Delhi High Court
Commisssioner Of Customs vs Shiva Khurana on 14 January, 2019
$~17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : 14th January, 2019
+ CUSAA 45/2017
COMMISSSIONER OF CUSTOMS ..... Appellant
Through : Mr. Harpreet Singh, Sr.
Standing Counsel along with
Ms. Suhani Mathur, Adv.
versus
SHIVA KHURANA ..... Respondent
Through : Ms. Shikha Sapra, Mr. Piyush
Kumar, Ms. Riya Chanana and
Mr. Shashwat Bhardwaj, Advs.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE PRATEEK JALAN
S. RAVINDRA BHAT, J. (ORAL)
1. The questions of law framed in this appeal are as follows:
"(i) Whether Customs, Excise and Service Tax Appellate
Tribunal was right in deleting penalty of Rs.50 lakhs
imposed on the respondent as customs house clearing agent
and in holding that the respondent was not required to verify
and ascertain the address and details of the importers?
(ii) Whether the order passed by the Customs, Excise and
Service Tax Appellate Tribunal is perverse and contrary to
the facts on record and mentioned in the order-in-original?"
2. The brief facts of this case are that the respondent assessee
Customs House Agent (hereafter referred to as "CHA") was issued a
show cause notice on 15.03.2012, which alleged that the export of
goods facilitated by it, was dubious and that the concerned parties,
upon investigation and inquiry were found to be non-existent. The
CHA has replied to the show cause notice and contested the
proceedings arguing that it facilitated the consignments in question at
the behest of one of its employees - Mr. Sanjay Panwar, who had in
the past too, brought clients. It appears that in the course of
investigations, the Revenue authorities found that the concerned
exporters, were fictitious and that the consignments in truth were
smuggled and also highly over-valued. In these circumstances, the
penalty of `50,00,000/- was imposed on the CHA under Section 114
of the Customs Act, 1962.
3. The CESTAT by its impugned order allowed the CHA's appeal;
while doing so, it relied upon the judgment in Falcon India v.
Commissioner of Customs, 2015 (326) ELT 728 (Del).
4. It is argued on behalf of the Revenue that the CHA in this case
could not be absolved of responsibility inasmuch as Regulation 13 of
the Customs House Agent Regulation, 2004 requires it to exercise due
diligence and care. Therefore, a duty was cast upon it to ensure that
the documents submitted by it on behalf of its clients were reflected as
genuine export transactions and were not sham, meant to be conduit
for smuggling over-valued goods. Learned counsel relied upon the
judgment of the Andhra Pradesh High Court in Commissioner of
Customs & Central Excise v. H.B. Cargo Services, 2011 (268) ELT
448 (A.P.) and submitted that the judgment in Falcon (supra) is not
applicable.
5. In this case, the discussion with respect to the CHA's defence
and the reasoning of the Commissioner of Customs is as follows :
"66.1. The noticee CHA in their defence have argued that
the whole fiasco was the result of a fraud committed by one
ex-employee Mr. Sanjay Panwar, who had provided them
"export business" as he knew many people in exports
business and after knowing about his ill doings, they
terminated their association with him and Mr. Sanjay
Panwar, no longer worked with them. They have also
claimed that the same exporters had exported goods
previously without any adverse notice, which was also the
reason they did not suspect any foul play. They have only
put an argument that they did not get to see or handle the
goods for export as CHA and they work merely on the basis
of the documents provided to them by the concerned party.
They have also argued that in the present case the goods
referred for examination were examined by the customs
officers and cleared for export and that they had no
expertise on in valuation of the goods nor they could
physically count them prior to export and therefore they did
not willfully cooperated with the exporters for the fraudulent
exports. All these are alibis to cover up their failures once
the offence being perpetuated by them was detected and
their game plan exposed, they have resorted to such
explanations in self defence.
67. The investigations into the matter have conclusively
established and proved beyond any measure of doubt that
the noticee export firms were found to be non-existing at the
addresses declared in the shipping bills or in the IEC.
Further Regulation 13 of the CHALR, LUU4 stipulates that
a CHA shall verify antecedent, correctness of Importer
Exporter Code (IEC) Number, identity of his client and
functioning of his client at the declared address by using
reliable, independent, authentic documents, data or
information. Further Regulation 19 also emphasizes that the
CHA shall exercise such supervision as may be necessary to
ensure the proper conduct of his employees in regard to
their employment. The failures on part of the CHA to
discharge its legal and statutory responsibilities have
enabled and fully facilitated the fraudulent exports in the
name of his non-existing clients, who are the noticees in the
instant proceedings. The fraudulent exports to claim undue
drawback benefits could not have taken place or at least
come to light earlier, had the CHA fulfilled his obligations
honestly. To get additional business, they reportedly shut
their eyes on the activities of their employee and also failed
to verify the antecedents or their clients. Even the items
being exported by the five exporters show the same declared
PMV, but they failed to notice the same. This obviously
cannot be so without their active and clear complicity in the
matter. If in the name of business the CHA overlooks his key
legal responsibility and role, he is not only unworthy of a
CHA but liable to not only equivalent but stricter punitive
liabilities, more so on account of the fact of his being a CHA
and licensed in term of CHALR Rules, 2004 under the
Customs Act. He has deliberately failed to produce/unravel
his co-conspirators and fraudsters in the matter."
