Max Shipping and Forwarding P. Ltd. vs CESTAT and Others

This petition is directed against the order dated 21.10.2013 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (''the Tribunal'') on the prayer made by the present petitioner for waiver of the condition of pre-deposit in the appeal filed under Section 129 of the Customs Act, 1962 whereby, the Tribunal directed the petitioner to deposit an amount of Rs. 30,00,000/- within four weeks from the date of the order against the impugned demand of penalty in the sum of Rs. 50,00,000/-; and ordered that upon compliance, there would be waiver of deposit of the balance amount.

The matter herein being related only with the quantum of the amount involved in the prayer for waiver of the condition of pre-deposit, we do not propose to deal with the merits of the case and hence, dilatation on all the factual aspects is not necessary. Only a brief reference to the relevant background aspects of the matter would suffice.

The Order-in-Original No. 4/2013 dated 12.03.2013 came to be passed by the Commissioner of Customs, Jodhpur with reference to the show cause notices issued to 8 persons/entities following the investigation made in the matter of the goods cleared for export by one M/s. Mehar Traders, K-170, Durgadas Colony, Baldev Nagar, Masuria, Jodhpur from ICD, Jodhpur to the overseas buyer in Dubai. The Department called back the container carrying the exported goods to Mundra Port and on examination, found the same stuffed with Red Sander Logs, an item prohibited for export, instead of the items declared in the shipping bill and the export documents. In the matter under investigation, the Department alleged that several persons were involved in different capacities; and, in the process, also alleged that the petitioner, working as H&T Agent of M/s. RAJSICO, failed to exercise due diligence in not enquiring the KYC norms and name and owner of a trailer bearing registration number GJ 18T 1012, through which, the prohibited goods were allegedly transported and that facilitated their stuffing in the container. The Commissioner held the petitioner liable, inter alia, with the following observations:-

"...... It is on record that the noticee instead of fulfilling their obligations as freight forwarder to safely deliver the customs sealed cargo to gateway port has unauthorisedly handed over the customs cleared cargo to unauthorized persons who tempered with the seal and replaced the export cargo with prohibited goods. It is on record that the customs cleared cargo was given in the custody and control of noticee for transport to gateway port showing a great amount of trust on them. However, the noticee has betrayed that trust by permitting the third party to hold the custody and transport of the export cargo, which was replaced by prohibited goods. Thus, it is clear that by doing aforesaid unauthorized and illegal acts, they were instrumental in facilitating the smuggling of red sanders wood out of country to the exporter. It is clear that the noticee acted in contravention of the provisions of Regulation 6(i), (k) and 6(2) of Handling of Cargo in Customs Areas Regulations, 2009. Thus I have no doubt while holding that M/s. Max Shipping & Forwarders P Ltd. are guilty of abetment of smuggling of red sanders and are liable for penalty under section 114(i) of Customs Act 1962."

In view of the above, the Commissioner proceeded to impose a penalty in the sum of Rs. 50,00,000/- on the petitioner-Company under Section 114(i) of the Customs Act, 1962. The petitioner has filed an appeal against the aforesaid order dated 12.03.2013 before the Tribunal with the contentions, inter alia, that the findings returned in the order are beyond the allegations levelled in the show cause notice; that the findings are based more on assumptions rather than on cogent material; that the Department has failed to trace the alleged master mind of smuggling and has unnecessarily attempted to shift the burden on the petitioner who had no role in handling and transportation of the container to the exporter; that the imposition of penalty is not justified; and that in any case, the quantum of penalty is highly excessive and is not commensurate with the gravity of offence, if any.

Apart from the petitioner, several other persons, including the Operational Executive and the Managing Director of the petitioner, against whom different penalties were ordered for the alleged involvement in the same transaction, have filed different appeals before the Tribunal. It may be noticed that as against the Operational Executive of the petitioner-Company, the Commissioner imposed a penalty of Rs. 5,00,000/- whereas against the Managing Director of the petitioner-Company, the Commissioner proceeded to impose the penalty of Rs. 10,00,000/-.

While considering the prayers in the stay applications moved with the appeals so filed against the aforesaid order dated 12.03.2013, the Tribunal has passed the common impugned order dated 21.10.2013 after finding prima facie involvement of the different appellants one way or the other. As noticed, the Tribunal has directed the present petitioner to deposit an amount of Rs. 30,00,000/- against the demand in question. The Tribunal has also directed the Operational Executive of the petitioner-Company to deposit an amount of Rs. 3,00,000/- and the Managing Director of the petitioner-Company to deposit an amount of Rs. 5,00,000/- against the penalty levied upon them.

The petitioner has filed this writ petition, inter alia, with the submissions that instead of dealing with the persons directly and actively involved in the alleged smuggling, the Department has proceeded to impose an excessive penalty on the petitioner, who had no direct role to play in the matter and no case is made out that the petitioner was directly involved in the alleged export of the prohibited goods.

