Chandan Chatterjee Vs Commissioner of Customs (Port) (CESTAT Kolkata)
Introduction: Chandan Chatterjee, a partner at M/s. Shuvam Enterprises, challenges a penalty imposed by the Commissioner of Customs (Port) for an attempted export of 19650 kg Red Sanders. The case revolves around violations of the Foreign Trade Policy 2009-2014.
Detailed Analysis: The Tribunal acknowledges Chatterjee’s prior issues under the Custom Brokers Licensing Regulations, which were resolved. The penalty in question pertains to Section 124 of the Customs Act and Section 114(i), imposing a penalty not exceeding three times the value of the goods.
The Tribunal notes Chatterjee’s lack of knowledge regarding the prohibited goods in the containers. While finding him at fault for not fulfilling obligations, the Tribunal emphasizes the need for a proportionate penalty. The penalty is set up to March 31, 2016, considering no irregularities post-detection.
The Tribunal examines the charges against Chatterjee, emphasizing his role in facilitating the attempted smuggling. It notes his failure to verify details, misleading investigations, and continuous contact with the client post-interception. However, it questions the lack of explicit evidence indicating conspiracy or abetment.
The Adjudicating Authority finds Chatterjee liable under Section 114(i) based on his omissions and commissions. It concludes that Chatterjee, as a Customs House Agent, failed in his duties, facilitating the attempted export. The order points out specific lapses, such as not reporting discrepancies and not insisting on KYC documents.
Conclusion: The Tribunal sets aside the penalty imposed on Chatterjee, citing insufficient evidence of active involvement or mensrea in the attempted smuggling. It stresses the need for a positive role to invoke penalties. The order highlights the duty of Customs Officers in verifying seals, questioning the imposition of responsibilities solely on the Customs Broker.
In conclusion, the case underscores the importance of establishing an active role and mensrea for penalties under Section 114(i) of the Customs Act. The Tribunal emphasizes proportionality and considers Chatterjee’s lack of knowledge about the prohibited goods in determining the penalty period.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The present appeal has been filed by Shri Chandan Chaterjee partner of M/s. Shuvam Enterprises, a Customs Brokers firm against, the order of the learned Commissioner of Custom (Port) issued vide order No. KOL/CUS/COMMR/PORT/50/2014 dated 08.09.2014. The aforesaid order has been passed pursuant to a show cause notice issued under Section 124 of the Customs Act, 1962 to the appellant amongst others. The issue concerns the attempted export of 19650 kgs of red sanders- the export of which is prohibited as per Foreign Trade Policy 2009-2014.
2. It is pointed out by the learned advocate that in addition to the impugned show cause notice they were also issued a show cause notice under the provisions of the Custom Brokers Licensing Regulations, 2004 which has since been adjudicated upon and whereby in appeal the Custom Brokers license has since been restored and they were allowed to function as a Customs Broker on a regular basis.
3. We note that the Tribunal vide its order referred supra observed as under:
“5.1. In the above case CHA was out of business for 8 years but Hon’ble Court while deciding clearly observed that trust between the CHA and the Customs authorities has to be viewed seriously. It was also held that punishment has to be proportionate to the nature and extent of violation. Based on the existing facts in the present appeal before us we hold that appellant was found wanting in discharging his obligations under Regulation 13(a), (b) and (o) of the CHALR, 2004 and accordingly orders passed by the adjudicating authority under Regulation 2 0(1) of CHALR, 2004 are upheld.
6. However, looking to the fact that appellant had no knowledge of the contraband nature of the goods substituted in the containers and in view of the ratio of the relied upon case law, punishment for a lifetime cannot be imposed upon the appellant. We are of the considered opinion that revocation ordered by the adjudicating authority should be for a limited period. As there is no irregularity committed by the appellant from the date of offence detected by DRI, the revocation ordered by the adjudication authority is made effective upto 31.03.2016 and with effect from 01.04.2016 CHA Licence of the appellant and forfeiture of Security deposit will be restored.”
4. The present proceedings concern the initiation of action against the accused persons for action in terms of Section 124 of the Customs Act. The said section deals with issuance of show cause notice before confiscation of goods. The same is enumerated as under:
‘The Customs Act, 1962
124. Issue of show cause notice before confiscation of goods, etc.
No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person-
(a) is given a notice in writing with the prior approval of the officer of Customs not below the rank of an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;
(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and
(c) is given a reasonable opportunity of being heard in the matter:
PROVIDED that the notice referred to in clause (a) and the representation referred to in clause (b) may, at the request of the person concerned be oral:
PROVIDED FURTHER that notwithstanding issue of notice under this section, the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed.”
