Case Law Details
Swastik Cargo Agency Vs Commissioner of Customs (CESTAT Delhi)
CESTAT Delhi held that Customs Broker failed to verify the correctness of the documents, violated the obligation as a custom broker under CBLR, 2013, accordingly, revocation of licence and forfeiture of security deposit justified.
Facts- The present appeal has been filed by M/s Swastik Cargo Agency against the Order-in-original dated 18.10.2018 whereby the Commissioner of Customs (Airport & General), New Customs House, New Delhi revoked the Customs Broker License of the appellant for violating the various provisions of Customs Broker License Regulation, 2013 (CBLR in short).
During search, it was found that no office of Customs Broker (CB) was found at the given address. The Partner of CB was contacted on the mobile number. Statement of the Chartered Accountant was recorded under Section 108 of the Customs Act, 1962 who informed that the office address of the CB was under construction for past 1½ years and she occasionally visited his office for meeting her client.
In view of the aforesaid irregularities detected, the CB license was suspended under Regulation 19(1) of CBLR, 2013 by the Commissioner of Customs (General) for violation of Regulation 11(d), 11(e), 11(n) and 11(o) of CBLR, 2013.
Conclusion- Observed all the three exporters, have been found to be bogus and non-existent firms, fraudulently created so as to claim undue drawback benefits. As a result, neither the Partners of the CB nor their employees ever met any of the exporters who were actually farmers and have no knowledge about there being exporters. It is also an admitted position that the export assignments and the KYC documents were provided and the authorization was also from the said freight forwarder. In the circumstances, there is no scope for the CB to obtain authorization from the fictitious and non-existent exporters.
This being a case of facilitating the fraudulent exports carried out and it being duly proved during the inquiry proceedings that the exporters were non-existent, CB has failed to verify the correctness of the documents, violated the obligation as a custom broker under CBLR, 2013. Therefore, the Adjudicating Authority had rightly directed for forfeiture of the security deposit of Rs. 5 lakhs submitted by CB.
FULL TEXT OF THE CESTAT DELHI ORDER
The present appeal has been filed by M/s Swastik Cargo Agency against the Order-in-original No. 57/MK/Revocation Policy2018 dated 18.10.2018 whereby the Commissioner of Customs (Airport & General), New Customs House, New Delhi revoked the Customs Broker License of the appellant for violating the various provisions of Customs Broker License Regulation, 2013 (CBLR in short).
2. Brief facts of the case are that M/s Swastik Cargo Agency (appellant herein) is an importer of CB license No. R-18/DEL/CUS/2017 valid upto 27.01.2027 issued by the Commissioner of Customs (General), New Delhi.
3. The Assistant Commissioner (SIIB), Noida Customs vide his letter No. VIII(30)CUS/ICD-DD/SIIB/Swastik/37/2017/8687-88 dated 27.09.2017 informed that a case of fraudulent export against M/s Shagun Overseas, M/s Fine Art Traders and M/s S. K. Exports under various shipping bills is being investigated under the provisions of the Customs Act, 1962. The shipping bills in all these cases were filed through CHA – M/s Swastik Cargo Agency, the appellant. Under search authorisation No. 341/2017 dated 21.09.2017 issued by the Assistant Commissioner of Customs (Prev.), New Customs House, New Delhi search was conducted at the office address, i.e. B-2/173, Safdarjung Enclave, New Delhi. That, no office of Customs Broker (CB) was found at the given address. The Partner of CB, namely Smt. Madhulika Rastogi was contacted on the mobile number given by Sh. Mohit Kapur, a resident of 2nd Floor of the same premises. However, she refused to divulge her residential address and told the search team to reach her Chartered Accountant‟s Office in Bhikaji Cama Place, New Delhi. Statement of Sh. Rajesh Kumar, Chartered Accountant was recorded under Section 108 of the Customs Act, 1962 who informed that the office address of the CB was under construction for past 11/2 years and she occasionally visited his office for meeting her client. Sh. Jai Kumar Sharma, G-Card holder of CB in his statement under Section 108 of the Customs Act, 1962 admitted of not carrying out due diligence in verification of documents received through one forwarder.
4. In view of the aforesaid irregularities detected, the CB license was suspended under Regulation 19(1) of CBLR, 2013 vide Order-in-Original No. 63(NK/Suspension/Policy/2017 dated 05.10.2017 by the Commissioner of Customs (General) for violation of Regulation 11(d), 11(e), 11(n) and 11(o) of CBLR, 2013. Soon thereafter, the Commissioner of Customs considered the matter under Regulation 19(2) of CBLR, 2013 and finding that no concrete evidence/ specific charges or any other role of the CB in the said offence was brought on record, revoked the suspension of CB license vide Order-in-Original No. 66/KB/Revocation of suspension/Policy/2017 dated 27.10.2017, specifically stating that if new facts emerged or established at a later stage, action in terms of provisions of CBLR, 2013 may be taken against the said CB.
