Custom, Excise & Service Tax Tribunal
D.V.R. Freight Forwarders Pvt. Ltd vs Commissioner Of Customs (Imports) on 7 December, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH
CHENNAI
Appeal No.C/41892/2015
[Arising out of Order-in-Original No.30233/2014 dt. 20.10.2014 passed by the Commissioner of Customs (Seaport-Import), Chennai]
D.V.R. Freight Forwarders Pvt. Ltd. Appellant
Versus
Commissioner of Customs (Imports),
Chennai Respondent
Appearance:
Shri Hari Radhakrishnan, Advocate For the Appellant Shri Kailash Chandra Jena, ADC (AR) For the Respondent CORAM : Honble Shri R. Periasami, Technical Member Honble Shri P.K. Choudhary, Judicial Member Date of Hearing/Decision : 7.12.2015 FINAL ORDER No.41677/2015 Per R. Periasami
Pursuant to Hon'ble Madras High Court's order dt. 26.8.2015, the appeal is taken up for hearing.
2. The present appeal is filed by appellant-CHA against the impugned order dt. 20.10.2014. The brief facts of the case are that appellant is a holder of Custom House Broker Licence issued under the provisions of CHALR 2004. In connection with the investigation of a case of import of PVC flex banners imported by M/s.Sri Jayalakshmi Enterprises and 7 others through Chennai Airport, it was alleged that the importer has misdeclared the country of origin as Malaysia instead of China thereby evaded Anti-dumping duty. Since the appellant contravened the provisions of Regulation 11(a) & (d) and 11(m), his licence was suspended on 18.11.2013. The suspension was continued vide order dt. 12.12.2013. Subsequently, a SCN dt. 12.12.2013 was issued under Regulation 20 of CHALR for revocation of licence. The adjudicating authority after following the principles of natural justice in his impugned order revoked the licence and also forfeited the full amount of security deposit. Against this order, appellant preferred a writ petition before the Hon'ble Madras High Court and the Hon'ble Single Judge by order dt. 15.7.2015 in W.P. No.28921/2014 dismissed the writ petition on the ground that appellant has got alternate appeal remedy before CESTAT. Against this order, appellant preferred a writ appeal and the Hon'ble High Court by their order dt. 26.8.2015 in in W.A.No.1236/2015 and M.P. No.1/2015, dismissed the writ appeal with a direction to the petitioner to file an appeal before the Tribunal after condoning the delay from 5.11.2013 till the date of receipt of copy of the High Court's order. The Hon'ble High Court also directed the Tribunal to dispose of the appeal within a period of four months. Hence the present appeal filed by appellant before Tribunal. The appeal was heard on 9.10.2015, 4.11.2015 and finally today (7.12.2015).
3. The learned advocate appearing for the appellant submits that appellant's licence was suspended in the year 2013 on the ground of lending of Importer-Exporter Code (IE Code) to the importers for import of PVC flex banners by misdeclaring the country of origin so as to evade anti-dumping duty. He submits that DRI has investigated the case and they have completed the investigation and till date no show cause notice issued to the importers for evasion of anti-dumping duty nor any seizure of goods. No SCN was issued within 6 months from the date of suspension. He submits that entire revocation of licence was made only on the ground of lending of IE code. He drew our attention to para 21.2 , 21.4 of OIO where the Inquiry Report was brought out and submits that Inquiry Officer dropped the proceedings and the Commissioner has not agreed with the findings of the Inquiry Officer and held that charges proved. He further submits that SCN is pre-mediated and the allegation in para-9 of SCN itself is a finding at the notice stage itself. He also referred to para-13 of the SCN. He submits that SCN is liable to be set aside on this count as the department has already made up their mind and given a finding in the SCN itself. He relied an unreported judgement of High Court dt. 15.9.2014 in W.P. No.21941/2014 in the case of Bharat Marine Co. Vs CC (Seaport-Import), Chennai. He also relied the Hon'ble Supreme Court order in the case of Oryx Fisheries Private Ltd. Vs UOI - 2011 (266) ELT 422 (SC).
