By TIOL News Service

AHMEDABAD, MAY 29, 2014: ON investigation it was noticed that Shri Malleshwar Rao and Shri Jayesh were engaged in forging the signatures of the cashier of the Customs Dept. on the TR6 challans and forging signatures of Customs Officers on the reverse of photo copy of the duplicate copy of Bill of Entry and clearing consignments from the tank terminals.

The modus operandi adopted by Shri Malleshwar Rao was forging the signature of the cashier of Customs on TR6 challans against the demand draft which were received by him and utilizing the said demand drafts for clearance of consignments of various other importers by en-cashing the amounts indicated on the demand drafts & collecting the cheques from the importers in various names.

The Adjudicating Authority has imposed penalties holding that the importers were liable to be penalised for their actions of purchasing the demand draft from an individual with whom they were not well acquainted and by doing so they have committed and contravened of provisions of law due to which the goods became liable for confiscation; the CHA and their agents and employees are penalised for not having effective control over the individual and defrauders; and the storage terminals are penalised for not being vigilant and clearing the consignments on the photo copy of the duplicate Bill of Entry (ex-bond).

All these appellants are before the CESTAT.

It is submitted by the importers that the Adjudicating Authority has erred in imposing penalty on them u/s 112(a) of the Customs Act 1962 since they had paid the customs duty to CHA who had defrauded by forging the documents; that in any case they have discharged the entire customs duty taking a double blow. Reliance is placed inter alia on the decision in MNS Exports Pvt. Ltd 2007-TIOL-1659-CESTAT-BANG to submit that the importers had no idea of fraud being committed by the individuals hence they cannot be penalised.

On behalf of the Storage Terminals and their employees it is submitted that they cannot be visited with penalties as they had in good faith allowed clearance of the warehouse goods on the photo copy of duplicate ex-bond Bill of Entry and they had no reason to doubt that the signatures on the Bill of Entry were forged.

As regards the CHAs and individuals on whom penalties have been imposed, the counsel submitted that in the O-in-O it is specifically recorded that the entire mastermind of forging the signature of the Customs officer and cashier of Customs is one Shri Malleshwar Rao who has admitted to such activity on his part and, therefore, the appellants cannot be saddled with any penalty.

The appellant Shri P.V. Jayesh submitted that he had forged signature of the Customs Appraiser on being instructed by Shri Malleshwar Rao only in respect of one entry for seeking time bound clearance and, therefore, he pleads for leniency.

The Revenue representative submitted that the Adjudicating Authority had correctly brought out the roles played by the appellants in the massive fraud and that in view of s. 147(3) of the Customs Act, 1962 penalties have been correctly imposed on the principals and their agents. As regards the penalty on storage warehouse terminals and their employees, it is the submission that they have also been correctly penalised as instead of clearing the warehoused goods on duplicate ex-bond Bill of Entry they have cleared warehouse consignments on the photocopy of duplicate copy of ex-bond Bill of entry, very well knowing that such clearance are not permitted. Reliance is placed on the decision in Essar Oil Ltd 2004-TIOL-84-SC-CUS.

The Bench observed -

Penalties on Importers: The action of the importers or their employees can at the most be an act of erroneous business diligence. In my view, such an action is not covered under the provisions of Section 112 (a) of the Customs Act, 1962. In any case, importers having discharged the customs duty and the interest thereof on all the goods imported by them, the question of visiting them with penalty does not arise.

Penalties on CHA & proprietors of CHA: The Adjudicating Authority has specifically recorded that one Shri Malleshwar Rao is the master mind of the entire fraud committed on the Revenue. There is nothing on record which indicates that the CHA or power of attorney holder or the proprietor of CHA were aware of the actions of the individuals who committed the fraud. It is on record that Shri Malleshwar Rao committed the fraud for his personal gain. In my view penalty imposed on the appellant who are CHA or Power of Attorney holders or authorised signatories or proprietors does not arise, hence that portion of the order is unsustainable and is being set aside.

Penalties on Storage Terminals: It would be incorrect to hold that the said storage terminals or their employees were aware of the fraud committed by the individual Shri Malleshwar Rao and due to which the appellants can be visited with the penalty.

At the same time, I find that the storage terminal have not put in place the correct system for clearance of warehouse goods, in as much as they have allowed clearance of warehoused goods based on photo copy of the duty paying Bill of Entry which is not in accordance with the rules and regulations. To that extent the storage terminals have contravened the provisions of the Customs Act 1962 and the Rules made there under. In my view Storage Terminals having not put in place the correct system due to which warehoused goods were cleared on photocopy of B.O.E; have contravened the provisions of customs Act, for which a penalty can be imposed on them under the provisions of Sec 117 of the Customs Act 1962. Invoking the said provision, I hold that the warehouse storage terminals need to be visited with a penalty of an amount of Rs.1 lac each under the provisions of Section 117 of Customs Act, 1962.

Penalty on Shri P.V. Jayesh: It is recorded by the Adjudicating Authority that he had forged the signature of an appraiser on at least on one bill of entry. It is also seen from the records that he has admitted such act; in my view the said appellant Shri Jayesh has been penalized correctly under the provisions of Sec 112(a) of the Customs Act 1962.
All the appeals are disposed in the above manner.

(See 2014-TIOL-890-CESTAT-AHM)