LEVY OF PENALTY ON CUSTOMS BROKER U/S 114 & 114AA AND PRESUMPTION OF CULPABLE MENTAL STATE U/S 138A
A shipper has exported inferior quality of RMG, blouses etc and gained huge drawback amount. Customs Dept investigated the case and imposed penalty on Customs Broker u/s 114 & 114AA apart from their action against shipper. There were two middleman between the exporter and the Customs Brokers, who took cash from shippers. The allegation against the Customs Broker is that having received ₹ 1 lakh in cash per consignment over and above the usual charges, he has actively involved in the fraud.
The observations of Hon’ble CESTAT as follows ;
The Customs Broker in his normal course of business, did the clearance for exporter - RMG, blouses etc., He was merely acting in the capacity of facilitator of the customs transaction and was bound to facilitate the authorised clearance work of exporter. Therefore, in the present case as the Customs Broker was only facilitating the customs transaction on behalf of principal (exporter), penalty is not imposable, otherwise all the customs transaction will come to halt, if penalty is imposed on CB for the omission & commission of exporter/ importer.
Moreover in the present case, the CB had no knowledge of the quality of goods being exported neither was capable to judge the quality of RMG, since he was never involved in the business of sale, purchase, procure and manufacture of RMG, MMF and ladies blouse. The sample provided to the CB firm was of decent quality. Further the CB was not aware and had no knowledge that the RMG, MMF and ladies blouse being exported is of inferior quality. In absence of mens-rea or malafide, the CB cannot be punished. The penalty upheld by ld. Commissioner of Customs (Appeals) is based on erroneous and ill-founded ground.
The Customs Broker has filed Shipping Bills on the basis of documents such as invoice, packing list, etc. supplied by client/ forwarder on the reasonable belief that such documents are genuine, that their filing of shipping bills were not with intent to fraudulently claim the drawback, or collude with the exporter.
That with respect to the said consignments, all the documents were procured such as invoices, packing list, SDF form and other export related documents including shipper’s authorisation. The CB has received work through from one of the freight forwarder and that the CB was not in direct contact with shipper/ exporter.
The ld. Commissioner of Customs (Appeals) erred in observing that the CB is involved in the preparation of inflated invoices without any corroborative evidence. The Commissioner has failed to assign any motive to substantiate the appellant’s involvement in the availment of duty drawback or any proceeds flowing to them.
The confessional statement made by the middlemen cannot be relied upon and made a ground to prosecute the Customs Broker,solely based on the statement recorded under Section 108 of the Customs Act, 1962.
Corroborative evidence is necessary to initiate proceedings against the Customs Broker, as held by the Hon’ble Supreme Court in Vinod Solanki vs. Union of India (2008) 16 SCC 537 and Noor Aga vs. State of Punjab and Anr -2008 (56) BLJR 2254; Criminal Appeal No. 1034 of 2008 (arising out of SLP (Crl.) No. 5597 of 2006, which is missing in the present case.
Ld. Commissioner has completely disregarded Section 138A of Customs Act, 1962, as the CB has been penalised merely on the basis of preponderance of probability. He has not been able to assign any motive or knowledge of cheap quality RMG, MMG and ladies blouses to the appellant, beyond reasonable doubt.
The allegation against the Customs Broker of their having received ₹ 1 lakh per consignment is not substantiated, over and above the usual charges. Thus, receipt of ₹ 1 lakh by middlemen is not the amount received by the Customs Broker
There is no allegation of any flow back of ill gotton draw back money to the Customs Broker. The consignment under seizure was to be exported to Dubai for which as per the inspection norms, prescribes 100% examination of the export consignment. Further, it has nowhere come on record that Customs Broker was present at the time of packing and stuffing of container for shipping. Further, there is no allegation that Customs Broker has cooked or concocted any document for presenting it to the Customs, knowing it to be false.
Penalty is imposable under Section 114 of the Act where 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. From the facts on record, that the CB has not done any act of omission or commission leading to violation of any of the provisions mentioned in Section 113 of the Customs Act.
Section 114AA provides for penalty, if a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty.
The Customs Broker has given cogent explanation as regards the valuation that the samples shown to them were of good quality and hence on such reasonable belief they have undertaken the clearance work. No case is made out that the Customs Broker knowingly filed the shipping bills that the goods are overvalued. Accordingly, penalty under Section 114AA is also not imposable.
CUSTOMS BROKER VERSUS COMMISSIONER OF CUSTOMS, CESTAT NEW DELHI, Pronounced on 02.09.2020
Key takeaway for the fellow CB’s from this case :
1. Make sure to get 100% KYC documents including an authorisation letter
2. Deal directly with Importers and exporters & be careful when you deal through others.
3. Whenever get doubt about the valuation or quality of the product shipped, try to get the sample of the product for your satisfaction and for records. In above case CB has verified the quality of the product shown to him, which saved him from penalty. Try to study the value declared vs quality of the product.
4. Make sure, service charges are received against proper tax invoice to bank account directly by chq/DD/NEFT/RTGS/IMPS.
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