5. The summons dated 28.09.2017, 22.11.2017, 12.12.2017 and 18.12.2017 were also issued to Ms. Nidhi Rastogi, F-Card holder, however, she failed to appear in terms of the summons. Summons were also issued to Smt. Madhulika Rastogi on 22.11.2017, 12.12.2017 and 18.12.2017, however, she appeared on 26.12.2017 and gave her statement, inter-alia stating that:-
i. Ms. Nidhi Rastogi, F-Card holder of M/s Swastik Cargo Agency, who was her daughter, was living in Atlanta, United States of America for the past 10 years;
ii. She comes to India for about 15 days every year;
iii. She last visited India at the time of filing of application for renewal;
iv. Authorisation letter issued by Ms. Nidhi Rastogi, as produced by Sh. Jai Kumar Sharma, G-Card holder of M/s Swastik Cargo Agency was given on pre-signed letter head of the firm.
v. Ms. Nidhi Rastogi, F-Card holder her daughter, was OCT (Overseas Citizen of India) card holder;
vi. She concurred with the facts stated in the statement dt. 21.09.2017 of Sh. Rajesh Kumar, her CA export that she had not met any of the importer or exporter either in the office of Sh. Rajesh Kumar, her CA or at anywhere else;
vii. Customs work was looked after complete by Sh. Jai Kumar Sharma and Sh. Ashok Bhutani, who were G-card holder of Delhi Customs.
viii. Digital Signature Device (electronic device „Dongle‟) issued to Nidhi Rastogi by the Customs remained with Jai Kumar Sharma;
ix. During re-construction phase of her office address, customs related work was carried out by Sh. Jai Kumar Sharma and Ashok Bhutani from their respective homes;
x. They merely provided shipping bills/ bills of entry detail in the office of Sh. Rajesh Kumar, C.A.;
xi. There was no office of M/s Swastik Cargo Agency at B2/173, Safdarjung Enclave, New Delhi-29 from May 2016 onwards till date;
xii. KYC documents were verified by Jai Kumar Sharma and kept in his custody;
xiii. Work of exporters M/s Shagun Overseas, M/s Fine Art Traders and M/s S. K. Exports was brought by Jai Kumar Sharma but no payment was received for above work by the firm;
xiv. Number of shipping bills filed at Dadri Port by M/s Swastik Cargo Agency, cleared for export and payment received in lieu of them can only be provided by Jai Kumar Sharma.
xv. She had carefully gone through the statements of Jai Kumar Sharma tendered under Section 108 of the Customs Act, 1962 on 30.11.2017 and 05.12.2017 and was in complete agreement with all the facts stated therein.
6. Statement of G-Card holder of the Customs Broker, Sh. Jai Kumar Sharma was recorded on 15.09.2017 under Section 108 of the Customs Act, 1962 wherein, he inter alia stated that M/s Swastik Cargo Agency is a partnership firm with Smt. Madhulika Rastogi and Ms. Nidhi Rastogi as the partners; that M/s Swastik Cargo Agency is registered as CHA since March, 2017, in New Customs House New Delhi and the F-Card holder is Ms. Nidhi Rastogi; that M/s Swastik Cargo Agency got registered in Customs Commissionerate, Noida in June, 2017; that he was working as G-card in M/s Swastik Cargo Agency, having registration No. R-18/2017 issued from New Customs House, New Delhi with ID No. 47/2004 valid upto 27.01.2027; that he attended work related to customs clearance, filing of papers such as Bill of entry, shipping bill, KYC updation with the Customs authorities and all other work as required by exporters and importers related to Customs Department; that before processing any paper such as filing of shipping bill, bill of entry etc. of the exporters/ importers in the Customs department they obtained the KYC documents of the exporter/ importer; that these documents include the copies of PAN card, IEC Code, AD Code duly issued by the bank, GST registration copy, etc.; that he was aware that they have filed shipping bills in respect of M/s Shagun Overseas, M/s S. K. Exports, M/s Fine Art Traders, all of Moradabad and M/s R. K. International, Hathras; that business of all the four exporters was received by them from forwarding agency M/s Sahibji Freight Movers, Building No. 201, IInd floor, Nagar Complex, Hasanpur Village, Patparganj, New Delhi whose proprietor was Sh. Abhishek Saxena; that the KYC documents were also provided by Sh. Abhishek Saxena to them; that the shipping bills of all the four exporters were filed on the basis of the copy of invoice, packing list and other documents provided by Sh. Abhishek Saexna; that the goods were never inspected/ examined by the CHA when the goods were sent by the exporter nor the goods were inspected/ examined at the time of receipt at the port for export; that the goods were directly sent by the exporters to the port; that they facilitate the entry of the goods in the port and assist the exporter in the Customs procedures for exporting the goods; on being asked whether they were monitoring the export process at Startrack Port, ICD-Dadri in respect of above said exporter, it was inter alia stated that the work at Dadri was being supervised by forwarding agent Sahib Ji Freight Movers and his employee Sh. Harish Chandra who applied for issuance of G-Card for ICD-Dadri on the license of M/s Swastik Cargo Agency, however, the G-Card was not issued to Sh. Harish; that he used to go to Dadri whenever consignment of M/s S. K. Exports and M/s Fine Art Traders; on being asked whether they were aware about the goods being exported under the shipping bills filed by the above said exporter, it was interalia stated that as already stated they filed papers on the basis of the documents received from Sh. Abhishek; that carting and other work was supervised by Sh. Abhishek. If required, he went for examination and other customs work; that the payment in respect of the paper filed by the above said exporter was to be received from M/s Sahib Ji Freight Movers, as they were not directly in touch with the exporters.