4. On the merits of the case, he submits that the allegation made against the appellant is that he failed to obtain authorization and Regulation 11(a) was invoked. He submits that lending of IE code is not an offence under Customs Act. He drew our attention to Regulation 11(d) and says that said regulation stipulates to advice the client to comply with provisions of the "Act". "Act" means only "Customs Act" whereas the lending of IE code does not fall within the ambit of Customs Act but is only falling under the Foreign Trade (Development and Regulation) Act, 1992. In support of his contention, he relied the High Court's order in the case of Hamid Fahim Ansari Vs CC Nhavasheva 2009 (241) ELT 168 (Bom.) and the Tribunal's order in the case of Atul D. Sopnal Vs CC Mumbai 2012 (275) ELT 248 (Tri.-Mumbai). He submits that definition of "Importer" as per the Customs Act is any person who files Bill of Entry is an importer. He relied Section 7 of the FT (D&R) Act, 1992 read with Rule 12 of the Foreign Trade (Regulations) Rules,1993. He relied Hon'ble High Court's order dt. 25.6.2014 in the case of GAC Shipping (India) Pvt. Ltd. Vs UOI and submits that when no action has been initiated for contravention under the Customs Act against any importer, revocation of licence of CHA is pre-mature. He also submits that till date, no SCN has been issued to any of the importers for demanding anti-dumping duty.
5. On the other hand, Ld. A.R for Revenue reiterates the findings of the impugned order and submits that initiating action against CHA is an independent action of CHALR and submits that Hon'ble Bombay High Court order in the case of Hamid Fahim Ansari Vs CC (supra) relates to the period prior to the amendment of FT Policy w.e.f 16.9.2013. FT Policy was amended and includes "lending of IE code is an offence" under F.T. Act and also submits that CHA not obtained any authorization from IEC holders and they did not file any authorisation before the investigating authorities. It was obtained only later on to cover up the lapse. Regarding reliance of Inquiry Officer report, he submits that Commissioner of Customs, who is the quasi-judicial authority, is not be bound by the IO report and has powers to accept or overrule the I.O report. Therefore, he rightly revoked the licence for contravention of Regulation 11(a) & (d).
6. We have carefully considered the submissions of both sides and the direction of the Hon'ble High Court order dt. 26.8.2015. We find that the suspension of CHA licence and revocation of licence originated on account of investigations initiated by DRI based on the intelligence on the alleged import of PVC flex banners in respect of seven IEC holders i.e. including Jeyam Impex and 7 others who filed various Bills of Entries for import of PVC flex banners. It is alleged that IE codes of these firms were lent to persons to import the goods who in turn misdeclared the country of origin as Malaysia to evade anti-dumping duty as the said goods are actually originated from China and not from Malaysia. During the investigation proceedings, the appellant's CHA licence was suspended on 18.11.2013 and the same was continued vide another order dt. 12.12.2013. On perusal of the findings in the order, we find that the appellant failed to inform the department of filing of IE code who are not IEC holders and also failed to verify KYC norms.
7. On merits of the case, we find that even though the investigation was completed in the year Nov 2013, till date no proceedings initiated nor any SCN issued to importers and other persons for the alleged misdeclaration of goods for evasion of anti-dumping duty. Only after issuance of SCN under Customs Act where the charges are brought out only, then authority can allege whether IE code belongs to another person and who is actual importer etc. and the role played by appellant leading to evasion of ADD can be taken as ground for taking any action under CHALR. We failed to understand the reasons for initiating revocation of CHA licence based on the alleged contravention of lending of IE code when no SCN was issued under Customs Act. In this regard, the Hon'ble Bombay High Court in the case of GAC Shipping (India) Pvt. Ltd. Vs UOI in their order dt. 25.6.2014 in W.P. No.1376 of 2014 the Hon'ble High Court held that when no proceedings are initiated under Customs Act there is no justification for initiating action under CHALR. The relevant para of the High Court order is reproduced as under :-
"11. ....There are enough provisions in the Customs Act enabling the Commissioner to take care of evasion of duty and dealing with persons responsible for the same. There are also enough measures and which can be initiated so as to prevent such activities in future. However, when the proceedings against the importer in this case are pending and no final adjudication has taken place and the matter is as old as 3 years, then, we do not see any justification for issuing a notice to the petitioner and proceeding against it in terms of Regulation 23. There is much substance in the contention of Shri Shah that the show cause notice has close proximity with the case or stand of the importer/client. From time to time the importer/client has succeeded in protecting its rights, namely, of import and the grant of Essentiality Certificate. The petitioner can be proceeded against together with the importer under independent powers conferred in the Commissioner by the Customs Act, 1962, and that is not disputed. That a show cause notice against the importer/client is issued and is pending adjudication, is further not disputed. That provisional orders enabling clearance of the Vessel and giving security for payment of duty has been passed and all this is to the knowledge of the department. Further, the attempt of the importer/client in approaching the Assistant Commissioner of Customs to assess the Vessel not on permanent basis but temporary one and seeking amendment to the Bill of Entry, is also the knowledge of the department. These events are of the year December 2010. Therefore, there is no explanation much less a justification for initiation of proceedings in the year 2014 against the petitioner and that too for prohibition from operation or working at the Mumbai Customs Station."