5. As vide the order in original the adjudicating authority has imposed a penalty of Rs. 50,000/- under Section 114(i) of the Customs Act, it would be apt to refer to the said section as well.
“The Customs Act, 1962
114. Penalty for attempt to export goods improperly, etc.
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, shall be liable,-
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding three times the value of the goods as declared by the exporter or the value as determined under this Act, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of Section 11 4A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five thousand rupees, whichever is higher:
PROVIDED that where such duty as determined under subsection (8) of Section 28 and the interest payable thereon under Section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. of the penalty so determined;
(iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater.”
6. In view of the fact that the action initiated against the Customs Broker for violation of his functions and non-fulfilment of responsibilities as a Customs Broker, a show cause notice was issued to the appellant under the provisions of CBLR and has been decided upon, the limited question, therefore now remains is with regard to penal action taken in terms of Section 114(i) of the Customs Act. Any penal consequence will befall on a person who commits an act or fails to do an act as would render the concerned goods liable to confiscation under Section 113 of the Customs Act. It is nobody’s case that the red sander woods logs seized were not liable for confiscation under the said section, therefore all that remains to be examined, is the omission or the commissioning of action/act, performed/non-performed by the present appellant with regard to the said export of red sander wood logs.
6.1. Para 31(d) of the show cause notice deals with the alleged role of the appellant in the present matter. The said para reads as under:
(d) Shri Chandan Chatterjee, Partner of M/s. Shuvam Enterprises, the CHA firm has not complied with his responsibilities and obligations as Custom House Agent. He had neither kept watch on the account of bottle seals issued either by the container agent or applied on the containers and/or mentioned on the CTD documents, as detailed in table at Sl. No. 24 above. He also, did not report any discrepancy to customs regarding defaced customs bottle seal at one of the containers. He appears to have not insisted for KYC documents from Shri Sanjay Singh (by whom he was engaged/employed for clearance of the CTD consignments and/or from whom he received payments) till the interception of the subject consignment as envisaged in CHALR ‘2004. He appears to have misled the investigation by placing one KYC document, viz, copy of PAN card of Shri Sanjay Kumar Singh, as was reportedly received by e-mail after the interception of the consignment, which was found to be forged and fabricated one. He neither tried to verify Shri Sanjay Singh’s other particulars like address, bank details etc, though, he handled various consignments of Shri Sanjay Singh of M/s. Global Marine Agency on earlier occasions and thus failed to discharge his obligations as a C.H.A. Even after interception of both the containers, he was in regular contact with Shri Sanjay Singh, as detailed in the call detail analysis as mentioned in Table Sl. No. 28 and 28.3 above. He received the carting order from the container agent on being advised by Shri Sanjay Singh, as would be evident from the e-mail correspondences, while he did not verify the container seals with the CTD documents which he processed at Customs House, Kolkata. Thus his acts and omissions, appear to have facilitated the attempted smuggling of Red Sanders.
6.2. Further, as regards the role of the appellant, para 32(vi) of the show cause notice has the following to state:
“vi) Shri Chandan Chatterjee, partner of M/s. Shuvam Enterprises (CHA firm) for his material gain assisted the said racket in the attempt of illicit export of Red Sanders in the name of M/s. Osia Enterprise of Nepal and have thus failed to discharge his responsibilities properly/legally in dealing with the subject goods as detailed above. It thus appears that the acts and omissions of Shri Chandan Chatterjee, partner of M/s. Shuvam Enterprises rendered the subject goods (red sanders) liable to confiscation and thereby Shri Chandan Chatterjee is liable to penal action under Section 114(i) of the Customs Act, 1962 for the grounds mentioned hereinbefore.”