7. Further, statement of Sh. Jai Kumar Sharma, G-Card holder wasrecorded on 30.11.2017 wherein he submitted that he was not authorised to work at Noida Customs, in spite of this fact, he had filed shipping bills at Noida Customs and it is under knowledge of the Customs Broker. He also accepted that the office of the Customs Broker has not been working at B-2/173, Safdarjung Enclave, New Delhi since the construction work at this place had started i.e. from February, 2016 onwards. On being shown photographs (taken at the time of visit of the premises by officer on 16.11.2017) of the declared premises, he inter alia stated that the said premises appeared to be new construction on demolition of old building. He further admitted that during the construction of declared premises, the work were being done at their home and they did not give any intimation to the department about the change of address as they were not aware about the rules and regulations. He further admitted that they never verified the documents supplied by Sh. Abhishek Saxena at their own level and they simply filed the paper relying upon the forwarder M/s Sahib Ji Freight Movers.
8. The officers of Noida Customs Commissionerate visited the declared address of the three exporters, namely M/s Shagun Overseas, M/s Fine Art Traders, M/s S. K. Exports. However, the abovesaid exporters were found nonexistent at their declared address.
9. It was also revealed that the office building at B-2/173, Safdarjung Enclave, New Delhi was being used only as a P.O. Box address as the Caretaker Sh. Ajai Kumar Saket informed that he used to receive the dak meant for Smt. Madhulika Rastogi and Ms. Nidhi Rastogi and the same was collected through someone on behalf of Smt. Madhulika Rastogi. That neither Smt. Madhulika Rastogi nor Ms. Nidhi Rastogi were residing at the said address nor any office of CB was operating from the said building.
10. The matter was investigated and the investigation report incorporating additional facts was sent by the Commissioner of Customs, Noida vide their letter dt. 25.01.2018 and the same was received in the office of the Commissioner of Customs (Airport & General), New Customs House, New Delhi on 09.02.2018. As per the said report, three cases were booked against the exporters, namely M/s Shagun Overseas, M/s Fine Art Traders and M/s S. K. Exports. The shipping bills of these exporters were filed by the CB, the appellant herein. Over 90% of the declared consignment was found short in respect to the shipping bills filed by the CB for the aforesaid three exporters and over Rs. 70 lakh drawback was claimed by the exporters in the shipping bills filed through CB herein.
11. The aforesaid report was considered in extenso by the Commissioner of Customs and vide order dated 15.02.2018, he suspended the Custom Broker License with immediate effect, granting opportunity under regulation 19(2) of CBLR,2013 to the CB or their authorised representative to appear for post decisional hearing on 20.02.2018. Accordingly, the case was examined under regulation 19(2) and after examining the statements recorded under section 108 of the Customs Act and the submissions made by the CB, order dated 12.03.2018 was passed whereby the order of suspension dated 15.02.2018 was confirmed.
12. From the investigation, it was clear that CB has failed to fulfil the obligation cast upon him under the CBLR, 2013. Accordingly, a show cause notice No. 12/MK/POLICY/2018 dated 07.05.2018 was issued to the CB. The Commissioner of Customs in exercise of his powers under Regulation 18 and 20(7) of CBLR, 2013 vide Order No. 57/MK/Revocation/Policy/2018 dated 18.10.2018 considered the entire record including the statements and agreed with the findings of the enquiry officer that CB have violated the provisions of the regulation, revoked the Customs Broker License, independent and without prejudice to the earlier Order-in-Original dated 12.03.2018 whereby the CB license was suspended and the security deposit of Rs. 5 lakhs was ordered to be forfeited.
13. Being aggrieved by the aforesaid Order-in-Original, the appellant has filed the instant appeal before this Tribunal. The appellant has laid much stress that two show cause notices could not have been issued on the same facts and the license cannot be suspended and revoked twice on the same issues and facts. Accordingly to him, the show cause notice dt. 07.05.2018 was beyond the mandatory period of 90 days. He relied on the Circular No. 09/2010 dated 08.04.2010 to say that the offence report has to be submitted within thirty days of detection of the offence in terms of para 7.2 of the Circular. On merits, he pleaded that there is no evidence to show that he was aware about the ill intention of the exporters and there is no mens rea on their part to be benefited. Rather he acted bonafide as all the KYC documents were obtained from the exporters, which was duly submitted. He also denied that the exporters were fictitious firms as the same was verified from the ROC and DGFT. There is no requirement on physical verification of the premises or the documents made available to him. Accordingly to him, there is no evidence that he ill advised his clients. The learned Counsel for the appellant relied on various judgements to say that no knowledge of irregularity in export consignments can be attributed on him as he had no mens-rea. Also that he is not required to physically verify the premises or the documents whether they are genuine or not. The cases referred to (i) Kunal Travels (Cargo) vs. Commissioner of Customs (I&G), IGI Airport, New Delhi -2017 (354) ELT 0447 (Del.), (ii) Krishna Shipping Agency vs. Commissioner of Customs (Airport & Administration) Kolkata 2017 (348) ELT 0502 (Tri. Cal.), (iii) APS Freight & Travels Pvt. Ltd., vs. Commissioner of Customs (General) New Delhi -2016 (344) ELT 602 (Tri. Del.), (iv) Baraskar Brothers vs. Commissioner of Customs (General), Mumbai -2013 (294) ELT 0415 (Tri. Bom .), (v) G. M. Enterprises vs. Commissioner of Customs (Exports), Nhava Sheva -2010 (262) ELT 796, (vi) Adani Wilmar Ltd., vs. Commissioner of Customs (Prev.) Jamnagar -2015 (330) ELT 549 (vii) V. Esakia Pillai vs. Commissioner of Customs, Chennai -2001 (138) ELT 802, (viii) Him Logistics Pvt. Ltd., vs. Commissioner of Customs, New Delhi -2016 (338) ELT 725 (Tri. Del.) (ix) Commissioner of Customs vs. Him Logistics Pvt. Ltd., -2017 (348) ELT 625 (Del.) are of no avail to the appellant as the same are distinguishable with reference to the facts of the present case.