The present writ petition was considered alongwith two other petitions filed by the said Operational Executive and the Managing Director of the petitioner-Company. While considering the writ petitions together, this Court found no case of undue hardship in relation to said two individuals and their petitions were dismissed. However, so far the present petition is concerned, only as regards the quantum, the matter appeared calling for consideration. In the totality of circumstances, this Court directed the present petitioner to deposit a sum of Rs. 5,00,000/- by 20.12.2013 and another sum of Rs. 15,00,000/- on or before 15.01.2014; and ordered that upon compliance, no adverse order shall be passed by the Tribunal in the petitioner''s appeal and the respondents would not adopt coercive recovery proceedings. The order dated 19.12.2013 in its entirety reads as under:-

"In these petitions, the petitioners seek to question the common order passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (''the Tribunal'') on 21.10.2013 on their prayer for waiver of the condition of pre-deposit in the different appeals filed under Section 129 of the Customs Act, 1962.

After having heard the learned counsel for the petitioners and having perused the material placed on record, so far the case of the petitioners in CWP Nos. 14363/2013 and 14364/2013 is concerned, looking to the amount directed to be deposited i.e., the sum of Rs. 5,00,000/- and the sum of Rs. 3,00,000/- respectively, we are unable to find a case of undue hardship so as to warrant interference in the discretion exercised by the Tribunal. These writ petitions are required to be, and are, therefore, dismissed.

So far petitioner of CWP No. 14362/2013 is concerned, it has been directed to deposit a sum of Rs. 30,00,000/- as against the disputed due demand of about Rs. 50,00,000/-. The matter, only as regards quantum, prima facie appears calling for consideration, particularly looking to the subject-matter of the appeal and the stand sought to be taken by the petitioner. Therefore, let notice for final disposal be issued to the respondents in this case.

Service on the proforma respondent No. 1 is dispensed with. So far respondent No. 2 is concerned, Mr. Ravi Bhansali, Senior Standing Counsel for Customs and Excise has put in appearance. Paper-book be supplied to the learned counsel Mr. Ravi Bhansali so as to enable him to complete his instructions.

Heard on the prayer for interim relief.

Having regard to the facts and circumstances of the case, as at present, it is considered appropriate and hence directed that if the petitioner deposits a sum of Rs. 5,00,000/- (five lacs) with the respondent No. 2 by tomorrow i.e., 20.12.2013 and makes further deposit of a sum of Rs. 15,00,000/- (fifteen lacs) on or before 15.01.2014, no adverse order shall be passed by the Tribunal in its pending appeal bearing No. C/58047/13 and the respondents shall also not adopt coercive recovery proceedings against the petitioner in relation to the demand in question.

This writ petition (CWP No. 14362/2013) be listed for final disposal on 17.01.2014."

In the totality of circumstances and the singular facts of the case, it is noticed that the Department has alleged different roles of different persons in the alleged smuggling of Red Sanders Logs; and the principal allegations appear to be directed against the exporter M/s. Mehar Traders, one Shri Abdul Jaffer, said to be the master mind, and another Shri Shahnavaz N. Gavli. The acts and omissions of want of due diligence as also not coming out forthright in relation to the investigation, have been levelled against the Operational Executive and the Managing Director of the petitioner-Company, whose petitions have already been dismissed, as noticed hereinbefore.

So far the petitioner-Company is concerned, the basis of quantum of penalty i.e., Rs. 50,00,000/- is not available as such in the order dated 12.03.2013. For the present purpose, we are of the view that when the petitioner has deposited a substantial amount of Rs. 20,00,000/- in terms of the order passed by this Court on 19.12.2013, any direction for deposit of any further amount may cause undue hardship to the petitioner. On the contrary, after such a deposit of the sum of Rs. 20,00,000/-, hearing of the petitioner''s appeal by the Tribunal on merits would serve the cause of justice. Hence, the rule issued in this matter on 19.12.2013 deserves to be made absolute with further necessary observations.

Accordingly and in view of the above, this petition is allowed in the manner that the condition of pre-deposit, as imposed by the Tribunal in the impugned order dated 21.10.2013 is modified; the petitioner is held liable to make payment of an amount of Rs. 20,00,000/- (twenty lacs) towards the condition of pre-deposit; and the deposit already made by the petitioner pursuant to the order dated 19.12.2013 is taken as sufficient compliance of the requirements of pre-deposit. It is also considered appropriate and hence directed that until final disposal of the appeal before the Tribunal, the respondents shall not adopt coercive recovery proceedings against the petitioner in relation to the demand in question. The Tribunal shall, of course, be expected to proceed with the appeal on its merits expeditiously.

No costs.