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Case Law Details

Case Name : Surendran Vs Commissioner of Custom (CESTAT Bangalore)
Appeal Number : Customs Appeal No. 1409 of 2010
Date of Judgement/Order : 19/04/2024
Related Assessment Year :
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Surendran Vs Commissioner of Custom (CESTAT Bangalore)

The case of Surendran vs. Commissioner of Customs (CESTAT Bangalore) revolves around allegations of fraudulent exports and violations of customs regulations by M/s. Globe Fashions (Exim) India, facilitated by Shri D. Surendran (Appellant 1) of M/s. Trans Asia Shipping Services Pvt. Ltd., and Shri Ashok Shukla (Appellant 2) of M/s. Cargo and Travel Services Pvt. Ltd. This summary will outline the key aspects and findings of the case, focusing on the parties involved, the alleged violations, the arguments presented, and the final decision by CESTAT Bangalore.

Background and Allegations: M/s. Globe Fashions (Exim) India, an exporter, was suspected of engaging in fraudulent activities by misdeclaring goods for export. Specifically, they were accused of exporting inferior quality cloth pieces as ladies nightwear, thereby availing undue benefits under the Duty Entitlement Pass Book (DEPB) Scheme.

Availment of undue benefits under DEPB Scheme: CESTAT reduces penalty on CHA

Investigations and Findings: Customs officials initiated investigations after intercepting a consignment at ICD Hyderabad, which revealed that the goods were not as declared but rather irregularly shaped cloth pieces made from leftover rags. Similar suspicions arose regarding exports facilitated by M/s. Trans Asia Shipping Services Pvt. Ltd. (Appellant 1) through ICD Bangalore. It was found that containers were routed from Bangalore to Goa for stuffing before being returned to Bangalore for export via ICD Bangalore. This circuitous route and the misdeclaration of goods raised concerns over the validity of DEPB claims.

Role of Appellants:

  1. Shri D. Surendran (Appellant 1): He arranged containers and facilitated exports for M/s. Globe Fashions (Exim) India. Despite not holding a Customs House Agent (CHA) license, he used blank signed shipping bills from Shri Ashok Shukla (Appellant 2) of M/s. Cargo and Travel Services Pvt. Ltd. He admitted to being aware of the DEPB Scheme and took precautions such as obtaining a letter from the exporter regarding the quality of goods. He was accused of aiding in misdeclaration and facilitating fraudulent exports.
  2. Shri Ashok Shukla (Appellant 2): As the director of M/s. Cargo and Travel Services Pvt. Ltd., he sublet his CHA license to Appellant 1 and provided blank signed shipping bills without verifying the actual contents of the shipments. He also facilitated the issuance of identity cards for customs clearance under false pretenses. His actions were deemed to have aided in the fraudulent activities of misdeclaration and misuse of the DEPB Scheme.

Legal Proceedings and Decision: The Commissioner of Customs imposed penalties under Section 114 of the Customs Act, 1962, based on the findings that both appellants were involved in acts that rendered goods liable for confiscation under Section 113. These penalties were initially substantial but were later reduced on appeal to Rs. 5,00,000 each considering the cancellation of DEPB licenses and the penalties imposed on M/s. Globe Fashions (Exim) India.

Arguments and Defense: The appellants argued that they were not directly involved in the misdeclaration of goods or aware of the fraudulent intent of M/s. Globe Fashions (Exim) India. They claimed that they acted in good faith, merely providing logistical support and customs clearance services without knowledge of the actual contents of the shipments. They cited precedents and legal provisions to argue against the severity of the penalties imposed.

Conclusion: The CESTAT Bangalore, while acknowledging the appellants’ arguments, upheld the imposition of penalties under Section 114 due to their involvement in facilitating exports that violated customs regulations and enabled the misuse of the DEPB Scheme. The reduction in penalties from the original amount reflected consideration for the canceled DEPB licenses and penalties already levied on the exporter. The decision highlighted the seriousness of customs violations and the responsibility of all parties involved in export processes to ensure compliance with regulations.