14. As per contra, learned Authorised Representative submitted that the show cause notice is not time barred as the limitation to issue the show cause notice starts from the date of receipt of the offence report and which in the present case is proper. According to him, the license in the present case was virtually sublet to the G-Card holder in India who connived with the forwarder Sh. Abhishek Saxena of M/s Sahid Ji Freight Movers. He emphasised that authorisation was illegal as the export documents were filed without receiving the same from the authorised representative of the exporters. The question of advising their client as per the provisions of CBLR, 2013 does not arise as the exporter was not known to the CB and they were found to be non-existent. The CB having failed to discharge his duties as a custom broker with utmost speed and efficiency and without ensuring due diligence with the exporter has violated the obligations and therefore the license have been validly revoked under CBLR, 2013. Ld. Authorised Representative also pleaded that the CB connived with the freight forwarders for fraudulent export from fictitious exporters inasmuch as they were farmers so as to claim drawback duty and relied on the principle that forgery nullifies everything and referred to the decision of the Apex Court in the case of Aafloat Textile -2009 (235) ELT 587 and Commissioner of Customs vs. Candid Enterprises – 2001 (130) ELT 404.
15. We have heard the learned Counsel for the appellant and the Revenue and have perused the records.
16. The CB had raised an issue that Inquiry Officer had not granted him the opportunity of cross examination. The Commissioner of Customs vide OIO dated 18.10.2018 agreed with the Enquiry Officer that as the SCN was issued on the basis of the statements of the partner of CB and his employee and the same have not been retracted, there is no justification in providing the opportunity of cross examination. The WP(C) No. 6571 of 2018 filed by CB before the High Court of Delhi challenging the show cause notice was disposed of vide order dated 05.12.2018 granting liberty to avail the appellate remedy and seek appropriate order for cross-examination of the witness. In terms of the said order, the appellant made an application before this Tribunal to remand the matter on the issue of cross examination, however subsequently, the said application was withdrawn by the appellant. So nothing survives on the plea of cross examination.
17. In view of the controversy in the present case, the following questions of law arises:
(i) Whether show cause notice is beyond the period of limitation under CBLR, 2013?
(ii) Whether the present case is hit by the principle of double jeopardy on issuance of second suspension order?
(iii) Whether the Custom Broker has violated the provisions of Regulation 11 (a), (d), (m), (n) (o) and 17 (9) of CBLR, 2013?
18. The learned counsel for the appellant has strenuously raised the issue of limitation and that revenue could not have issued two show cause notices on same set of facts. According to him, the revenue having revoked the suspension of the license did not issue the SCN under Regulation 20 of CBLR, 2013 and thereafter once again initiated the process so as to safeguard the limitation period which is violative of Article 20(2) of the Constitution of India. The learned counsel has also relied on the Circular No. 09/2010 dated 8.4.2010, particularly with reference to para 7.2 which states that the offence report has to be submitted within 30 days of detection of the offence. Para 7.2 reads as under:
“7.2 Further, Board has also prescribed certain time limits in cases warranting immediate suspension under Regulation 20(2). Accordingly, the investigating authority shall furnish its report to the Commissioner of Customs who had issued the CHA license (Licensing authority), within thirty days of the detection of an offence.”
19. The ld. Counsel for the appellant further argued that the offence was detected on 12.09.2017 when the case was booked against the exporters but the offence report was issued on 25.01.2018 after a lapse of more than four months. Before adverting to consider the above argument, it is necessary to quote the provisions of Regulations 18, 19 and 20 of CBLR 2013:
“18. Revocation of licence or imposition of penalty. -The Commissioner of Customs may, subject to the provisions of regulation 20, revoke the licence of a Customs Broker and order for forfeiture of part or whole of security, or impose penalty not exceeding fifty thousand rupees on a Customs 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.
19. Suspension of licence. (1) Notwithstanding anything contained in regulation 18, the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the licence of a Customs Broker where an enquiry against such agent is pending or contemplated.
(2) Where a licence is suspended under sub-regulation (1), the Commissioner of Customs shall, within fifteen days from the date of such suspension, give an opportunity of hearing to the Customs Broker whose licence is suspended and may pass such order as he deems fit either revoking the suspension or continuing it, as the case may be, within fifteen days from the date of hearing granted to the Customs Broker :
Provided that in case the Commissioner of Customs passes an order for continuing the suspension, the further procedure thereafter shall be as provided in regulation 20.
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 of 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 time limit 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 oral 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 of 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.”
