, there is no infirmity in the findings in the order under challenge. Ld. Departmental Representative has relied upon the following case laws:-
(i) Decision of Hon‟ble Supreme Court in the case of Commissioner of Customs vs. K.M. Ganatra & Company reported in 2016 (332) E.L.T. 15 (S.C.).
(ii) Decision of this Tribunal in the case of Evershine Customs C & F Private Ltd. vs. Commissioner of Customs reported in 2021 (TIOL) 482 – CESTAT, Delhi.
(iii) The earlier decision of the Tribunal in the case of Millennium Express Cargo Pvt. Ltd. vs. Commissioner of Customs, New Delhi reported as 2017 (346) E.L.T. 471 (Tri.-Del).
With these submissions the order under challenge is prayed to be upheld and the appeal is prayed to be dismissed.
14. Having heard the rival contentions and perusing the entire record, we observe from the offence report dated 22.03.2018 and the Show Cause Notice issued by DRI dated 27.08.2018 that Shri Sumit Agarwal is held as the mastermind of the impugned offence of availing undue draw-back by means of fraudulent export who plotted the whole scheme with the help of other unscrupulous persons. He persuaded Shri Murari Sabu a supplier of readymade garments, on commission basis, for supply of cheap quality of garments which he attempted to export at highly inflated declared value to avail undue drawback. He only arranged for IEC in the name of a non-existent firm, namely, M/s. Linwood Sale Pvt. Ltd. and even changed the identity of its Director from Shri Anil Singh to Shri Pradeep Singh. Fake documents were used to avail the IEC in the name of said M/s. Linwood. It is apparent from the several statements of Souvik Guha Sarkar who himself was a partner of Customs Broker firm M/s. S. Guha Sarkar & Co. and whose license had already been revoked on earlier several occasions. He deposed that Sumit Agarwal managed to obtain IEC of M/s. Linwood Sales Pvt. Ltd. (the impugned exporter) on the basis of fake documents. The modus operandi has also been acknowledged by Director of the exporter Shri Pradeep Singh alias Anil Singh in his statement dated 06.01.2017 that he conspired with Shri Sumit Aggarwal for some monitory consideration. Similar reason for conspiring into the fraudulent exports has been given by Murari Sabu. Not only this, the G Card holder of the present appellant Shri Chandra Shekhar Hore in his statement dated 02.01.2017 has acknowledged that the appellant CB was aware about Souvik Guha Sarkar to be a habitual offender who only used to process the transactions on behalf of the appellant. Mr. Hore despite being the G Card Holder of the appellant but has acknowledged to sign on the blank annexures of the shipping bills and to handover them to said Shri Savik Guha Sarkar.
15. With these apparent and corroboratively admitted facts alongwith the absence of the proprietor of the present appellant Shri Ram Pratap, we have no reason to differ from the said findings of the original adjudicating authority that the appellant has transferred his license to Shri Souvik Guha Sarkar to transact the business in appellant’s name. The said act is highly impermissible in terms of Regulation 1(4) of CBLR, 2018. In the light of absence of appellant to bring evidence to falsify the evidence brought against him or to cross-examine the witnesses who had deposed about using his license and authority to facilitate a fraudulent export transaction, the findings arrived at by the adjudicating authority cannot be faulted.
16. It is the appellant’s own case, through Shri Chandra Shekhar Hore, that the exporter was not known to them. They had never met with him nor ever visited his premises. Apparently no authorization letter in favour of the appellant from M/s. Linwood Sales could be produced on record. Hence, we do not find any infirmity when violation of Regulation 10 (a) of CBLR has been confirmed against the appellant.
17. As already observed above, the business in customs station was transacted though in the name of the appellant but apparently by Shri Souvik Guha Sarkar though the appellant has argued that they never authorised said Shri Sarkar but simultaneously it is an apparent fact that the impugned export transaction was not transacted in person by the Custom Broker despite it was processed in its name. The G card holder of the custom broker has admitted that he was signing the blank papers required to transact the business in customhouse and was handing over the same to M/s. Guha Sarkar. These observations since have not been refuted by the appellant who rather opted to remain absent are sufficient for us to confirm the violation of Regulation 10 (b) of CBLR of 2018 by the appellant.
18. Coming to the allegations confirmed under Regulation 10 (d) of CBLR of 2018, we observe that it is very much on record that one Mr. Sumit Aggarwal was the mastermind behind the fraudulent highly under-valued exports. The G Card Holder of the appellant was aware about Shri Guha Sarkar to transact the fraudulent exports. Since the custom broker is responsible for all acts and means of his employees during their employment as per Regulation 13 (12) of CBLR of 2018, it was mandatory for the appellant to advice the exporter to comply with the provisions of the Customs Act, else to have brought to the notice of the Dy. Commissioner Customs about the non-compliance. But neither the appellant nor his G card holder has ever brought the impugned fraud to the notice of the competent authorities. We have no reason to differ from the findings arrived at against the appellant.