FULL TEXT OF THE CESTAT BANGALORE ORDER

M/s. Globe Fashions (Exim) India (exporters) who undertake exports through ICD Bangalore and ICD Hyderabad was represented by Shri Vijay Kumar Poddar as it’s proprietor. The said exporter was adopting unreasonable circuitous route in moving empty containers from Hyderabad to Goa for stuffing consignments and instead of exporting the same from Goa or from nearby port, was undertaking exports from ICD Hyderabad. Based on suspicion, the officers attached to Hyderabad Commissionerate intercepted a consignment of export goods declared as Ladies nightwear covered under 4 shipping bills filed at ICD Hyderabad. On examination of the consignment, it was noticed that the consignments were actually cloth pieces irregularly shaped, made out of leftover rags of various textile materials and not fit to suit the declaration as well as its value. Investigation proceedings were initiated against the exporter for fraudulent export. Simultaneously, investigations were caused at Bangalore to examine the previous exports of M/s. Globe Fashions (Exim) India. Investigations at Bangalore revealed that the said exporter had undertaken export of similar goods under 31 shipping bills from ICD Bangalore and adopted similar circuitous route as in the case of exports from Hyderabad of sending empty containers from Bangalore to Goa and after stuffing at Goa instead of exporting from Goa or any nearby port had undertaken the exports through ICD Bangalore.

2. Shri. D. Surendran, Proprietor (Appellant 1) of M/s. Trans Asia Shipping Service, Bangalore in his statement dated 12.4.2004 stated that he was using the facilities of M/s. Cargo and Travel Services who was registered as a Custom House Agent (CHA) and undertook exports for the said exporter. Shri Ashok Shukla, Director of M/s. Cargo and Travel Services Pvt. Ltd. (Appellant 2) had signed blank shipping bills and delivered him such shipping bills for undertaking exports and he was being compensated with some money for such blank shipping bills. The exporter had approached him for arranging empty containers from Bangalore to Goa and stuffing at Goa and to be returned to Bangalore for exports through ICD Bangalore. He used to prepare the shipping bills and give it to Shri Sanjeev Ansari and Shri Muralidharan, his employees for clearing the same at ICD, Bangalore. He had a doubt that exporter would export substandard quality goods and so had obtained a letter from the exporter that they would not make substandard exports. He also stated that their employees got the identity cards from customs by claiming to be employees of M/s. Cargo and Travel Services Pvt. Ltd. and requested that his lapses may be viewed leniently. Shri. Sanjeev, Clerk in his statement dated 12.04.2004 admitted that his salary was paid by M/s. Trans Asia Shipping Services Pvt. Ltd. and acted as per directions of M/s. Trans Shipping Services Pvt. Ltd. and that of the CHA. Shri Muralidharan in his statement dated 12.04.2024 stated that he was working for Trans Shipping Services Pvt. Ltd. and assisted Shri Sanjeev in the preparation of the shipping bills. Shri D. Surendran in his further statement dated 23.04.2004 stated that he did not have the CHA License and he had used services of M/s. Cargo Travel and Services Pvt. Ltd. for clearing the consignments with an understanding with the Director Shri Ashok Shulka (Appellant 2) and also stated that the exporter used to contact over phone and he was aware of the fact that all the exports were cleared under DEPB Scheme. Shri Sanjeev in his further statement dated 22.4.2004 stated that he did not know the exporter and attended to their work as directed by Shri D. Surendran and he had cleared 31 shipping bills of the same exporter and he was not aware of the samples nor any samples were produced to the customs authorities.

3. Shri Ashok Shukla (Appellant 2) Director of M/s. Cargo and Travel Services Private Limited, Bangalore in his statement dated 21.4.2004 stated that neither he had any direct contact with the said exporter nor had any dealings with them, that he dealt with Shri D. Surendran to whom he had given blank signed shipping bills on the assurance that the dealings by the exporter would be bona fide, he was not aware that empty containers were sent from Bangalore to Goa for stuffing and brought back to Bangalore for customs clearance, he had not taken any permission from customs for taking containers outside Bangalore and that he had signed 35 blank shipping bills for the said exporter, of which 4 bills were cancelled, that he admits the seizure of blank shipping bills which are purchased by Shri D. Surendran and later signed by him was all done in order to help Shri Sanjeev and Shri Muralidharan when they had applied for identity cards to carry out customs clearances by showing them as their employees. Shri Ashok Shukla (Appellant 2) in his further statement dated 26.4.2004 stated that he had shown Shri Praveen Kumar of M/s. Silver Sands and Shri Sudheer of M/s. Peak International, as their employees to get ID cards from the department to undertake customs clearances and that it was a mistake to give blank signed shipping bills to them.

4. Based on the investigations and the statements from various parties, the Commissioner in the impugned order rejected the value declared by M/s. Global Fashions (Exim) India that were exported vide 31 shipping bills through ICD Bangalore where inferior quality rags were exported in the guise of Ladies nightwear. Since the said goods were rags and had no commercial value, the value was rejected under Section 14 of the Customs Act and it was also found that no remittance was received for these consignments which were exported and therefore, the exports done under the DEPB Scheme were held to be improper and unlawful and the DEPB credit of Rs. 98,54,987/- was denied by concluding that the exporter was not eligible for the benefit of the Notification No.45/2002 dated 22.4.2002 and the 5 licenses under DEPB Scheme were held to be invalid/unlawful and were frozen in view of the fraudulent exports of substandard goods by description in the shipping bills filed by the exporter. Penalties were imposed on the Proprietor of M/s. Global Fashions (Exim) India and Rs.15,00,000/- penalty on Shri D. Surendran, Proprietor (Appellant 1) of M/s. Trans Asia Shipping Services Pvt. Ltd. and Rs.15,00,000/- on Shri Ashok Shukla (Appellant 2) of M/s. Cargo and Travel Services Pvt. Ltd. There is no appeal on record either by M/s. Global Fashions (Exim) India or by the Proprietor of M/s. Global Fashions (Exim) India and the Proprietor of M/s. Welspun and Branded Impex.

5. The present appeals are filed by Shri D. Surendran, Proprietor of Trans Asia Shipping Services (Appellant 1) and Shri Ashok Shukla, Director of Cargo and Travel Services (Appellant 2). The learned counsels on behalf of the appellants submits that the exporter sought the appellants services for providing containers for stuffing their export consignments of readymade garments from Bangalore to Goa and back to Bangalore to be exported through ICD Bangalore. Since Appellant 1 did not have a CHA Licence for completing the customs formalities, approached M/s. Cargo and Travel Service Pvt. Ltd. Ltd; Bangalore represented by Appellant 2, Shri. Ashok Shukla for extending the CHA services for the consignments. Accordingly, 31 shipping bills were filled in respect of the containers received after stuffing goods from Goa under the supervision of the Central Excise officers and these exports were under claim for DEPB credit. It is submitted that the Customs Officers have detected a consignment at ICD Hyderabad and found that it contains substandard material and based on that investigation, investigations were conducted at ICD Bangalore and reviewed the exports affected by the same exporter through Bangalore and held that the appellant had abetted in exporting the substandard goods and consciously facilitated the alleged crime. It is stated that the Commissioner has held them guilty purely on suspicion and there is no evidence whatsoever that the goods exported through ICD Bangalore were overvalued or mis-declared, the appellant had taken abundant precautions to get a letter from the exporter confirming that there would not be any discrepancy in the declaration. This declaration has been misinterpreted by the authorities that it was a deliberate effort to insulate the appellant and it is also alleged that the appellant had charged Rs.75,000/- Per container from the exporter which is exorbitant. The Counsel further states that this amount included freight to be paid to the foreign carrier and therefore, it cannot be questioned. It is also claimed that they had no knowledge regarding the alleged inferior quality of the export goods and there is no evidence on record to attribute such knowledge. It is submitted that foreign exchange in respect of all the 8 containers exported were realised and if so, there is no irregularity or misuse of DEPB Scheme and accordingly, requested for setting aside the penalty.

5.1 Shri Ashok Shukla (Appellant 2) in his grounds submits that there is no investigation or finding that the appellant had been directly or indirectly involved in the said export of the consignment alleged to have been undervalued. When there is no mens-rea, the imposition of penalty is bad in law and is liable to be set aside and it is submitted that he was neither concerned about the export transactions in question nor had any say in the matter. Both the appellants rely on the following decisions for exonerating them from the penalties imposed on them.

6. The Authorised Representative referring to the observations of the Commissioner in the impugned order held that since the main appellant i.e., the exporter had not disputed any of the facts and that the amounts have not been received and the fraudulent activities have been not contested, therefore, the allegations in the notice are established. Also, both the appellants admit in their statements that they had filed these shipping bills without verifying the genuineness of the exporter and their involvement is established and they are liable for penalty. The Authorised Representative relied on the following decisions:

  • Commissioner of Customs (Airport & Administration vs. Marico Logistics Pvt. Ltd.: (2023) 2 Centax 129 (Cal.)
  • Om Prakash Bhatia vs. CC, Delhi: 2001 (127) ELT 81 (Tri.-LB)
  • Ratan Exports & Industries Ltd. vs. CC, Chennai: 2000 (123) ELT 808 (Tribunal)

7. Heard both sides. M/s. Globe Fashions (Exim) India had exported 31 consignments of inferior quality of fabrics after mis-declaring the goods as Ladies nightwear with an intention to defraud Revenue by claiming irregular DEPB benefits. As per the records, the concerned bank had confirmed that no remittance had been received in respect of these shipping bills. None of this have been disputed by the exporter nor it has been contested as seen from the records placed before us.