20. That same provisions as provided in Regulation, 14, 16 and 17 of CBLR, 2018 have been considered in a recent decision in the case of ICS Cargo Vs Commissioner of Customs (General), New Delhi, Customs Appeal No. 52789/2019 vide Final Order No. 50016/2023 dated 06.01.2023 where this Tribunal has taken the view that the Regulations having statutory force are mandatory in nature. The Regulations contemplate timely action as it results in serious repercussions of curtailing the right to carry on any trade or profession as guaranteed by the Constitution of India. The relevant paras of the above noted judgement are quoted:
“6.1 Upon perusal of the above regulation, it can be seen that an independent right has been vested with the Commissioner of Customs to initiate action de hors the enquiry under Customs Broker License Regulations and the Customs Act against the Customs Broker (CB) licensed in his jurisdiction. The regulation does not only contemplate action against the erring Brokers but also contemplates a timely action. Hence, the action which has to be initiated against the erring brokers, the same has to be in strict compliance with the said provision as laid down by this Court in the case of M/s Kamatchi Agencies vs. Commissioner of Customs, Chennai reported as 2001 (129) ELT 29 (Mad.)., the law of limitation is common to both the parties. The provision not only enables the Commissioner to levy penalty, but also empowers him to revoke the license of Customs Broker, which is an extreme step curtailing the right to carry on any trade or profession as guaranteed by the Constitution of India. To our opinion, the object behind such a provision can only imply the following:
(a) the truth must be culled out at the earliest point in the interest of not only the Customs Broker but of the department also,
(b) that such unlawful activities must be curbed at the earliest point by revoking the license,
(c) unless a time limit is prescribed, action would not be initiated.
6.2 We also opine that the purpose for which such time limit has been prescribed is to curb the smuggling of goods and associated illegal activities at the earliest and in the result to cancel the licenses of the brokers if they are involved and to impose penalty. Another purpose is that the proceedings which affect the lives, properties and business of Customs Broker/CHA should be decided without wastage of time out without the Customs Broker/ CHA being at the whims of the departmental authorities. The interpretation of a statute must always be to give a logical meaning to the object of the legislation and the aim must be to implement the provisions rather than to defect it.”
21. In the present case, the Assistant Commissioner, (SIIB) Noida vide letter dated 27.09.2017 intimated the Assistant Commissioner, Policy, New Delhi, that a case of fraudulent export against M/s Shagun Overseas, M/s Fine Arts Traders, and M/s S. K. Exports is being investigated under the provisions of the Customs Act, 1962. The shipping bills in all these cases were filed through the appellant and on search at his office address, no office of the customs broker was found there. The partner of the CB Smt. Madhulika Rastogi was contacted, but she refused to divulge her residence address and sent the search party to her CA‟s office. In view of serious irregularities detected in the export consignment of all the three exporters, request was made for taking appropriate action under CBLR, 2013.
22. The Commissioner of Customs, (General) considered the case under Regulation 19 (1) of CBLR, 2013. In the OIO No. 63 dated 05.10.2017 he observed that further enquiries against the CB are pending, however, as immediate action is warranted to prevent misuse of custom broker license which was valid up to 27.01.2027, suspended the said license. The said order was passed without prejudice to any other action that may be taken against the CB or any other person or firms under the provisions of Customs Act, 1962 and Rules or Regulations framed thereunder. The case was considered by the Commissioner Customs vide OIO No 66 dated 27.10.2017 and in accordance with the provisions of Regulation 19(2) he revoked the order of suspension holding that no concrete evidence against the said CB has been brought on record to establish the contravention of provisions of CBLR, 2013, however, he was pleased to observe that, “on later stage during the investigations, if new facts emerges/ established, actions in terms of provisions of CBLR, 2013”.
23. In this context the argument of the learned counsel for the appellant that after the passing of the aforesaid order of revocation of suspension no further proceedings could have been initiated is not supported by the scheme of the Regulations inasmuch as Regulation 19 of CBLR, 2013, which deals with suspension of licence is independent of the order which may be passed under Regulation 18 read with Regulation 20 which provides for revocation of license or imposition of penalty and procedure thereof. Moreover, Regulation 19 starts with a non-obstante clause, i.e. “Notwithstanding anything contained in regulation 18”, therefore there is no bar for an action under Regulation 19. The law stands settled by the decision of this Tribunal which was concerned with the provisions of Regulation 14, 16 & 17 o CBLR, 2018 in the case of Green View Logistics in Customs Appeal No. 50749 of 2021, judgement dated 3.9.2021, wherein it has been observed:
“10. This submission advanced by learned Counsel for the Appellant cannot be accepted. Proceedings for revocation of license contemplated under regulations 14 and 17 are independent of the proceedings for suspension of the license under regulation 16. Merely because the Commissioner of Customs decides not to continue with the suspension order after hearing the Customs Broker, would not divest the Commissioner of Customs of his power to proceed under regulations 14 and 17 for revocation of the license. In fact regulations 14 and 17 can be resorted to by the Commissioner without even suspending the license of a Customs Broker and a Customs Broker cannot be placed in a better position if the license is suspended under regulation 16(1) but such suspension is not continued under regulation 16(2). Regulation 16 (2) only provides that if the Commissioner decides to continue with the suspension order, then in that case he would have to thereafter follow the procedure as contemplated under regulation 17.