7. Analysing the said charges, it would be of interest to see as to how the learned Adjudicating Authority has dealt with the said charges. Thus para 45 and 45.1 of the order in original concerning the appellant are reproduced hereunder:
“45. Shri Chandan Chatterjee, Partner of the CHA M/s. Shuvam Enterprises (notice No:3) has replied to the SCN and also appeared for the personal hearing on the scheduled date. He denied and disputed the charges made out in the SCN. One of the basic contention made by him is that for failure to discharge functions a CHA can be proceeded against under Custom House Agent~ Licensing Regulations (CHALR in short) and not under Section 124 of the Customs Act, 1962. Contention of the notice is not acceptable. Here the SCN has been issued under Section 124 of the Customs Act, 1962 with a proposal inter alia of penal action under Section 114(i) of the Customs Act, 1962 on the said noticee for his omission and commission in the attempted export of prohibited Red Sanders. Therefore, the matter has to be decided in the light of violations made if any, under Customs Act, 1962 irrespective of the fact whether they can be proceeded against under CHALR as Customs Act, 1962 and CHALR are two different statutes.
45.1. A Customs House Agent (CHA) is appointed by the Government to act as a facilitator for export or import of goods by exporters or importers as per the provisions of law. The elaborate procedure/formalities that has to be followed prior to the appointment of a CHA, goes to indicate that, paramount importance of a CHA is to look into the interest of the Government while discharging the function as a facilitator for an exporter/importer. The noticee No. 3 in this case has been found to be wanting in his duties and responsibilities in as much as he did not report any discrepancy to customs regarding defaced customs bottle seal of one of the containers. He did not insist on KYC documents from Shri Sanjay Singh – notice No:1, (who purportedly engaged/employed the CHA for clearance of the CTD consignments and/or from whom he received payments) till the interception of the subject consignment. He produced a copy of PAN card of Shri Sanjay Kumar Singh (noticee No. 1) purportedly received by e-mail after the interception of the consignment, which was found to be forged and fabricated. Shri Chatterjee has failed to take basic precaution to verify the other particulars of Shri Sanjay Singh like address, bank details etc. although, he handled various consignments of Shri Sanjay Singh of M/s. Global Marine Agency on earlier occasions as well and thus failed to discharge his obligations as a CHA. From the analysis of the call record at para 28.3 of the SCN it is found that even after interception of both the containers, Shri Chatterjee was in touch with Shri Sanjay Singh (notice No.1) in as much as, on 30.11.12, Shri Sanjay Singh called Sri Chatterjee four times and sent an SMS and also received calls of Shri Chandan Chatterjee twenty times. Further, Shri Chatterjee received the carting order from the container agent on being advised by Shri Sanjay Singh, as would be evident from the email correspondences, but did not verify the container seals with the CTD documents which he processed at Customs House, Kolkata. The very fact that Shri Sanjay Singh, having his purported office at M. G. Road, Kolkata (which is not far from the Customs House) was never coming forward but always communicating by phone or email was sufficient reason to cause suspicion, which Shri Chatterjee has ignored. Further it is not the first time that a consignment of Red Sanders has been intercepted at the time of export by misdeclaration of description by unscrupulous persons/exporters. Many such cases have been caught and several CHAs have been implicated in the recent past in the similar export of Red Sanders. Being in the trade the present CHA should have been aware of and alter against such possibilities. Even assuming (but not admitting) that the CHA did not actively participate in the subject attempted export, nothing can take away from the fact that the failure on the part of the CHA to exercise necessary precaution had facilitated the attempted export in question. Thus, by his aforementioned acts of omissions and commission Shri Chandan Chatterjee (noticee No.3) is liable for penal action under Section 114(i) of the Customs Act, 1962, as proposed in the SCN.”
8. We note that in the aforesaid findings of the learned Commissioner there is nothing to impute by way of a categorical assertion the conspiring of, or an express omission or commission, leading to the fraud on the part of the appellant. There is nothing in the findings of the learned Commissioner to assert a positive role or to impute abetment on the part of the appellant in the attempt to smuggle out Red Sanders. Thus, in view of anything specific on the part of the appellant being brought out on record, it would be completely inappropriate to subject the appellant to penal provisions under Section 114(i).
9. The fact that in so far as this Custom Brokerage firm was concerned, Tribunal has categorically held that though the appellant was found wanting in discharge of his obligations under Regulation 13 (a), (b) and (o) of CBLR, 2004, they cannot be penalized in perpetuity and though had accordingly upheld the order of the learned Adjudicating Authority issued under Regulation 20(1) of the CBLR, it had however restored the same.