6. The Regulation in question reads as follows :
"13. Obligations of Customs House Agent.-
A Customs House Agent shall -
xxx xxx xxx
(o) verify antecedent, correctness of Importer Exporter Code
(IEC) Number, identity of his client and functioning of his
client at the declared address by using reliable,
independent, authentic documents, data or information."
7. This court is of the opinion that the impugned order is justified
in the facts and circumstances of the case. The reference to the
verification of "antecedents and correctness of Importer Exporter
Code (IEC) Number" and the identity of the concerned
exporter/importer, in the opinion of this Court is to be read in the
context of the CHA's duty as a mere agent rather than as a Revenue
official who is empowered to investigate and enquire into the veracity
of the statement made orally or in a document. If one interprets
Regulation 13(o) reasonably in the light of what the CHA is expected
to do, in the normal course, the duty cast is merely to satisfy itself as
to whether the importer or exporter in fact is reflected in the list of the
authorized exporters or importers and possesses the Importer Exporter
Code (IEC) Number. As to whether in reality, such exporters in the
given case exist or have shifted or are irregular in their dealings in any
manner (in relation to the particular transaction of export), can hardly
be the subject matter of "due diligence" expected of such agent unless
there are any factors which ought to have alerted it to make further
inquiry. There is nothing in the Regulations nor in the Customs Act
which can cast such a higher responsibility as are sought to be urged
by the Revenue. In other words, in the absence of any indication that
the CHA concerned was complicit in the facts of a particular case, it
cannot ordinarily be held liable.
8. As far as the decision in H.B. Cargo Services (supra) is
concerned, the facts reflected in paras 5 and 9 facially show that the
CHA played an active role. It is in these circumstances that in para 15
(which was relied upon by the Revenue), the Court made the
following observations :
"15. While the punishment imposed on the CHA has to be
commensurate with the gravity of the proved acts of
misconduct as, on revocation of his license, the CHA would
suffer, it must not be lost sight of that, though it is the right
of a citizen to carry on his business or profession, it is
subject to reasonable restrictions and conditions which, in
the present case, are stipulated under the CHALR
[Worldwide Cargo Movers - 2010 (253) E.L.T. 190]. As
noted hereinabove, blank shipping bills were issued by the
partner and authorized representative of the respondent -
CHA for a consideration of Rs.150/- per shipping bill. In
cases involving corruption there cannot be any punishment
lesser than the maximum i.e., revocation of the license. No
other lesser punishment can be contemplated in such cases
[State of T.N. v. K. Guruswamy - (1996) 7 SCC 114]. Any
sympathy shown in such cases is totally uncalled for and
opposed to public interest. The consideration received for
the act of misconduct may be small or large. It is the act of
corruption that is relevant, and not the quantum involved in
such acts. [Ruston & Hornsby (I) Ltd. v. T.B. Kadam -
(1976) 3 SCC 71; U.P. SRTC v. Basudeo Chaudhary -
(1997) 11 SCC 370; Janatha Bazar (South Kanara Central
Coop. Wholesale Stores Ltd.) v. Sahakari Noukarara
Sangha - (2000) 7 SCC 517; Karnataka SRTC v. B.S.
Hullikatti - (2001) 2 SCC 574; Rajasthan SRTC v.
Ghanshyam Sharma - (2002) 10 SCC 330; Municipal
Committee, Bahadurgarh v. Krishnan Behari - (1996) 2
SCC 714; U.P. SRTC v. Suresh Chand Sharma - (2010) 6
SCC 555; J.A. Naiksatam v. Prothonotary & Senior Master,
High Court of Bombay - (2004) 8 SCC 653; Union of India
v. Gyan Chand Chattar (2009) 12 SCC 78; NEKRTC v. H.
Amaresh - (2006) 6 SCC 187; U.P. SRTC v. Vinod Kumar -
(2008) 1 SCC 115]."
9. In the given circumstances, this Court is of the opinion that the
decision in H.B. Cargo Services (supra) does not apply in the present
case.
10. Having regard to the above discussions, this Court is of the
opinion that there is no merit in the appeal; the CESTAT's impugned
order is accordingly affirmed. The appeal is dismissed.
S. RAVINDRA BHAT, J
PRATEEK JALAN, J
JANUARY 14, 2019
aj