11. The second submission advanced by the learned Counsel for the Appellant cannot also be accepted. The power exercised by the Commissioner under regulation 16 (2) is summary in nature. An order under regulation 16(2) to either revoke the suspension or continue with it is passed after giving an opportunity of hearing to the Customs Broker. On the other hand, the procedure under regulation 17 contemplates a full fledged inquiry. A notice has to be issued to a Customs Brokers stating the grounds on which it is proposed to revoke the license or impose penalty and a Customs Broker has to submit a reply to the Deputy Commissioner of Customs nominated by the Commissioner to submit statement of defense and also to specify whether the Customs Broker desires to be heard in person. After the submission of the written statement, the Deputy Commissioner has to inquire into the grounds which are not admitted by the Customs Broker and for this purpose, the Deputy Commissioner has to consider such documentary evidence and take such oral 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 Customs Brokers, for the purpose of ascertaining the correct position. The Customs Broker is also entitled to cross examine the persons examined and at the conclusion of the inquiry, the Deputy Commissioner has to prepare a report of the inquiry and after recording his findings thereon submit it to the Commissioner. The Commissioner thereafter has to furnish to the Customs Broker a copy of the report of the Deputy Commissioner and require the Customs Broker to submit within the specified period any representation that he may wish to make against the said report. It is on a consideration of the report submitted by the Deputy Commissioner and the representation made by the Customs Broker that the Commissioner is required to pass an order either revoking the suspension of the license or revoking the license. In this view of the matter, the findings recorded under regulation 16(2) cannot in any manner have any bearing on the findings recorded under regulation 17”.
24. Further, in the case of ICS Cargo (referred above) this Tribunal held that both the provisions relating to suspension & revocation of license can be invoked independently. The relevant paras of the said judgment are quoted below:-
“6.4 Thus we hold that the time limit prescribed in Regulation 17(1) has to be understood in the context of the strict time schedule prescribed in various portions of the Regulations. Regulations 17(1) prescribes a time limit of 90 days from the date of receipt of offence report within which action is to be initiated i.e. for issuance of Show Cause Notice to Customs Broker who has to file his defense within 30 days of receipt of said Show Cause Notice.
7.4 Regulation 16 itself provides that such immediate action can be taken either during pendency of the enquiry against CHA or even when enquiry is contemplated. It means that action taken either under Regulation 16(1) or under 16(2) is not a bar for inquiry against CHA to continue or to be initiated, irrespective of the order is of revocation of suspension or of continuation of suspension. The pending enquiry has to proceed as per Regulation 17 and enquiry which is contemplated has to begun as per Regulation 14 followed by Regulation 17. Hence, action under Regulations 14 and 17 is independent of order passed under Regulation 16 and vice versa. Both can be invoked independently. Thus, it is clear that action under regulation 16 can be taken during the pendency of proceedings initiated under regulation 14 to revoke the license of the Customs Broker. It becomes abundantly clear that any order whether of continuation of suspension of CB‟s Lincese or of revocation thereof is not a bar for the inquiry as has already been initiated under Regulation 14 following the procedure prescribed under Regulation 17 of CBLR, 2018. Hence, the contention of appellant is not sustainable and we hold that irrespective of the order of revocation of suspension of appellants license the proceedings for revocation under Regulation 17 of CBLR, 2018 thereof have rightly been continued against him. With these observations the Issue No. 2 is decided in negative holding that the findings recorded under Regulation 16(2) of CBLR, 2018 cannot in any manner have any bearing on the findings recorded under Regulation 17. We draw our support from the decision of the Principal Bench of this Tribunal in the case of M/s. Green View Logistics Vs. Commissioner, Customs (Airport & General)-New Delhi reported as 2021 (9) TMI 258 – CESTAT NEW DELHI.”
25. In the present case, it is evident that after further investigation in accordance with the provisions of Regulation 20 of CBLR 2013, the Commissioner of Customs, Noida, vide letter dated 25.01.18 sent the Offence Report dated 19.01 .2018 which was received by the Commissioner of Customs, New Delhi on 09.02.2018. The subject of the said report, specifically stated, “Role of Customs Broker, Swastik Cargo Agency in fraudulent exports and investigations against M/s Shagun overseas, M/s Fine Art Traders and M/s S. K. Exports.” After the receipt of the Offence Report on 09.02.2018, the show cause notice issued on 07.05.2018, was issued within the time limit of 90 days as prescribed under Regulation 20(1) and hence there is no delay and the show cause notice is not barred by limitation.
26. The plea of issuing two SCNs or that the license cannot be suspended or revoked twice on same issues does not survive as the action under Regulation 19 has to be taken immediately to restrain the CB from functioning. On receipt of the information on 27.09.2017, the order of suspension was passed immediately on 05.10.2017. Following the provisions of Regulation 19(2), CBLR, 2013 after granting an opportunity of hearing to the CB, further order with regard to revocation of suspension was passed, however specific liberty was granted to initiate action under CBLR, 2013 if new facts are established. On receipt of the offence report on 09.02.2018, immediate action was required to restrain the CB from indulging in any further activity which could be detrimental to the interest of the Revenue and therefore an order of suspension of license was passed on 15.02.2018 which was then confirmed on 12.03.2018 under Regulation 19(2) CBLR, 2013. We are of the view that order of suspension under Regulation 19 of CBLR, 2013 is required to be issued immediately to restrain him from functioning on the basis of that license and is in the nature of an interim measure. The dictionary meaning of the word „suspension‟ as per the Cambridge Dictionary is the act of stopping something happening, operating etc. for a period of time, meaning thereby that it is a temporary stoppage. In the present case, the matter was pending under enquiry and liberty was granted to proceed once additional facts emerge. So, it is not a case of double jeopardy. The final order revoking the license was passed only after following due process of law in terms of Regulation 20 of CBLR, 2013.
