Ajay Sharma ORDER
Ajay Sharma, Member (J)
1. This Appeal has been filed from the order dated 16.3.2018 passed by the Commissioner of Customs (Appeals) JNCH, Nhava Sheva, Mumbai-II in Order-in-Appeal No. 231[Adjn(I)]/2018(JNCH)/Appeal-II by which the Commissioner (Appeals) disposed of the Appeal filed by the Appellant and reduced the penalty under Section 112(a) of the Customs Act, 1962 to Rs. 5 lacs. The issue for determination is whether the Appellant, who is a CHA, is liable for penalty under Section 112(a) ibid.
2. The facts of the Appeal in brief are as follows. The Appellant is the partner of M/s. P.N. Shipping -CHA. One Mukhtar Shaikh of M/s. Fast Forward Logistics Solutions approached them and started giving them business of import & export clearance. In past also during the period December, 2014 to April, 2015 the said Mukhtar Shaikh gave work to the appellants regarding 6 import consignments of different importers (IEC holders) and the appellant cleared them from JNCH. The said Mukhtar Shaikh used to forward the invoice, packing list, Airway Bill & certificate of origin by email to the Appellant and on the basis of that information, the appellant used to prepare the final check list and mail it to Mukhtar Shaikh for his approval and on getting his approval, he used to upload this check list in the Custom EDI system. Therefore the only work the appellant used to do as CHA was to prepare the final check list and upload the same in the Customs EDI system through their login ID. The arrangement for assessment, examination and transportation of those consignments were directly looked after by Mukhtar Singh through his own sources.
3. In the same manner, the said Mukhtar Shaikh approached the Appellant regarding the consignments in question of one M/s. Ganesh Enterprises mentioning the consignment as Trolley Bags and the appellants agreed to only upload the checklist, Bills of Entry and did not attend to assessment and examination work for this Bills of Entry. The appellant, on the basis of the documents for this consignment provided by Mukhtar Shaikh, uploaded the documents in the customs EDI system through their login ID and prepared the checklist, filed Bill of Entry on 7.5.2015 around 16.00 hrs and informed the same to Mukhtar Shaikh. He was paid Rs. 10,000/- for this work, although in usual course this amount is charged by him for the entire clearance process of the consignment. On the same day at about 16.30 hrs the Appellant was informed by DRI that the consignment contained offending goods and needed to be examined. Upon examination it was found that apart from the declared goods, the said consignment contains 20445 boxes of cigarettes valued at Rs. 3.36 crores. The said consignment was seized under panchnama dated 7.5.2015. After investigation, a show cause notice dated 29.10.2015 was issued by DRI to 7 known persons including the Appellant viz., Omkar Rajender Kumar Keer, Kanaiya Hurbada, Rajan Hemraj Bhanushali, Dinesh Bhanushali, Mukhtar Shaikh, Jaideep Ramniklal Shah, Suresh Bhanushali and other unknown persons in connection with seizure of Omega Trolley Bags valued at Rs. 6,34,500/- and cigarettes valued at Rs. 3,36,62,160/- (LMV); totally valued at Rs. 3,42,96,660/- (LMV) imported in the name of M/s. Ganesh Enterprises. So far as the appellant is concerned, the said show cause notice was for the purpose of imposition of penalty under Section 112(a) of the Act. Since this Appeal has been filed by the Appellant i.e. CHA only, therefore I am confining my order to that extent only.
4. The Adjudicating Authority vide Order-in-Original dated 19.5.2017 held that the Appellant is liable for penalty under Section 112(a) of the Customs Act, 1962 and imposed the penalty of Rs. 25 lacs on the Appellant. On Appeal filed by the Appellant, the learned Commissioner vide impugned order dated 16.3.2018 although held the Appellant liable for penalty u/s. 112(a) but reduced the penalty to Rs. 5 lacs.
5. I have heard the learned Consultant for the Appellant and learned Authorised Representative for the Revenue and perused the Record. Undoubtedly this is a case of smuggling of cigarettes in the guise of trolley bags which were seized by the investigating agency. The learned Consultant for the Appellant submitted that there may be violation of Customs Broker Licensing Regulations, 2013 (hereinafter referred to as "CHA Regulations") on the part of the Appellant but the penalty under Section 112(a) ibid cannot be imposed on the Appellant because no evidence has been produced to prove that the appellant had knowingly allowed Mukhtar Shaikh and Kanaiya Hurbada, who were not authorised to handle the customs post filling Bill of Entry work, to handle & examination part of the custom broker's job on his behalf, which has resulted in fraudulent attempt to clear the contraband goods. According to him, alongwith the copy of invoice, packing list and Bill of Lading the said Mukhtar Shaikh also sent copy of the documents mandated for KYC verification namely IEC, PAN card, Aadhar Card, Signature verification from the concerned bank, ITRs alongwith P&L A/c statement and ST-1 form and after due verification of these documents through site of DGFT, entered the particulars in the job register on 7.5.2015. On the other hand, the learned Authorised Representative for the Revenue reiterated the findings recorded in the impugned order and prayed for dismissal of the Appeal.
6. For failure of fulfilling certain obligations, penalty under Section 112(a) has been imposed on the Appellant. Imposition of penalty on the Appellant i.e. CHA under Section 112(a) of the Customs Act, 1982 is the issue in the instant Appeal. This section deals with the cases of confiscatory goods where abetment goes to the root of the matter. It stipulates that a person shall be liable to penalty, 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 111 or abets the doing or omission of such an act. The said section provides for imposition of penalty on any person who abets the doing or omission, of any act or omission, which will render the goods liable to confiscation. In other words there should be clear evidence to the conclusion that the appellants by their specific act or omission of any act, abetted the illegal importation of the offending goods. Cogent, tangible and reliable evidence is required for such penal actions. There is no evidence to establish that the appellant was aware that the clearance work undertaken by them at the instance of the said Mukhtar Sheikh, was not of a genuine importer. Nor any evidence has been produced to show that the appellant had the knowledge of any fraud or mis-declaration. As per the evidence on record, import of cigarettes under the guise of trolley bags was not within the knowledge of the Appellant and this establishes that the CHA was not aware about the violations beforehand. No evidence has been brought out about the prior knowledge of the appellant regarding violation of the provisions of Customs Act. As per evidence brought on record, it is not a case that the appellant had wrong intent. It is also not a case that the appellant worked as an accomplice. It is settled principle that lack of due diligence and failure to take more precautions cannot, by itself bring in penal consequences under Section 112(a). For imposition of penalty under Section 112(a), a positive act or omission is to be established. For imposition of penalty malafide act/omission is one of the requirements. Admittedly negligence is there on the part of the Appellant and the Appellant admitted violation of CHA Regulations on his part. Such negligence/omission on the part of the Appellant may attract proceedings, if at all, under the regulations for licensing of a CHA, which, I have been informed, are already pending against the Appellant.
7. When there is no evidence to establish that the appellant had prior knowledge of the illegal import of cigarettes and also when there is no evidence to establish any wrongful intent on the part of the appellant then there is no justification to impose penalty under section 112(a) ibid. In the result, the impugned order upholding imposition of penalty on the appellant is set aside and the appeal filed by the Appellant is allowed with consequential relief, if any.
(Order pronounced in the open Court on 07.05.2019)
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