Bombay High Court
S.R. Sale & Co vs Commissioner Of Customs (General on 5 April, 2013
Author: D.Y.Chandrachud
Bench: D.Y. Chandrachud, A.A. Sayed
VBC 1/12 cuapp21.13-5.4
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O. C. J.
CUSTOMS APPEAL NO.21 OF 2013
S.R. Sale & Co. ...Appellant.
Vs.
Commissioner of Customs (General),
Mumbai. ...Respondent.
....
Mr.Rajiv Ravi with Mr.Krishna Kumar for the Appellant.
Mr.Pradeep S.Jetly with Mr.B.B.Sharma for the Respondent.
.....
CORAM : DR.D.Y.CHANDRACHUD AND
A.A. SAYED, JJ.
April 5, 2013.
ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) :
The appeal arises from a decision of the CESTAT dated 2 January 2013. The Tribunal has held, following its decision in Vetri Impex Vs. Commissioner of Customs (General), Mumbai,1 dated 16 April 2012, that an appeal is not maintainable against an order passed under Regulation 21 of the Customs House Agents Licensing Regulations, 2004, prohibiting a Customs House Agent from working in one or more sections of the Customs Station.
2. The Appellant has raised the following substantial questions of law:
"(a) Whether the CESTAT was justified in holding that in view of the provisions of Regulation 22(8) of the CHALR, 2004, no appeal lies to the CESTAT against an order passed by the Commissioner of Customs under Regulation 21;
-(b) Whether Regulation 22(8) of the CHALR, 2004 is ultra vires the provisions of the Customs Act, 1962 inasmuch as the same 1 Appeal No.C/451/11 ::: Downloaded on - 09/06/2013 19:48:53 ::: VBC 2/12 cuapp21.13-5.4 takes away the substantive right of Appeal to the CESTAT as provided under Section 129A of the Customs Act, 1962;
-(c) Whether Regulation 21 of the CHALR, 2004 is ultra vires the provisions of the Customs Act, 1962."
3. The appeal is admitted on the aforesaid questions and is taken up for hearing and final disposal, at this stage by consent.
4. The Appellant was licenced as a Customs House Agent (CHA) by the Commissioner of Customs, Pune on 8 October 1998 under the erstwhile Customs House Agents Licensing Regulation, 1984. On the basis of the licence, the Appellant has been permitted by the Respondent to transact business at the Mumbai Customs House in pursuance of a licence dated 28 September 1999. The licence has been renewed from time to time. On 12 September 2012, the Respondent, in exercise of the power conferred by Regulation 21 of the Customs House Agents Licencing Regulations, 2004, passed an order, prohibiting the Appellant from transacting CHA related business in Zones I, II and III of the Mumbai Customs Station with immediate effect and forwarded the case of the Appellant to the Pune Customs Authorities in accordance with a Circular of the CBEC dated 8 April 2010.
The prohibitory order records that the Commissioner of Customs (Export), JNCH, Nhava Sheva has by an order dated 24 August 2012 furnished intimation that the Appellant was involved in the export of cheap material such as soap stone powder in the names of exporting firms in Mumbai and Delhi, misdeclaring the goods as high value bulk drugs and its intermediates and illegally availed of the benefits of export promotion schemes such as the Duty ::: Downloaded on - 09/06/2013 19:48:53 ::: VBC 3/12 cuapp21.13-5.4 Entitlement Pass Book (DEPB). The prohibitory order records that intelligence inputs collected in the case revealed the following modus operandi, namely, (i) No bulk drugs had been procured by the exporters and soap stone powder had been exported by misdeclaring it as high value bulk drugs and intermediates on the export documents. The exporters had submitted fabricated ARE-1 forms to create an impression that genuine goods were being exported; and (ii) The goods declared on export documents had actually been procured from manufacturers without payment of Central Excise duty on bond and were subsequently substituted en- route to the port of export with cheap material like soap stone powder. It has been alleged that the CHA Licence of the Appellant has been permitted to be used for the clearance of export goods by a person who has neither been an employee or proprietor of the Appellant. It is alleged that the Appellant has violated Regulations 12, 13 and 19 of the Regulations of 2004 on the basis of which it was considered that the continuance of the permission granted to the Appellant to transact CHA business in Mumbai Zones I, II and III was prejudicial to the interests of the Revenue and that immediate action was warranted to prevent a further misuse of the CHA Licence.
5. The Appellant filed an appeal before the CESTAT together with an application for stay against the prohibitory order. The Tribunal dismissed the appeal as not being maintainable on the ground that under Regulation 21 of the Licensing Regulations of 2004, an appeal does not lie against a prohibitory order. The Tribunal has followed its earlier decision in the case of Vetri Impex (supra).