27. That Regulation 2(c) defines “Customs Broker” as a person licensed under these regulations to act as agent for the transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any Customs Station. Regulation 3 places an embargo stating that no person shall carry on business as a Customs Broker relating to the entry or departure of a conveyance or the import or export of goods at any Customs Station unless such person holds a license granted under these regulations. Regulation 11 provides for various obligations of the CB.
28. Before adverting to the specific violations of CBLR, 2013, it is necessary to appreciate the role or the position of the CHA / CB. The Apex Court in the case of Commissioner of customs Vs K. M. Ganatra & Co. reported in 2016 (332) ELT 15 (SC), placed reliance on the decision in Noble Agency Vs. Commissioner of Customs, Mumbai -2002 (142) ELT 84 (Tri. Mum.) wherein a Division Bench of the CEGAT, West Zonal Bench, Mumbai has observed:-
“The CHA occupies a very important position in the Customs House. The Customs procedures are complicated. The importers have to deal with a multiplicity of agencies viz. carriers, custodians like BPT as well as the Customs. The importer would find it impossible to clear his goods through these agencies without wasting valuable energy and time. The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/ exporters as well as by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed. Regulation 14 of the CHA Licensing Regulations lists out obligations of the CHA. Any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulations….”
We approve the aforesaid observations of the CEGAT, West Zonal Bench, Mumbai and unhesitatingly hold that this misconduct has to be seriously viewed.”
29. Similarly, the view taken by the High Court of Madras, in Sri Kamakshi Agency Vs Commissioner of Customs, Madras -2001 (129) ELT 29 it has been held that:
“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.”
30. 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.”
31. Keeping in view the aforesaid decision as well as the facts & findings of the present case, it stands proved that the CB has not discharged the obligations cast on him under the Regulation as the CB fully connived with the freight forwarder and therefore never verified the existence of the exporters or the documents submitted in this regard. The facts of the present case reflects that it is virtually a case of subletting the license as practically the entire transaction of export was controlled & managed by the Proprietor of the freight forwarder. Thus, any contravention of the obligations on the CB under the Regulations even without any intent would be sufficient to proceed for imposition of punishment as provided in the Regulations, M. Ganatra & Co. (supra).
32. That Regulation 11 of CBLR, 2013 enumerates the obligations of Customs Broker. The specific violations with reference to Regulation 11 are as follows:
11. Obligations of Customs Broker. A Customs Broker shall-
“(i) Regulation 11 (a) reads as:
(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 of Customs, as the case may be;
We have gone through the inquiry report as also the findings of the Adjudicating Authority and it is crystal clear that the F-Card holder of the CB, namely Ms. Nidhi Rastogi lives in Atlanta (USA) for the past ten years and comes to India only for fifteen days every year. The authorization letter issued by her, as produced by Sh. Jai Kumar Sharma, G-Card holder of the appellant was given on pre-signed letter head of the firm. The Digital Signature Device issued to Ms. Nidhi Rastogi by the Customs remained with Sh. Jai Kumar Sharma who carried out all the custom related work of the firm. That all the three exporters, M/s Shagun Overseas, M/s Fine Art Traders and M/s S. K. Exports have been found to be bogus and non-existent firms, fraudulently created so as to claim undue drawback benefits. As a result, neither the Partners of the CB nor their employees ever met any of the exporters who were actually farmers and have no knowledge about there being exporters. It is also an admitted position that the export assignments and the KYC documents were provided by Sh. Abhishek Saxena, Prop. of M/s Sahib Ji Freight Movers and the authorization was also from the said freight forwarder. In the circumstances, there is no scope for the CB to obtain authorization from the fictitious and non-existent exporters.
Reliance is placed on the decision of this Tribunal in Millenium Express Cargo Pvt. Ltd., vs. Commissioner of Customs, New Delhi -2017 (346) ELT 471, where it has been observed that filing of Bill of Entry in the name of a non-existent importer is a grave offence on the part of CHA and it becomes graver when it turn out that CHA did not make minimum efforts to verify the genuineness of the importer and its address. Similarly, in the recent decision of this Tribunal in M/s Falcon India (supra), this Tribunal noted that the appellant in that case did not obtain the authorization from the Proprietor of M/s Popular Metal Industries but filed Bills of Entry using his IEC and obtained the documents from some Anil and filed the Bills of Entry knowing that he was not IEC holder. It was held that it is not a case of carelessness but a case of deliberately filing benami Bills of Entry. The Adjudicating Authority rightly concluded that CB has failed to fulfill the obligation in terms of Regulation 11(a) of CBLR, 2013.
(ii) Regulation 11 (d) reads as:
(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;
It is an admitted position that neither Smt. Madhulika Rastogi nor Ms. Nidhi Rastogi ever met any of the exporters. In fact, Sh. Jai Kumar Sharma expressed his inability to locate the exporters at their declared premises who were found to be non-existent. Therefore, the question of advising their clients about the provisions of the Act, the Rules or the Regulations does not arise. In the circumstances, it is a clear case of contravention of Regulation 11(d) of CBLR, 2013.
(iii) Regulation 11(m) reads as:
(m) discharge his duties as a Customs Broker with utmost speed and efficiency and without any delay;
The Customs Broker had not discharged his duties and responsibilities in accordance with the regulations as they were not at all active in export of the said consignments and the active role was played by Sh. Abhishek Saxena, Prop. of M/s Sahib Ji Freight Movers. As is seen from the order of the Adjudicating Authority the F-Card holder had not responded to the various summons sent to her nor did she join the investigation. Thus the CB had not discharged his duties & responsibilities and thereby violated the provisions of Regulation 11(m) of CBLR, 2013.