19. With respect to the allegations of violating Regulation 10 (k) and 10 (n) of CBLR of 2018, apparently and admittedly no records have been produced. The onus was upon the appellant CB only to produce the same. He rather opted to remain absent. His agent/his G Card holder has deposed about not maintaining any record with respect to M/s. Linwood Sales Pvt. Ltd. He also has acknowledged to not to ever verify the correctness of IEC and GSTIN of the exporter. It is otherwise on record that the impugned exporting firm were found to be non-existent. The address as was declared as the address of Directors of M/s. Linwood Sales pvt Ltd in the IEC details was found to be the residential address of Directors/Proprietors of other Companies/ Firms. Though it was noticed that an account was opened in the name of M/s. Linwood Sales Pvt. Ltd in February, 2015 but the Directors shown were Shri Krishan Chandra Dey and Shri Dayal Singh. However, the later got substituted by Shri Pradeep Singh alias Anil Singh in August, 2017. The Articles of association of the said company were also found to be forged. No evidence could be brought on record to falsify these findings. In the circumstances, we have no reason to differ from the findings that the appellant has failed to make the appropriate enquiries of their clients prior transacting the business in customhouse station. Hence, the findings confirming the violation of Regulation 10 (k) and 10 (n) are held sustainable.
20. The appellant has challenged the order in question on the ground of it being barred by time. But present is a case of proven fraud of availing false duty draw backs after exporting the cheap/scrap fabric at highly inflated price. Fraud vitiates everything as was observed in the case of Evershine Customs C & F Private Ltd. (supra). The time line otherwise is to avoid the serious repercussions of curtailing the right to carry on the trade or profession by a genuine and diligent custom broker. The object of the Regulations (CBLR) is that it contemplates a timely action but simultaneously contemplates an action against the erring brokers.
21. We draw our support from the decision of this Tribunal in the case of M/s. Swastic Cargo Agency vs. Commissioner of Customs reported as 2023 (2) TMI 677 wherein the decision of Hon’ble High Court of Madras in the case of M/s. Kamakshi Agency vs. Commissioner of Customs, Madras reported in 2001 (129) ELT 29 (Mad.) has been relied upon. It was held by the Hon’ble Madras High Court as follows:-
“…… the grant of licence to act as a Custom House Agent has got a definite purpose and intent. On a reading of the Regulations relating to the grant of licence to act as Custom House Agent, it is seen that while Custom House Agent should be in a position to act as agent for the transaction of any business relating to the entry or departure of conveyance or the import or export of goods at any customs station, he should also ensure that he does not act as an agent for carrying on certain illegal activities of any of the persons, who avail his services as Custom House Agent. In such circumstances, the person playing the role of Custom House Agent has got greater responsibility. The very prescription that one should be conversant with various procedures, including the offences under the Customs Act to act as a Custom House Agent would show that, while acting as Custom House Agent, he should not be a cause for violation of those provisions. A CHA cannot be permitted to misuse his position as a CHA by taking advantage of the access to the department. The grant of licence to a person to act as Custom House Agent is to some extent to assist the department with the various procedures such as scrutinising the various documents to be presented in the course of transaction of business for entry and exit of conveyance or the import or export of the goods. In such circumstances, great confidence is reposed in a Custom House Agent. Any misuse of such position by the Custom House Agent will have far reaching consequences in the transaction of business by the Custom House officials.”
22. The recent decision of this Tribunal in the case of M/s Falcon India (Customs Broker) Vs. Commissioner of Customs, (Airport and General) New Delhi in Customs Appeal No. 50934 of 2021 dated 21.03.2022, it has been observed:
“33. The above decisions lay down that the Customs Broker (or Custom House Agent) is a very important person in the transactions in the Custom House and it is appointed as an accredited broker as per the Regulations and is expected to discharge all its responsibilities under them. Violations even without intent are sufficient to take action against the appellant. While it is true, as has been decided in a number of cases, that the Customs Broker is not expected to do the impossible and is not expected to physically verify the premises of the importer or doubt the documents issued by various Governmental authorities for KYC, it is equally true that the Customs Broker is expected to act with great sense of responsibility and take care of the interests of both the client and the Revenue. It is expected to advise the client to follow the laws and if the client is not complying, it is obligated under the Regulations to report to the Assistant Commissioner or Deputy Commissioner. Fulfilling such obligations is a necessary condition for the CB licence and it cannot be termed as „spying for the department‟ as argued by the appellant before us. It has also been argued that if it spies for the department, it will lose its business. It is evident from the facts of this case, that the appellant was not only aware of the benami Bills of Entry but has actually filed them with the full knowledge that they were benami and they were filed by Anil after a case of undervaluation has been booked by DRI against him. It is afraid of losing business because it has built its business model on violators who, it does not want to upset by reporting to the department. Therefore, we find no reason to show any leniency towards the appellant. At any rate, once violation is noticed, it is not for the Tribunal to interfere with the punishment meted out by the disciplinary authority, viz., the Commissioner unless it shocks our conscience. In this case, it does not.”
23. Relying upon these decisions and the above findings, we have no reason to differ with the decision under challenge revoking the licence of the appellant which was otherwise valid up to 05.09.2023 alongwith forfeitures of the security deposit. Consequent thereto the appeal in hand is hereby dismissed.
[Pronounced in the open Court on 06.11.2023]
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