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6. Counsel appearing on behalf of the Appellant submits that (i) Under Section 129A of the Customs Act, 1962, an appeal lies to the Tribunal against a decision or order passed by the Commissioner of Customs as an adjudicating authority; (ii) The expression "adjudicating authority" has been defined by Section 2(1) to mean any authority competent to pass any order or decision under the Act; (iii) A prohibitory order passed by the Commissioner of Customs under the Regulations of 2004 is an order passed under the Act as an adjudicating authority; (iv) Hence, an appeal would lie under Section 129A and though Regulation 22(8) prescribes an appeal only against an order of suspension or revocation of a licence under Regulation 20 or Regulation 22(7), an appeal against a prohibitory order under Regulation 21 would be maintainable under Section 129A(1)(a).
7. On the other hand, Counsel appearing on behalf of the Revenue submits that (i) Section 146 of the Customs Act, 1962 mandates the holding of a licence in order to carry on business as an agent at any Customs Station relating to the entry or departure of a conveyance or the import or export of goods; (ii) Sub-section (2) of Section 146 is a specific provision under which regulations can be made to give effect to the provisions of the Section including in the matter of appeals against orders of suspension or revocation;
(iv) The Regulations provide for an appeal against an order of suspension or revocation under Regulation 20 or Regulation 22(7) and advisedly no appeal is provided under an order of prohibition since it is only a temporary order which is to remain into effect until a decision is taken to suspend or revoke ::: Downloaded on - 09/06/2013 19:48:53 ::: VBC 5/12 cuapp21.13-5.4 the licence; (v) Hence, recourse cannot be taken to the general provisions for appeal in Section 129A(1)(a), having regard to the fact that the Regulations constitute a self contained code.
8. Section 146 of the Customs Act, 1962 provides as follows:
"146. Customs house agents to be licensed. - (1) No person shall carry on business as an agent relating to the entry or departure of a conveyance or the import or export of goods at any customs-
station unless such person holds a licence granted in this behalf in accordance with the regulations.
-(2) The Board may make regulations for the purpose of carrying out the provisions of this section and, in particular, such regulations may provide for -
-(a) the authority by which a licence may be granted under this section and the period of validity of any such licence;
-(b) the form of the licence and the fees payable therefor;
-(c) the qualifications of persons who may apply for a licence and the qualifications of persons to be employed by a licensee to assist him in his work as an agent;
-(d) the restrictions and conditions (including the furnishing of security by the licensee) subject to which a licence may be granted;
-(e) the circumstances in which a licence may be suspended or revoked; and
-(f) the appeals, if any, against an order of suspension or revocation of a licence, and the period within which such appeals shall be filed."
9. Under sub-section(1) of Section 146, a licence is mandated before a person can carry on business as an agent at any Customs Station ::: Downloaded on - 09/06/2013 19:48:53 ::: VBC 6/12 cuapp21.13-5.4 relating to the entry or departure of a conveyance or the import or export of goods. Such a licence, as sub-section (1) provides, has to be granted in accordance with the regulations. Sub-section (2) of Section 146 empowers the Board to frame regulations in order to give effect to the provisions of the section. What follows in clauses (a) to (f) of sub-section (2) of Section 146 are illustrations of the subjects on which regulations can be framed. Clauses
(a) to (f) are evidently illustrative since the prefatory part of sub-section (2) of Section 146 is that the Board has power to make regulations for the purpose of carrying out the provisions of the section. The regulations which are framed under Section 146 have to be laid before Parliament under Section 159 and in the event the Parliament determines that any modification is necessary or that the regulations should not be made, the regulations shall then take effect with such modification or be of no effect.
10. In exercise of the power conferred by Section 146(2), the CHA Licensing Regulations came to be framed in 2004 instead and in place of the earlier Regulations of 1984. Regulation 3 requires all Customs House Agents to be licensed. Regulation 4 provides for invitation of applications by the Commissioner of Customs and Regulation 5 for applications for a licence.
Regulation 6 stipulates conditions which are required to be fulfilled by an applicant. Regulation 7 provides for a scrutiny of applications. Under Regulation 8 provision has been made for conducting examinations, both written and oral for that purpose. The regulation provides the syllabus for and the scope and ambit of the examination. Regulation 9 provides for the grant of a licence. Under Regulation 10, before a licence is granted, a bond and a ::: Downloaded on - 09/06/2013 19:48:53 ::: VBC 7/12 cuapp21.13-5.4 surety has to be furnished. Regulation 11 provides for the validity of a licence for a period of ten years. Regulation 12 stipulates that the licence would not be transferable. Under Regulation 13, the obligations of a Customs House Agent have been specified. Regulations 14, 15 and 16 provide for a change in the constitution of a company, firm or, as the case may be, of a concern.
