Illegal Removal of Seized Red Sanders by CCSP: CESTAT upholds Penalty under Customs Act [Read Order]

The Mumbai bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld the penalty under the Customs Act, 1962 in the case of illegal removal of seized red sanders by the Customs Cargo Service Provider (CCSP).

M/s Container Corporation of India Limited, the appellant challenged the Order-in-Original passed by the Commissioner of Customs (General), Jawaharlal Nehru Custom House (JNCH), Nhava Sheva. The appellants was appointed as a ‘custodian’ of Container Freight Station (CFS) under Section 45(1) and 141(2) of the Customs Act, 1962 and also as a Customs Cargo Service Provider (CCSP) duly approved by the Commissioner of Customs (General), under Regulation 10 of Handling of Cargo in Customs Areas Regulations (HCCAR), 2019.

The CCSP license for the appellants was renewed from time to time by the Commissioner of Customs (General), JNCH and the latest approval as a CCSP was issued by Public Notice No.134/2020 dated 14.10.2020 for five years with effect from 15.03.2020.  A Shipping Bill No.5807023 dated 05.06.2013 was filed by an exporter M/s. Krish Exports, Mumbai, before JNCH Customs for export of “household articles of stainless steel, SS Utensils” to Hong Kong, in a factory stuffed container GESU-3997518 and the same was given “Let Export Order” (LEO) from the appellant’s CFS.

Special Intelligence & Investigation Branch (SIIB) received information about the smuggling of Red Sanders wood logs stuffed into container No. GESU-3997518 had put on hold the export goods in the said the container, and examined the same. It was found that as against the declared goods of ‘7454 Kgs. of stainless steel household articles’ mentioned in the Shipping Bill, the goods present in the containers actually were found to be the ‘Red Sanders of 12695 Kgs.,’ which are prohibited for export. The prohibited goods attempted for illegal export were seized under the Customs Act, 1962 and handed over for safe custody with the appellants.

The department had initiated separate show cause proceedings against the exporter and other persons concerned in respect of the attempt to smuggle red sanders under the Customs Act, 1962, A show cause proceedings was also initiated against the appellants in respect of violations of clauses (a), (b), (f), (i) and (q) of sub-regulation (1) of Regulation 6 of Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR) and Sections 45(2), 141 of the Customs Act, 1962.

 The appellants stated that HCCAR is applicable only to import/export goods; these regulations will not apply to seized goods which have been handed over for safe custody to the appellants.  Further, he stated that the provisions of Section 45(2) of the act will apply only in respect of imported goods, and since the goods involved are ‘export goods’, invocation of the above legal provision in the impugned order cannot be sustained.

The Authorised Representative appearing for the Revenue reiterated the findings of the Commissioner of Customs (General) and contended that the same is sustainable in view of the legal provisions cited in the impugned order.

Regulation 11 of HCCAR provides for suspension of approval for appointment as the Customs cargo service provider by the jurisdictional Commissioner of Customs, by following the prescribed procedure. In this case show-cause notice dated 16.03.2020 was issued and upon completion of inquiry, the enquiry report dated 27.05.2012 was submitted and on this basis the impugned order dated 18.04.2023 was issued.

It was viewed that the adjudicating authority has given personal hearing to the appellants and the Commissioner under Regulation 12(8) ordered for suspension of the operation of CCSP for 15 days besides imposition of penalty for the contravention of the provisions of HCCAR for an amount of Rs.50,000/-.

The clarification issued by CBEC vide circular No. 13/2009-Customs dated 23.03.2009, the provisions of Regulation 7(2) has been explained stating that in order to overcome situations where clearances of imported/export goods are getting affected by congestion at a particular CFS, the Commissioner of Customs may consider regulating the entry of goods in that particular CFS for a temporary period, say 15 days, in terms of this regulation.

 In such cases, the Commissioner of Customs may not allow any import/export cargo to be received and handled in the facility or may allow such reduced quantity as considered sufficient for being handled efficiently for such temporary period till the congestion is cleared and the delay in clearance of goods is sorted out.

It was viewed that Section 117 of Customs Act, 1962 provide for imposition of penalty on any person who contravenes any provision of the said Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, to be liable to a penalty not exceeding four lakhs rupees. The maximum amount of penalty prescribed under Section 117 initially at Rs. One lakh was revised upwards to Rs. Four lakhs, with effect from 01.08.2019.

A two-member bench comprising Mr. S.K. Mohanty, Member (Judicial) and Mr. M. M Parthiban, Member (Technical) observed that “the appellants not only failed to fulfil the conditions and to abide by the responsibilities reposed on them as CCSP, but also failed to rectify the situation as one another attempt was made again for illegal removal of seized red sanders, which was identified by SIIB Customs on 14.08.2014. Hence, there are clear violations of the HCCAR and Section 141(2) of the Customs Act, 1962 by the appellant and thus we do not find any infirmity in the impugned order imposing penalty under Section 117 ibid on the appellants.”

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