8. The appellant 1 (Shri Surendran) Proprietor of M/s. Trans Asia Shipping Services Pvt. Ltd. had arranged for the containers from Bangalore to Goa and after stuffing at Goa, the containers were exported from ICD Bangalore. It is admitted by the Appellant 1 (Shri Surendran) that he utilised the services of M/s. Cargo & Travel Services Pvt. Ltd. who was registered as a CHA and he got the blank shipping bills signed by Appellant 2 (Shri Ashok Shukla, Director of M/s. Cargo & Travel Services Pvt. Ltd.). He filed the shipping bills and arranged for the clearance of goods through his employees Shri Sanjeev and Shri E. Muralidharan. He also managed to get identity cards from the Customs Department by falsely claiming that they were employees of M/s. Cargo & Travel Services Pvt. Ltd. Appellant 1 in his statement admitted that he had met Proprietor of M/s. Global Fashions (Exim) India and had suggested to him that the container can come under factory stuffing procedure from Goa, so that it can easily be exported from ICD Bangalore. He also admitted that he had taken collected Rs.75,000/- which is unusually high for arranging the transportation of the container from Bangalore to Goa and back. He admits that he was not registered as CHA but had fraudulently used blank shipping bills of Shri Ashok Shukla (Appellant 2) Director of M/s. Cargo & Travel Services Pvt. Ltd., Bangalore. Shri Surendran (Appellant 1) in his statement dated 12.4.2004 and 23.4.2004 admits that the entire process right from obtaining the blank shipping bills from the CHA, introducing the CHA to the exporter, sending the containers to Goa and bringing them back and onward export from ICD Bangalore was done under his supervision. He also admits that he had taken a letter from the exporter that he would not export substandard products which indicate that he was aware of the fraudulent intention of the exporters.

9. Shri Ashok Shukla (Appellant 2) admits to the fact that the CHA license which belongs to him was sublet to Shri Surendran (Appellant 1) and had given him 31 signed blank shipping bills for undertaking the said exports which was ultimately found to be a fraudulent export. It is admitted that all this is done for monetary consideration which are against the provisions of the Customs Act and the CHALR regulations. He also admits that he managed to get identity cards to the employees of Appellant 1 stating they were his employees. Shri Ashok Shukla (Appellant 2) not only sublet his license but had given signed blank shipping bills, which indicated his involvement in the case of fraudulent exports. He had also arranged two employees to get identity cards from customs by falsely declaring them to be his employees.

10. Verification with the Bank revealed that there were no remittances received in respect of 16 shipping bills. Verification of the Consulate General of Dubai revealed that the value of the goods declared in the shipping bill was higher and there was no claimant for one of the containers that were sent to Dubai. Letter dated 21.10.2004 received from Shri Girish Hegde B.M., Executive-Marketing, M/s. Balaji Shipping (U.K.) Ltd. specified that in respect of container No. BLR/DXB/20040078 delivery order had not been issued and the containers were sent to the auction shed on 19.7.2004 and was destuffed. Thereafter, the empty container was returned by the port with the cargo still lying in auction shed.

12. The Commissioner in the impugned order observes that the provisions of Section 114 arise with the accrual of the liability of the goods to confiscation under Section 113 of the Customs Act, 1962. By virtue of Section 23A of the Foreign Exchange Regulation Act, 1947, the provisions of Sections 113 and 114 of the Customs Act, 1962 are attracted when there is a contravention of Section 12(1) of the Foreign Exchange Regulation Act, 1947 in relation to goods which had in fact been exported. In the present case, the goods were fraudulently exported and the appellants had abetted and misused the provisions to enable the exporter for ineligible benefit under the DEPB scheme which warrants penalty under Section 114 of the Customs Act ,1962.

13. Sections 113 and 114 of the Customs Act, 1962 are reproduced for ready reference:

SECTION 113. Confiscation of goods attempted to be improperly exported, etc.