Regulation 17 provides for engagement of persons qualified in the examination to undertake business on behalf of the firm or a company licenced under Regulation 9. The employment of persons by a Customs House Agent is governed by Regulation 19.
11. Regulation 20 provides for suspension or revocation of licences in the following terms:
"REGULATION 20. Suspension or revocation of licence.- (1) The Commissioner of Customs may, subject to the provisions of regulation 22, revoke the licence of a Customs House Agent and order for forfeiture of part or whole of security, or only order forfeiture of part or whole of security, on any of the following grounds, namely:-
-(a) failure of the Customs House Agent to comply with any of the conditions of the bond executed by him under regulation 10;
-(b) failure of the Customs House Agent to comply with any of the provisions of these regulations, within the jurisdiction of the said Commissioner of Customs or anywhere else;
-(c) any misconduct on his part, whether within the jurisdiction of the said Commissioner of Customs or any where else which in the opinion of the Commissioner renders him unfit to transact any business in the Customs Station.
(2) Notwithstanding anything contained in sub-regulation (1), the Commissioner of Customs may, in appropriate cases where immediate action is necessary, within fifteen days from the date of receipt of a report from investigating authority, suspend the licence of a Customs House Agent where an enquiry against such agent is pending or contemplated.::: Downloaded on - 09/06/2013 19:48:53 :::
VBC 8/12 cuapp21.13-5.4
(3) Where a licence is suspended under sub-section (2),
notwithstanding the procedure specified under regulation 22, the Commissioner of Customs may, within fifteen days from the date of such suspension, give an opportunity of hearing to the Customs House Agent whose licence is suspended and may pass such order as he deems fit either revoking the suspension or continuing it, as the case may be, within fifteen days from the date of hearing granted to the Customs House Agent."
Regulation 20(1) provides for revocation of the licence of an agent or of the security essentially for a breach of a condition of the bond, for failure of compliance of the provisions of the regulations and for misconduct. Under sub-regulation (2) of Regulation 20, a power of suspension is conferred where the Commissioner of Customs considers it appropriate to take immediate action. Regulation 21 provides for a prohibition in the following terms:
"REGULATION 21. Prohibition. - Notwithstanding anything contained in regulation 22, the Commissioner of Customs may prohibit any Customs House Agent from working in one or more sections of the Customs Station, if he is satisfied that such Customs House Agent has not fulfilled his obligations as laid down under regulation 13 in relation to work in that section or sections."
Regulation 21 is prefaced with a non-obstante clause. Under the regulation, a CHA can be prohibited by the Commissioner of Customs from working in one or more sections of a Customs Station if he is satisfied that the agent has not fulfilled the obligations which have been laid down under Regulation 13 in relation to that section or sections.
12. The procedure for suspending or revoking a licence under Regulation 20 is specified in Regulation 22. Broadly speaking, Regulation 22 requires the issuance of a notice to show cause, an opportunity to file a ::: Downloaded on - 09/06/2013 19:48:53 ::: VBC 9/12 cuapp21.13-5.4 written statement and the holding of an enquiry in the course of which evidence can be produced. At the conclusion of the enquiry, a report is prepared, a copy of which is to be furnished by the Commissioner to the CHA who has a further opportunity to make a representation. Thereupon, the Commissioner is empowered to pass an order thereon.
13. Regulation 22(8) provides as follows:
"(8) Any Customs House Agent aggrieved by any decision or order passed under regulation 20 or sub-regulation (7) of regulation 22, may prefer an appeal under section 129A of the Act to the Customs, Central Excise and Service Tax Appellate Tribunal established under sub-section (1) of Section 129 of the Act."