(iv) Regulation 11(n) reads as:
(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; and
It is an admitted position that neither the Partners nor their employees ever met any of the exporters, who were found to be non-existent at their given addresses. None of them verified the correctness of KYC documents, the entire export assignment were controlled by the freight forwarders M/s Sahib Ji Freight Movers through its Proprietor as they had actually provided the export assignment and also the KYC documents. The CB completely failed to contact or verify the identity and functioning of their client which were found to be fictitious.
The Calcutta High Court in Welcome Air Express Private Ltd., vs. Commissioner of Customs (Airport & Administration) 2022 (380) ELT 544 where a forwarding agent approached the CB to export goods and the authorization letter was not received directly from the exporter but from the freight forwarder, upheld the punishment for revocation of the CHA license.
The CB has failed to comply with the provisions of Regulation 11(n) of CBLR, 2013.
(v) Regulation 11(o) reads as:
(o) inform any change of postal address, telephone number, email etc. to the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be within one month of such change.
In the present case, it is also an admitted position that CB was not working from their declared office premises since May, 2016 and neither the Partners nor the employees were available there. The functional office address was not informed to the Department and even when Smt. Madhulika Rastogi was contacted on the mobile, she refrained from giving her address. There was deliberate attempt by the CB to hide the actual address from where they were operating from the Department. Thus, CB violated the provisions of Regulation 11(o) of CBLR, 2013.
(iv) Regulation 17(9) reads as: The Customs Broker shall exercise such supervision as may be necessary to ensure the proper conduct of his employees in the transaction of business and he shall be held responsible for all acts or omissions of his employees during their employment”.
That one of the Partners Ms. Nidhi Rastogi was not present in India for most of the time and according to Smt. Madhulika Rastogi, Sh. Jai Kumar Sharma and Sh. Ashok Bhutani, G-Card holder managed the entire custom related work. Further, from the statement of Sh. Jai Kumar Sharma it is evident that the export assignments as well as the KYC documents were provided through Sh. Abhishek Saxena, Prop. of M/s Sahib Ji Freight Movers. Thus, the entire work relating to the said exports were being directly supervised by the freight holder. In the facts of the case, the CB cannot claim any exemption from the acts or omission of his employees. Thus, the CB has violated the provisions of Regulation 17(9) of CBLR, 2013.
33. This being a case of facilitating the fraudulent exports carried out and it being duly proved during the inquiry proceedings that the exporters were non-existent, CB has failed to verify the correctness of the documents, violated the obligation as a custom broker under CBLR, 2013. Therefore, the Adjudicating Authority had rightly directed for forfeiture of the security deposit of Rs. 5 lakhs submitted by CB.
34. We agree with the submission of the learned AR that forgery nullifies everything. The facts of the present case clearly show the fraudulent manner in which the exports have been made where 90% of the goods were short and nearly 70 lakhs of rupees were taken as duty drawback thereby defrauding the revenue. The entire transaction was fraudulently conducted. The exporters were found to be fictitious, non-existent who were actually farmers and had no knowledge about their being exporters and therefore the CB could not bring them before the Customs Authorities. Neither the partners nor the G-Card holder of CB met the exporters. It has to be concluded that CB had put himself into the shoes of fraudsters who were using forged documents of fictitious persons who were actually not involved with the said fraudulent exports to claim duty drawbacks. The Apex Court in Commissioner of Customs Vs Aafloat Textiles (I) Pvt. Ltd , 2009 (235) ELT 587 on the principal that fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence held that Special Import License were not genuine documents being fraudulently forged and hence had no existence in the eyes of law.
35. Reliance is placed on a recent decision of the Apex Court in Munjal Showa Ltd. Vs Commissioner of Customs & Central Excise CA No. 2576/2010 dated 23.09.2022 where DEPB licenses were forged and a fraud was played to avail the exemption benefit, it was observed:
“16. In that view of the matter and on the principle that fraud vitiates everything and such forged or fake DEPB licences /Scripps are void ab initio, it cannot be said that the department acted illegally in invoking the extended period of limitation. In the facts and circumstances, the department was absolutely justified in invoking the extended period of limitation.”
36. In view of the discussions herein above, our answers to the questions of law framed are as follows:-
(i) The SCN is not barred by limitation but has been issued within the time prescribed of 90 days from the date of receipt of the offence report.
(ii) The issuance of the suspension of license vide order dated 15.02.18 is not hit by the principle of double jeopardy as order of revocation of suspension of license was with a rider, that if new facts emerge in investigation action under CBLR, 2013 be taken. As the investigation revealed the fraud played in exporting the consignments, immediate action for suspension of license under Regulation 19 was initiated. There is no bar for issuing such order of suspension of license as the same is only an interim order and was passed keeping in view the change in circumstances evidencing specific violations of the provisions of CBLR by the It would lead to an absurd situation to say that no further order of suspension of license can be made in view of subsequent developments.
(iii) The CB has violated the obligations cast on him under the Regulations as discussed above and hence the revocation of the license and the forfeiture of security deposit is justified.
37. In the aforesaid facts and circumstances the order of the Adjudicating Authority cannot be faulted. The appeal is accordingly dismissed with no order as to cost.
(Order pronounced on 16th Feb., 2023).
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