The ratio of the above decision squarely applies to this case, as in the present case the imports were made in the year 2011-12 and the DRI initiated investigation and without issue of SCN or adjudication proceedings initiated against the appellant under Customs Act for the very same violations and the appellant's licence has been suspended and thereafter revoked the licence without waiting for issue of SCN under the Customs Act. We also find there is no seizure of goods in the present case.
8. On the merits of the case, the only allegation made against the appellant is that appellant has not verified IE code and lent IE code for import of the said goods. In the present case, there is no SCN issued alleging who is the actual importer therefore adjudicating authority cannot know that the appellant has lent IE code to any person and the adjudicating authority cannot proceed merely on the basis of investigation report received from the DRI for suspension of licence. We find that first investigation report is only for initiating action against CHA.
9. We also find that SCN issued to the appellant for revocation of licence is already concluded the charges and findings in the SCN itself. In this regard, SCN itself has already given what is the finding and what is the decision of the authority. SCN itself is pre-mediated. In this regard, the Hon'ble Madras High Court in the case of Bharat Marine Co. Vs CC Chennai (supra) on identical issue set aside the SCN The relevant paragraphs of the High Court's order are reproduced as under :-
"3. The main ground on which the impugned notice is challenged is that the contents of the show cause notice disclose a pre-conceived and closed mind. A careful look at the show cause notice would show that upto paragraph, the show cause notice contains the narration of the facts relating to investigation conducted, the evidence recorded in the course of enquiry, etc.
4. But, thereafter, in paragraph 9, the first respondent has recorded a series of findings. These findings, are very categorical in nature, without leaving any, scope for the petitioner to explain.
5. Even in paragraph 14 of the impugned show cause notice, the first respondent has asserted that a clear prima facie case has been made out against the petitioner and that if the petitioner is allowed to continue to operate, it would be detrimental to the interest of revenue.
6. In the light of the categorical assertions and findings, I do not think that any useful purpose would be served in asking the petitioner to submit a reply to the show cause notice. At the stage of show cause notice, the first respondent should only have an open mind. If his mind is closed with predetermined conclusions, the requirement of giving an opportunity to show cause becomes nugatory.
7. In SBQ Steels Ltd., Vs. Commissioner of Customs, Central Excise and Sales Tax, Guntur reported in 2014 (300) E.L.T. 185 (A.P.) a Division Bench of Andhra Pradesh High Court took exception even to use of the words it is clear in the show cause notice. Therefore, the impugned show cause notice is liable to be set aside.
8. Accordingly, the writ petition is allowed and the show cause notice is set aside. It is open to the first respondent to issue a fresh show cause notice, keeping the object of issuing show cause notice in mind. Consequently, the connected miscellaneous petition is closed. No costs."
The ratio of above High Court order squarely applies to the present case as we find that vide para 9 and 13 of the SCN dt. 12.12.2013, the adjudicating authority has made up his mind on his findings. Therefore SCN itself is premeditated one and violated principles of natural justice. In view of the High Court's order (supra) on this account also, the impugned order is liable to be set aside.
10. In view of the ratio of Hon'ble Bombay and Madras High Court decisions (supra), we find that the revocation of appellant-CHA licence is not justified, particularly taking into account that when no proceedings were initiated under Customs Act against any of the importers and other persons on the alleged lending of IE code and also taking into consideration the appellant has been under suspension since Nov 2013. Accordingly, the impugned order of revocation of licence is set aside and the appeal is allowed.
11. Before parting with the case, it is made clear this order is without prejudice to any action that may be taken against appellant under the Customs Act by Revenue.
(Dictated and pronounced in open court)
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
gs
8