10. Further, the order of the adjudicating authority, fails to show that the appellant had in effect supplemented the efforts to smuggle out Red Sander wood. For any failure of nonperformance of the obligation under the CBLR, appropriate orders have already been passed by this Tribunal. Thus, to take penal consequences against the present appellant, a partner of the Customs Brokerage firm, it is necessary in law to show that the appellant had in any way connived in the substitution of the declared cargo, or was in the knowledge of the fact that the declared cargo loaded in the container was substituted with prohibited goods. There is no such finding by the adjudicating authority in the matter. Moreover, remaining in contact with the client post detection of the act of attempted smuggling or communicating with clients on email despite being located nearby, do not in themselves establish any conspiracy, abetment or involvement in the act of smuggling and cannot be interpreted to mean anything ulterior with sinister designs. In so far as the issue concerning non-checking of the bottle seals is concerned, it must be pointed out that it is the prime responsibility of the Customs Officers concerned to verify the seals on the container and this responsibility cannot be cast upon the Custom Broker (read appellant). It be noted that in terms of the obligations under the CHALR, no case remains any further in view of the said proceedings, having attained finality. It is the expressly incumbent on the department to have pointed out the role played by the individual/appellant herein for imposition of penalty on them under Section 114(i) of the Customs Act. We also note that there is no finding by the adjudicating authority to indicate any beneficial consideration having been passed on to the appellant by way of a monetary reward or otherwise for his assumed role for which the appellant has been penalized by the adjudicating authority. It needs to be put on record that it is the container agent in fact who is required to maintain the account of bottles seals and nowhere does the statute assign this function to the Customs Broker. Further, as for the anomaly in the PAN it is a fact that there had been no previous knowledge of its substitution/manipulation. Under the circumstances, we feel that the order passed by the adjudicating authority is based largely on conjectures and assumptions. It is also noted that in respect of Nepal origin exports to third countries transiting through India, the Indian CHA’s function is limited to processing the Border endorsed CTD at Customs House, Kolkata, taking the EF no. and to get the seals on the containers inspected and to take “allow” order from Customs for export through Kolkata port. In the instant case, we find that the appellant did not have any chance to verify the seal of the containers before interception by the DRI and to inform the Customs accordingly. Further, as stated above it is not within the express scope of activities of the CHA to escort the consignment from the Indo-Nepal border and oversee physical transit of the cargo or for any acts of omission/commission of the transporter/freight forwarder as alleged. The learned Adjudicating Authority erred in not appreciating that the export documents in respect of the Nepalese export consignment were received from the Nepalese exporter. Also it is not in the scope/mandate of the CHA firm or his representative to collect KYC of transporter or freight forwarder or other intermediaries.
11. It is settled law that for imposition of penalty, it is necessary to establish a positive role on the part of the concerned person or the establishment of mensrea on part of such a person is a must. Vague allegations and negligence, if any, howsoever grave cannot be assumed to mean abetment so as to invoke penal action. For any penal action to be enforced, the establishment of an active role on the part of the accused is imperative. For the said propositions in law, reliance is placed on the ratio of the law as propounded in the following cases:
1. Commissioner of Customs Export Chennai Vs. Sahaya Edin Prabhu1,
2. Ashok Kumar Vs. Commissioner of Customs Export (Port), C hennai2,
3. Neptune Cargo Movers Pvt. Ltd. Vs. Commissioner of Customs Export Chennai3,
4. AN Bhatt Vs. Collector of Customs4,
5. Sahaya Edin Prabhu Vs. Commissioner of Customs, Chennai5, as affirmed by Madras High Court6,
12. In view of our findings above and the ratio of the law as flowing from the aforesaid case laws, we are of the view that the departments case falls woefully short of substantiating the invocation of penalty under Section 114(i) of the Customs Act. The impugned order is liable to be set aside. We therefore, set aside the order passed by the learned Adjudicating Authority and allow the appeal, with consequential relief, if any, in law.
(Operative part of the order was pronounced in the open Court)
Notes:-
1. 2015 (320) ELT 264 Madras
2. 2010 (262) ELT 321 Tribunal
3. 2007 (219) ELT 673 Tribunal, Chennai
4. 1991 (55) ELT 580 Tribunal
5. 2008 (222) ELT 308 Tribunal Chennai
6. 2015 (320) ELT 264 Madras High Court