14. Regulations 20, 21 and 22 contemplate three separate eventualities. The first, which is the most drastic, is the power to revoke the licence of a CHA under Regulation 20 on grounds which are stipulated in sub-regulation (1). The second is a suspension of the licence of an agent where immediate action is considered to be necessary by the Commissioner of Customs and where an enquiry is pending or contemplated. The third, which is a power to impose a prohibition in Regulation 21 operates to prevent an agent from working in one or more sections of a Customs Station. A prohibitory order under Regulation 21 does not constitute either a revocation of a licence or suspension of a licence. The effect of a prohibitory order under Regulation 21 is to prevent an agent from working in a customs station or in one or more sections thereof. Regulation 22(8) has provided for a right of appeal against an order of revocation of a licence or of suspension under ::: Downloaded on - 09/06/2013 19:48:53 ::: VBC 10/12 cuapp21.13-5.4 Regulation 20 or Regulation 22(7). Regulation 22(7) operates in the area of the suspension or revocation of a licence. Thus, the subordinate legislation has contemplated an appeal against an order of revocation or suspension, but no appeal against an order of prohibition under Regulation 21 in respect of the area of one or more sections of a customs station. But, according to the Appellant, an appeal would lie against a prohibitory order issued under Regulation 21 under Section 129A of the Customs Act, 1962. It is this aspect of the matter that would warrant consideration.
15. Section 129A provides an appeal to the Tribunal by a person aggrieved by orders of the nature provided in clauses (a) to (c ). Clause (a) is a decision or order passed by the Commissioner of Customs as an adjudicating authority. The Appellant relied upon the definition of the expression "adjudicating authority" in Section 2 as meaning any authority competent to pass an order or decision under the Act. A decision taken by an authority under subordinate legislation is as a matter of statutory interpretation, regarded as a decision taken under the Act. This principle has been enunciated in the judgment of the Supreme Court in Indramani Pyarelal Gupta vs. W.R. Natu.2 This, however, would not be dispositive of the issue which arises in this case because essentially what the Court has to consider is whether the general appellate provisions that are contained in Section 129A would apply to action which is initiated against a CHA under the Regulations of 2004. Section 146 provides for the licensing of an agent for carrying on business within a customs station involving import or export of 2 (1963) 1 SCR 721 at para 15 ::: Downloaded on - 09/06/2013 19:48:53 ::: VBC 11/12 cuapp21.13-5.4 goods or entry or departure of a conveyance. The entire subject matter of the licensing of CHAs which commences from invitation of applications and covers qualifications of eligibility, the holding of examinations, award of licences, obligations of CHAs and disciplinary control are governed by the regulations. Section 146(2) contemplates that the Regulations are intended to fulfill the purpose of carrying out of the provisions of the section. That the Regulations may also govern the remedies which are available to a CHA against an order passed in the disciplinary jurisdiction is made abundantly clear by clause (f) of Section 146(2). Section 146(2)(f) clarifies by way of illustration that the Regulations can govern the appeals, if any, against orders of suspension or revocation. If recourse to the general power of an appeal under Section 129A was intended by Parliament to be available in disciplinary matters involving CHAs, there was no necessity of including a provision such as that which is contained in Section 146(2)(f). The provisions of Section 129A have to be harmoniously construed with those of Section 146. There is no question, in our view, of there being any inconsistency between the two statutory provisions. Similarly there is no repugnancy between the provisions of Regulation 20(8) and Section 129A. Section 146 operates in a field different from Section 129A. Section 146 governs the licencing of CHAs and contemplates the making of regulations governing all aspects of the licensing of CHAs including disciplinary control. Remedies against orders passed in the disciplinary jurisdiction are to be provided in the regulations. The Regulations constitute a self contained code relating to the licensing of CHAs. The Regulations provide for disciplinary control over CHAs and have provided an appellate remedy against orders of revocation or suspension.
::: Downloaded on - 09/06/2013 19:48:53 :::VBC 12/12 cuapp21.13-5.4 An order of prohibition under Regulation 21, preventing a CHA from operating within one or more sections of a customs station is not subject to an appeal under the Regulations. The subordinate legislation has considered that such an order does not possess the consequence of either a revocation of a licence or for that matter, the suspension of a licence pending enquiry since such an order prohibits a CHA from operating in one or more sections of a customs station. The wisdom of the delegate of the legislature in not providing an appeal in such a case does not fall for re-evaluation by the Court.
It is trite law that there is no inherent right of appeal. An appeal is a creation of a statute or, as in the present case, the creation of a statutory provision (Section 146) read together with the regulations. A CHA is, however, not without remedy against an order of prohibition which is amenable to the jurisdiction of the High Court under Article 226 of the Constitution.
16. For these reasons, we have come to the conclusion that the Tribunal is justified in holding that an appeal is not maintainable against an order of prohibition under Regulation 21 of the Regulations of 2004. In view of this decision, we answer Question (a) in the affirmative and Questions (b) and (c) in the negative. The appeal shall accordingly stand disposed of in the aforesaid terms. There shall be no order as to costs.
( Dr.D.Y.Chandrachud, J.) ( A.A. Sayed, J. ) ::: Downloaded on - 09/06/2013 19:48:53 :::