Whether precaution not taken by the CHA to meet exporter and verify genuineness at time of filing shipping bills would mean failing to perform basic duties by accepting a fictitious, unidentifiable entity as client and would call for Revocation of licens

PJ/Case Law/2013-14/1983

Case:- BARASKAR BROTHERS Vs COMMR. OF CUS. (GENERAL), MUMBAI

Citation:-2013 (294) E.L.T. 415 (Tri. - Mumbai)

Brief facts:- The appellant namely M/s. Baraskar Brothers had preferred this appeal against the order of revocation of their CHA licence No. 11/97 vide order dated 29-1-2010.
The facts of the case were that it had been reported by the Directorate of Revenue Intelligence (DRI) that drawback had been fraudulently availed by companies holding Import Export Codes (IEC) obtained on fictitious addresses and in the names of persons who were found to be non-existent. The IEC holders M/s. Yas Nas Exports and M/s. Aka Chem International had cleared shipping bills and declared FOB value of exports excessively high to claim ineligible Drawback. Statement of Shri Vijay Anant Baraskar, Partner of the appellant was recorded where he had stated that they had attended to customs clearance in respect of exports of M/s. Yas Nas Exports and M/s. Aka Chem International; that the documents for the purpose of customs clearance of the firm were given to him by Shri Sitaram Shantaram Tambe, a forwarder, having a firm by the name M/s. Shashikant Logistics and he had never met the owner/proprietor of the said firms. He admitted that necessary precaution had not been taken by their firm as a CHA to meet the exporter and to verify the genuineness at the time of filing the shipping bills. On the basis of that following articles of charges were framed for violation of Regulations 13(d), 13(n) and 19(8) of the CHALR, 2004 for not advising his client to comply with the provisions of the Act, not bringing the matter to the notice of Dy. Commissioner/Assistant Commissioner of Customs and not discharging their duties as Customs House Agent with utmost speed and efficiency and without avoidable delay and not ensured the proper conduct of any such employees in the transaction of business as agents and be held responsible for all acts or omissions of his employees in regard to their employment. An inquiry was conducted and during the course of enquiry, it was informed that on verification of DGFT website on the internet, both the exporters were registered with JNCH. Further, the appellant also noted the Drawback account of the said two firms was also maintained at JNCH in which Drawback claim would have been credited. The Inquiry Officer found that charges against the appellant under Regulation 13(d) and 13(n) stood proved and under Regulation 19(8) has not proved.
On the basis of inquiry report, personal hearing was granted to the appellant and it was observed that the process of identifying a client was very important from the point of view of customs administration and the CHA had failed in his basic duties by accepting a fictitious, unidentifiable entity as client. Since this was not done, therefore, the CHA was not efficient enough to perform his duties. Thereafter, it was held that the CHA had not performed their job in a professional manner, whereas considering the lapse due to omission and commission on the part of the CHA, the CHA should be punished adequately. Therefore, their CHA licence was revoked.

Appellant’s contentions:- Shri Anil Balani, learned Advocate for the appellant submitted that the charges against them were that M/s. Yas Nas Exports and M/s. Aka Chem International were holding IEC obtained on fictitious addresses and in the names of persons who were found to be non-existent. It was categorically stated during the course of investigation that on verification of DGFT website, the IEC of two firms were found to be genuine and both the exporters were registered with JNCH and their accounts were also maintained by JNCH in which drawback had been credited. Therefore, the allegations against the appellant that they had dealt with the firms which were having fictitious IEC and the persons were non-existent were not sustainable. He further submitted that the allegation against the appellant was that they had dealt with the shipping bills without verifying the genuineness of the exporter was not sustainable at all, as they had confirmed from the DGFT website that both the firms were registered with JNCH. To support his contention, he relied on the decision of the Tribunal in the case of Thawerdas Wadhoomal v. Commissioner of Customs (General), Mumbai reported in 2008 (221)E.L.T.252 (Tri.-Mum.). He further submitted that in the case of Setwin Shipping Agency v. Commissioner of Customs (General), Mumbai vide Order No. A/249/2009/CSTB/C-I, dated 17-9-2009 [2010 (250)E.L.T.141 (Tribunal)] who also dealt with the same exporter, who were involved in the same investigation in DRI and in that case this Tribunal had revoked the order of suspension of CHA licence and the Commissioner of Customs (General), Mumbai accepted the order of this Tribunal and thereafter no investigation under Regulation 22 was conducted against M/s. Setwin Shipping Agency. Therefore, in this matter, discrimination had been done to the appellant, therefore, the impugned order to be set aside. He further relied on the order passed by the same Commissioner of Customs (General) in the case of M/s. Daroowala Bros & Co. - 2010 (249)E.L.T.310 (Tri.), wherein the charges against the CHA was more serious than the charges alleged in this case and after concluding the hearing, it was observed by the Commissioner of Customs that the CHA had performed their job in a casual manner and thereafter he made the operative CHA licence by forfeiting the security deposit. Therefore, the appeal may be allowed.

