Customs Broker Liable for Penalty Under Section 112(b) for Transporting Goods to Unauthorised Premises: CESTAT [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore Regional Bench, has dismissed the appeal by upholding the penalty of Rs. 2,00,000/- imposed on the Customs Broker for aiding in the diversion of duty-free imported goods.

The appellant, K. C. Jacob & Company, a Customs Broker, had facilitated the import of raw cashew nuts by M/s. Thankam Cashew Factory under Notification No. 18/2015-Customs, which granted duty concessions based on Advance AuthorizationLicences. A Department of Revenue Intelligence (DRI) investigation revealed that the imported goods were being diverted to the local market in violation of the licensing conditions, which mandated that goods be processed only at specific approved premises.

Pharma Job Work Manufacturing of Excisable Goods Not Classifiable as Renting of Immovable Property Service for levy of Service Tax: CESTAT[Read Order]

The Commissioner of Customs confirmed a duty demand of Rs. 2.55 Crores against the importer and imposed a penalty on the broker for abetting the fraud. The appellant, represented by M. A. Baby, Advocate, argued that they merely acted as a Custom House Agent following the importer's instructions. They contended that the necessary transportation forms (Form 15 and Form 8FA) were generated by the importer, and since the goods were cleared by Customs authorities, the broker could not be held liable under Section 112(b) of the Customs Act, 1962.

The Coram of Dr. D.M. Misra (Member Judicial) and R. Bhagya Devi (Member Technical), however, found that the broker was fully complicit in the violation. The Tribunal relied on the statement of Mr. Rapheal Vinisten, Executive representing the appellant, who admitted that they were aware of the licensing conditions requiring delivery to specific units. Despite this knowledge, the broker arranged transportation to different addresses provided in sales tax forms upon the importer's telephonic instructions, without informing the authorities.

The Bench observed that the appellant, being a partner in the transportation firm, had actively facilitated the diversion of goods for which payment was received directly from the importer. It was noted that the handling over of sales tax delivery notes to truck drivers, knowing the goods were being diverted in violation of the licence, established the broker's knowledge of the illicit activity.

The Tribunal observed:

“Since the representative of the appellant admitted to the fact that they were aware of the provisions of the Advance Authorization Licences and they were not supposed to divert the goods to places other than the premises mentioned in the advance licences, knowing well they had diverted the consignments thus violating the provisions of advance authorizations... the Revenue having clearly established the involvement of the appellant in aiding transportation of the imported goods to the places other than the premises mentioned in the Advance Authorised Licences, hence, the provisions of Section 112(b) of the Customs Act, 1962 are attracted since the goods are liable for confiscation.”

The Tribunal sustained the penalty imposed by the Commissioner and dismissed the appeal.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates