Legal principle

A customs broker's failure to perform duties under CHALR attracts disciplinary action under CHALR alone; a penalty under section 114 of the Customs Act requires proof of abetment or active collusion — involvement beyond those duties with knowledge of the illegality, common intention or a stake in it.

Court decision

The Tribunal set aside the penalties imposed on the customs broker under sections 114(iii) and 117 and allowed the appeals with consequential relief. On the extract, no final ruling is recorded on the DRI-jurisdiction question under Section 75; the disposal rests on the merits of the penalty.

Facts

DRI investigated alleged fraudulent exports by M/s. SSK Knit Apparels, Tirupur, finding fictitious firms, inflated export values, substandard goods and duty drawback claims of Rs. 1,05,81,796 without realisation of export proceeds. A SCN dated 06.10.2006 was issued by DRI to the customs broker (CHA), Manasa Impex Services, for allegedly filing shipping bills without verifying declarations and otherwise facilitating the wrongful drawback claims. Orders-in-Original 06-14/2009 of the Commissioner of Customs & Central Excise, Coimbatore confirmed recovery of the drawback with interest from the exporter and imposed a penalty of Rs. 5,00,000 on the CHA under section 114(iii) of the Customs Act, with a further penalty under section 117 in one OIO. The CHA appealed to CESTAT, Chennai, in nine appeals decided by a common order.

Key provisions

• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Rule 16, Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 — Repayment of erroneous or excess payment of drawback and interest
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 114(iii), Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 75, Customs Act, 1962 — Drawback on imported materials used in the manufacture of goods which are exported
• Section 4(1), Customs Act, 1962 — Appointment of officers of customs
• Section 2(34), Customs Act, 1962 — Definitions
• Section 142(1), Customs Act, 1962 — Recovery of sums due to Government
• Section 6, Customs Act, 1962 — Entrustment of functions of Board and customs officers on certain other officers
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 5, Customs Act, 1962 — Powers of officers of customs
• Rule 16A, Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 — Recovery of amount of Drawback where export proceeds not realised