Respondent’s contentions:- On the other hand, the learned A.R. reiterated the impugned order holding that the process of identifying a client was very important from the point of view of customs administration and the CHA had failed in his basic duties by accepting a fictitious, unidentifiable entity as client. Since this was not done, therefore, the CHA was not efficient enough to perform his duties. Thereafter, it was held that the CHA had not performed their job in a professional manner, whereas considering the lapse due to omission and commission on the part of the CHA, the CHA should be punished adequately.

Reasons of judgment:- After considering the submissions made by both sides, the Bench found that in this case the main allegation against the appellant was that they had not verified the contents of the exporter. In fact, the appellant had taken due diligence to find out through DGFT website, whether the IE Codes were genuine or not, which were found to be genuine. Moreover, it was also verified from the JNCH where these exporters were registered and the Drawback account was also maintained at JNCH in which Drawback claim would have been credited, therefore, the allegation that the appellant had not verified the contents of the exporters was not sustainable. Further, tey observed that in similar set of facts in the case of Setwin Shipping Agency (supra) wherein the same charges were made against the CHA and in that case, this Tribunal had held that CHA need not to be responsible for verifying the contents of the exporter. Thereafter, this Tribunal had revoked the order of suspension of CHA licence and the said order was accepted by the Commissioner of Customs (General), Mumbai. In the case of Thawerdas Wadhoomal (supra), this Tribunal had held that CHA files shipping documents on basis of material given to him by his clients and if in case of such exercise of his functioning, he believed in good faith that these documents were genuine, he was not liable to penal action. They further found that in the case of Daroowala Bros & Co. (supra), the Commissioner of Customs (General) had observed that “I am of the view that CHA has performed their job in a casual manner. Even though I do not fully concur with the findings in the Inquiry Reports, there are enough evidence on records to point out that the CHA has not behaved prudently. But for the lapses on the part of the CHA as enumerated in the Inquiry Reports as well as in my observations after weighing defence put forth by the CHA, it is seen that no mala fide intent has been proved against the CHA and thereafter, he made operative the CHA licence after forfeiting the security deposit. In this case, it was observed by the Commissioner of Customs that “the CHA have not performed their job in a professional manner. Whereas I do not agree with the findings of the Inquiry Officer in toto, there are enough evidences to show that CHA has not functioned in a prudent manner. Considering the lapses due to omission and commission on the part of the CHA, I am of the view that the CHA should be punished adequately” and thereafter, he revoked the CHA licence.
The Bench found that the observation/findings of the Commissioner of Customs in the case of Daroowala Bros & Co. (supra) and in the appellant’s case are almost identical and in both the cases treatments given were different. The Commissioner of Customs (General) should maintain consistency in passing the orders/decisions and should not follow the policy of pick and choose. In this case, the Bench held that the Commissioner of Customs (General) had followed the policy of pick and choose and there was no consistency in decision while dealing the same situation, thereby he revoked the CHA licence of the appellant, which could not be permitted. In view of these observations, they did not find any merit in the impugned order, the same was set aside and the appeal was allowed with consequential relief by making operative of CHA licence No. 11/97 by setting aside the revocation of CHA licence.

Decision:- Appeal allowed, impugned order set aside.

Comment:- The analogy drawn from the case is that if the CHA takes appropriate steps in finding out the existence of its clients in all possible manners, like verifying on DGFT website, checking registration with JNCH etc., then CHA could not be held responsible for lack of professionalism on his part. Also, he cannot be held responsible in complying with his basic duties by accepting a fictitious, unidentifiable entity as client.

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PJ/Case Law/2013-14/1983

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