Allegation of Smuggling of Cosmetics through Invalid Bill of Entry: CESTAT sets aside Penalty under the Customs Act in the absence of Deliberate Misdeclaration [Read Order]

The Ahmedabad bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) set aside a penalty under the Customs Act, 1962 imposed on an allegation of smuggling of cosmetics through an invalid bill of entry as there was no deliberate misdeclaration.

Ashutosh Container Services Pvt Ltd, the appellant, who has a CFS which has been declared as a customs area under Section 8(b) of the Customs Act, 1962, and has been approved as a custodian of the said premises under Section 45 of the Customs Act, 1962, vide Customs Notification No. 9/2007- dated 25.04.2007.

Two Containers stuffed with cosmetics items were mis- declared as Baby diapers in IGM, and were removed clandestinely from Ashutosh Container Services Private Limited (Ashutosh CFS) Mundra, by way of generating & producing bogus Customs documents viz. Bills of Entry, Invoice, and Packing list on 16.09.2015. By certain importers for smuggling, action was taken for interception.

The investigation revealed that both containers have been imported in the name of M/s Season International Pvt. Ltd, through Vessel CHICAGO, Voyage No. 002 & M/s Intec Poly Pvt. through Vessel Inter Mumbai, Voyage No. 041. The details of the goods as per the Import General Manifest (IGM) were declared as Baby Diapers.

On being enquired with the drivers, the intercepted containers were found laden on a trailer no. GJ-12 BT 0492 & GJ-12 AY 8910, it was learnt that both the containers were taken out of Ashutosh CFS, at around 19:05 hours & 20:00 hours on 16.09.2015. On being asked to produce the Customs clearance papers covering both the containers, both the drivers produced the Consignment Note, copies of Bills of Entry No. 2564071 dated 11.09.2015 & 2569697 dated 12.09.2015, Commercial Invoice pertinent to both Bills of Entry, Transport built & Form 402 etc.  

It was found that the status for both the Bills of Entry in the system showed invalid/inactive i.e. such Bills of Entry did not exist in the system or had not been filed. During the examination of goods it was noticed that the alleged bogus/ fake Bills of Entry inscribed the name of M/s Season International Pvt. Ltd., Mumbai (IEC 0494026693) an M/s Intee Poly Pvt. Ltd., Mumbai (IEC 0409001851) as importers name, Custom Broker as M/s Briano Marine, PAN based CB (AETPR2783QCH001) respectively for import of goods as declared "Baby Diapers".

During the examination of goods, it was found that cartons stacked in front rows only contained Diapers, while the cartons stacked behind the front rows were noticed containing Cosmetics of reputed brands viz. Nivea Body Lotion, Lomani Brand Deo Spray, Dove Brand Beauty Cream, Revlon Brand Colour Silk Beautiful Colour, Eskinol Natural Lemon Facial Cleanser.

While proceeding against various parties involved, it was noticed that the Custom Cargo Service Provider (Ashutosh CFS) had failed to fulfil/ comply with the provisions of Regulation 6 of HCCAR, 2009 and accordingly appointment of the Customs Service Provider of Ashutosh CFS was placed under suspension under Sub-regulation (2) of Regulation 12 of HCCAR, 2009, which was revoked by the Principal Commissioner of Customs,

Commissioner while dealing with the disciplinary proceedings against the policy under sub-Regulation (8) of Regulation 12 handling cargo in customs area Regulation 2009, imposed a penalty of Rs. Fifty thousand against the appellant (CFS).

It was viewed that in the normal course if the custodians complied with the procedure as mandated by the Public Notice, they could not be charged with an allegation of making the goods liable for confiscation under the provision of section 111 ) of the Customs Act, 1962. Only after detection of the instant case, it was mandated by Public Notice No.27/2015 dated 28.09.2015 that CFSS shall check the status of the Bill of Entry on the ICEGATE website before issuing the gate pass for exit of any import cargo.

During the verification of documents pertinent to the bills of entry under which clearance was taken, the employee of M/s Ashutosh CFS noticed the name of the custom broker for the first time and he has some doubts & about the verification of the genuineness of the bill of entry through ICEGATE, it displayed "No record Found", but he allowed the clearance as the document produced appeared to be genuine and many times ICEGATE show such type of error due to slow server.

A two-member bench comprising Somesh Arora, Member (Judicial) and C. L. Mahar, Member (Technical) held that “there is nothing in the public notice, which required the employees of the ICD/custodian to refer to ICEGATE before public notice of 2015. The department cannot pick and choose to decide the lack of diligence by number of transactions even when the employee involved in extra diligence believed that “documents not found” was due to some system error or failure. If is version has to be taken into account it has to be in totality and not piecemeal.”

The CESTAT set aside the impugned order and penalty imposed under Sub-Regulation 8 of Regulation 12, are not inclined to punish the employer for such facts of discretion or extra diligence than prescribed, on the part of the employee especially when the department did not find anything wrong when compared to employees of other CFS.

To Read the full text of the Order CLICK HERE

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