The following export goods shall be liable to confiscation:-

(a) any goods attempted to be exported by sea or air from any place other than a customs port or a customs airport appointed for the loading of such goods;

(b) any goods attempted to be exported by land or inland water through any route other than a route specified in a notification issued under clause (c) of section 7 for the export of such goods;

(c) any 1 [***] goods brought near the land frontier or the coast of India or near any bay, gulf, creek or tidal river for the purpose of being exported from a place other than a land customs station or a customs port appointed for the loading of such goods;

(d) 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;

(e) any 1 [***] goods found concealed in a package which is brought within the limits of a customs area for the purpose of exportation;

(f) any 1 [***] goods which are loaded or attempted to be loaded in contravention of the provisions of section 33 or section 34;

(g) any 1 [***] goods loaded or attempted to be loaded on any conveyance, or water-borne, or attempted to be water-borne for being loaded on any vessel, the eventual destination of which is a place outside India, without the permission of the proper officer;

(h) any 1 [***] goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77;

2 [(i) any goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made under this Act or in the case of baggage with the declaration made under section 77;]

3 [(ia) any goods entered for exportation under claim for drawback which do not correspond in any material particular with any information furnished by the exporter or manufacturer under this Act in relation to the fixation of rate of drawback under section 75;]

(j) any goods on which import duty has not been paid and which are entered for exportation under a claim for drawback under section 74;

4 [(ja) any goods entered for exportation under claim of remission or refund of any duty or tax or levy to make a wrongful claim in contravention of the provisions of this Act or any other law for the time being in force;]

(k) any goods cleared for exportation 5 [***] which are not loaded for exportation on account of any wilful act, negligence or default of the exporter, his agent or employee, or which after having been loaded for exportation are unloaded without the permission of the proper officer;

6 [(l) any specified goods in relation to which any provisions of Chapter IVB or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened.]

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 1[2[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;

3 [(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five thousand rupees, whichever is higher:

Provided that where such duty as determined under sub­section (8) of section 28 and the interest payable thereon under section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the penalty so determined;]

4 [(iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater.]

14. The appellants in the present appeals do not dispute any of the facts that have been part of the impugned order except to state that there is no evidence to show that they were aware of the fact that the goods were of inferior quality and they had knowledge of the undue benefit that the exporter was availing by mis-declaring the goods and the value. They also stated that remittances were received without any proof of the same. The exporter had not disputed the alleged offence nor had contested the alleged offence of misdeclaration of goods and value. Shri Surendran (Appellant 1) having arranged containers and advising them to ensure factory sealing so that it is not opened at ICD Bangalore; arranging a CHA and getting the blank shipping bills signed by the CHA admittedly for monetary consideration; getting a letter from the exporter not to export substandard goods and charging unusually high price for containers, all goes to prove the mala fide intention behind these exports. Moreover, the same team has worked for similar exports at Hyderabad ICD, thus, without doubt all the circumstantial evidences clearly prove their involvement in mis-declaring goods and value for undue DEPB benefit.

15. Shri Ashok Shukla (Appellant 2) also admits having sublet his license for monetary consideration, signing of blank shipping bills and allowing his license to be used without knowing the exporter and what for it is being used goes to prove that he is not clean in his intentions. Both the appellants have also admittedly misrepresented to the customs about their employees and enabled them to get the ID cards from the customs by misrepresenting that they were the employees of the CHA. Therefore, the admitted facts do not provide any immunity to the appellants. The reliance placed on the decision of the Hon’ble High court in the case of Rajeev Khatri Vs. Commissioner of Customs (Export) dated 04.07.2023 is not applicable in the facts of the present case where none of the statements and the irregularities committed by them have not been retracted. “Abet” means instigating, conspiring, intentionally aiding the acts of commission or omission that render the goods liable for confiscation. The facts discussed above clearly spell out the commissions and omissions of both the Appellants where the goods were made liable for confiscation.

16. The notice clearly alleges the penalty to be levied under Section 114 of the Customs Act, 1962 and though, the Commissioner in the penultimate order had not specified Section 114; from para 59 to 61 of the impugned order it is clearly held that penalty is imposed under Section 114 for violation of the provisions under Section 113 and the Foreign Exchange Regulation Act, 1947.

17. However, taking into consideration the fact that all the DEPB licenses were cancelled and the DEPB credit of Rs.98,54,987/- is denied, and the exporter having penalised, it would be fair to reduce the penalty to Rs.5,00,000/- on each of the Appellants. Accordingly, the penalty stands reduced to Rs.5,00,000/- (Rupees Five Lakhs Only) on Appellant 1 (Shri Surendran) and Rs.5,00,000/- (Rupees Five Lakhs Only ) on Appellant 2 (Shri Ashok Shukla).

18. Appeals are partially allowed on above terms.

(Order pronounced in Open Court on 19.04.2024.)

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