Penal provisions against CHA can be invoked only when CHA was in collusion with exporter.

PJ/CASE LAW/2015-16/2804

Case:-INTERNATIONAL CARGO SERVICES VERSUS COMMR. OF CUS. (EXPORT), NEW DELHI

Citation:-2015 (323) E.L.T. 206 (Tri. - Del.)

Brief facts:- The appellant is in appeal against the impugned order imposing penalty under Section 114 of the Customs Act, 1962.
The facts of the case are that the appellant is a CHA and filed shipping bills in the name of M/s. Sanjay Sales Corporation for export of various textile items which are highly overvalued. The shipping bills were filed under claim of drawback of Rs. 8,82,464/-. The allegation against the appellant is as under:
“CHA M/s. International Cargo Services (License No. R-61/98), while filing shipping bill in respect of the said exporter failed to ascertain the genuineness of the said exporter, namely M/s. Sanjay Sales Corporation and filed the documents and handles Customs clearance relating to the attempted export of the seized goods under said shipping bills and transacted business for non-existent/non-traceable exporter. They did not deal with the exporter directly but only through mediator and thus failed to take sufficient precautions before taking up Customs clearance job on behalf of the said exporter. They also failed to obtain the authorization from the exporter as required under Regulation 13 of the CHA Licensing Regulations, 2004. They also failed to make available the exporter to join in Customs investigation. Therefore, by his acts of omissions and commissions, Sh. S.S. Gaur, Proprietor of M/s. International Cargo Services, CHA appears to have facilitated/abetted the said exporter in the attempt to export poor quality sub-standard and highly overvalued goods under claim of undue drawback amount which appeared to be liable for confiscation under Section 113(d) and 113(i) of the Customs Act, 1962.”
The adjudication took place and the penalty on the appellant is confirmed as per show cause notice of Rs. 8,82,464/- under Section 114 of the Customs Act, 1962. Aggrieved from the said order appellant is before tribunal.

Appellant’s contention:-The ld. Counsel for the appellant submits that the allegation made in the show cause notice are totally incorrect. In fact, the appellant has filed proper authorization obtained from the exporter under Regulation 13 of the CHALR, 2004 and also found the genuineness of the exporter by verifying the IEC from DGFT. Further, the appellant has also obtained the verification report from the Punjab National Bank whether the exporter was having the different bank account with them. The only fault of appellant is that appellant did not meet personally to the exporter and same is not the requirement for a CHA to deal with the exporter of the goods. Therefore, the allegations against the appellant are not sustainable. Consequently, the impugned order is required to be set aside. He further submits that the appellant acted under good faith and Revenue has not been able to bring out any evidence to show that appellant was aware that the exporter was fraudulent or that there was any undue claim of drawback by exporter.

Respondent’s contention:- On the other hand, ld. AR oppose the contention of the ld. Counsel who submits that from the factual merits, it is coming out that the exporter was non-existent and their account was also opened fraudulently. The IEC was taken fraudulently by giving false description by the exporter and during the course of the investigation the exporter was found non-existent. Therefore, the appellant have not taken due care to deal with exporter being a first time client of the appellant. Therefore, relying on the decision in the case of Jasjeet Singh Marwaha v.UOI- 2009 (239)E.L.T.407 (Del.) and in the case of Sunil Shipping Agency v.CC, Mumbai- 2009 (242)E.L.T.541 (Tri.-Bom.), it is the responsibility of the CHA to verify the antecedents of his clients because the CHA is representing their client before the Customs Authorities. Therefore, he submits that penalty is rightly imposed on the appellant.

Reasoning of judgment:- On perusal of the records they find that appellant has obtained proper authorization which is required under Regulation 13 of the CHALR, 2004 from the exporter, also verified the details of the exporter and also verified the IEC obtained by the exporter from DGFT. These are the three primary documents which are supposed to be verified on 1st instance while dealing with the new client. In the law it is nowhere required that before dealing with the new client the CHA is required to meet the client personally. But to verify the antecedents of the exporter which appellant has done in this case by verifying bank account, IEC and by obtaining proper authorization. Therefore, they hold that appellant has taken due care for knowing the antecedent of exporter. Further, from the records it is not coming out that appellant was having any knowledge that the exporter was fraudulent and their shipping bill have been filed to claim undue drawback by overvaluation of the exported goods. The ld. AR relied on the decision in the case of Jasjeet Singh Marwaha(supra). The facts of the said case are not relevant to the facts of this case as in said case there was an admission on behalf of the CHA that he has mis-declared the goods at the time of clearance. The said allegation is not in the case. Moreover in the case of Sunil Shipping Agency(supra) there was an admission of consideration of waiver of pre-deposit on the grounds that the applicants licenses has been suspended since February 2008 and he would face severe undue financial hardship. Therefore, waiver of pre-deposit and penalty was sought. The facts of the said case are not coming out from the stay application, therefore, said decision cannot be relied in the facts of this case.
In view of the above discussion they hold that the appellant has not violated the provisions of Customs Act or any other law for the time being in force. Therefore, appellant is not liable to be penalized under Section 114 of the Customs Act, 1962.
Consequently, penalty imposed on the appellant is set aside by allowing the appeal filed by the appellant with consequential relief, if any.

Decision:-Appeal allowed

Comment:-The essence of the case is that CHA required to take due care in knowing the antecedents of the exporter. When CHA has duly verified the Bank Account, IEC Code of the exporter and obtained proper authorization, it cannot be said that there was any careless attitude adopted by the CHA. Moreover, as per law, personal meeting with the exporter not required. There is no evidence that CHA abetted alleged offence by exporter. Hence, penal provisions should not be imposed against CHA.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2804

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