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  • Rajesh Audithyan

Illegal Syndicate of IEC holders to bypass Customs assessment

A Customs Broker has filed various Bill of Entries of different IEC holders and cleared LED TV parts. DRI has investigated the issue of import of parts of LED TV with the perception that these parts are imported by a group of persons and that these parts should be assessed as complete LED TV. Customs Broker did not dealt with importers directly and one middlemen brought this business and Customs broker has raised invoice against middlemen and not against importers. The Customs department revoked licence, forfeited security deposit and imposed penalty of Rs.50,000/- and Customs broker appealed to CESTAT.


Let us see important observations of CESTAT as follows ;


Customs Brokers advocate has submitted that the Commissioner has failed to apply the ratio of the decision in the case of HIM Logistics Pvt. Ltd. Vs. CC, New Delhi [2016(338) ELT 725 (Tri. Del.)] wherein it has been held that “ customs broker need not meet the importer and their premises need not be verified physically”


Learned counsel also cited the decision of Kunal Travels (Cargo) Vs. CC (I&G), IGI Airport, New Delhi [2017(354) ELT 447 (Del.)] wherein it has been clarified that “it is onerous to expect CHA to inquire into and verify genuineness of IE code given by client for each import/export and that if goods did not corroborate with declaration in shipping bills, it cannot be deemed to be misdeclaration by CHA”


Learned counsel also submitted that in plethora of cases, the Tribunal has held that revocation of licence is too harsh punishment which will deprive them of their livelihood and for this he relied upon the following decisions:-


i. Sadanand Chaudhary Vs. CC(G), New Delhi [2018(363) ELT 1018 (Tri. Del.)]

ii. Service Bureau Vs. CC, New Delhi [2018(363) ELT 949 (Tri. Del.)]

iii. Shri Manjunatha Shipping Pvt. Ltd. Vs. CC, Bangalore [Final Order No.21867-21868/2018 dt. 11/12/2018 by CESTAT, Bangalore]


Further we find that in the present case there are serious allegations against the Customs Broker regarding the violation of various Regulations as to not properly authorized by the importer and not advised the importer regarding the compliance of Customs Act and also not verified the IE code, antecedents of the importer and the premises of the importer. We find that in the impugned order, the Commissioner has considered each and every submission raised by the appellant and has dealt with the same.


Hence, it is pertinent to reproduce the finding of the Commissioner ;


Para 22. The Customs Broker has been receiving documents of multiple IECs from the same persons, the cargo imported by these multiple IEC is the almost the same. The supplier of the goods is same. The modus operandi is so obvious that the TVs are being imported in SKD condition. The Customs Broker was aware of the fact that duty was being paid from the account of middlemen and not from importer's account. The documents are being forwarded from the same email account in respect of all importers. These are all enough indications that there is syndicate working in import of TVs in SKD conditions which were in the knowledge of the CB. These facts also indicate complicity of the CB in the offence of duty evasion carried out by fraudsters. The CB not only violated all the above provisions of Regulations, but also embroiled himself in the scheme of the duty evasion. Thus, the CB apart from violating the provisions under the Regulations have also indulged in misconduct. Such misconduct calls for exemplary punishment.


It is also clear from the evidence that the identity of the importer was not verified by the CB. It is also a fact that IEC holders have stated that they were not aware of any imports by them. We also find that CB actually knowing the correct facts, chose to keep quiet and continued to make clearances which were being imported by 3rd parties and not by the IEC holders.


We are of the considered view that CB has violated the Regulations as alleged in the show-cause notice and are guilty of gross negligence in performance of their duties as Customs Broker.


We are of the view that revocation of Customs Broker licence is a harsh punishment which will deprive the appellant from their livelihood along with livelihood of all those people working with them.


Hence by following the ratios in the cases of Sadanand Chaudhary and Shri Manjunatha Shipping Pvt. Ltd. cited supra, we take a lenient view and set aside the revocation but we uphold the forfeiture of security deposit as well as the penalty of ₹ 50,000/- imposed on the CB.


Customs Broker VERSUS C. C-BANGALORE-CUS, CESTAT, BANGALORE, Order pronounced on 12/06/2020


Take away for readers : Forming Illegal syndication and imports in SKD condition by various IEC holders to evade Customs duty / to circumvent import restrictions is a serious offence. CB should have strict vigil and needless to say, should have proper KYC documents.


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