Custom, Excise & Service Tax Tribunal
Shakti Cargo Movers vs Commissioner Of Customs Airport & ... on 27 September, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH-COURT NO. IV
CUSTOMS APPEAL NO. 54865/2023
(Arising out of Order-in-Original No. 18/ZR/Suspension-
Confirmation/Policy/2023 dated 02.03.2023 passed by the Commissioner, &
Customs (Airport & General), New Delhi)
SHAKTI CARGO MOVERS
Through its Proprietor -Prabhat Kumar Pandey
No. 329, 3rd floor, Admin Building Appellant
ICD Tuglakabad, New Delhi 110020.
Vs.
COMMISSIONER OF CUSTOMS
AIRPORT & GENERAL
Respondent
New Customs House, Near IGI Airport New Delhi 110037.
Appearance:
Present for the Appellant : Shri Priyadarshi Manish, Advocate Present for the Respondent :Shri M R Dhania, Authorised Representative CORAM:
HON'BLE DR. RACHNA GUPTA, MEMBER(JUDICIAL) HON'BLE Ms.HEMAMBIKA R. PRIYA, MEMBER(TECHNICAL) DATE OF HEARING : August 07, 2023 DATE OF DECISION: September 27, 2023 FINAL ORDER NO. 51369/2023 HEMAMBIKA R. PRIYA The present appeal is filed against the suspension order dated 02.03.2023 vide which the license of the Custom Broker (CB) was suspended with immediate effect. It has been alleged that the Appellant CB had filed the shipping bills during the period of 27.02.2021 to 15.05.2021 on behalf of an exporter whose first GSTIN was Suo-moto cancelled retrospectively, and the second
2 C/54865/2023 GSTIN although active, was non-functional at the registered premises.
2. The brief facts of the case are that M/s Shakti Cargo Movers Pvt Ltd. (hereinafter referred to as the appellant) a Customs Broker holding CHA license R-26/DEL/CUS/2010 is engaged in the business of clearance of import and export consignments. He has been engaged in this business for 11 years. During the normal course of business activity, M/s Shree Enterprises sought the services for clearance of the consignment from the appellant. The appellant thereafter requested the said exporter who supplied the requisite KYC documents viz., copy of the IEC, GST registration certificate, PAN of the exporting firm and partners, Aadhar number, electricity bill of the rented premises, partnership deed of the exporting firm, bank certificate etc. All these documents were verified with the original by the appellant along with the declared office premises. The Commissioner received the Analytical Report no: 32/2022-23 dated 05.01.2023, which had analysed various exports covering 436 shipping bills and had identified 27 non- existent exporters. On receipt of the said report, the Commissioner ordered immediate suspension of the Customs Broker license of the appellant vide the impugned order.
3. Learned Counsel for the appellant submitted that the Regulation 16 of CBLR, 2018 starts with a non-obstante clause and has invested the Commissioner of Customs with power to suspend the license of a Customs Broker in appropriate case 3 C/54865/2023 where immediate action is necessary. In other words, the provision of Regulation 16 CBLR, 2018 invested the power of suspension in Commissioner to exercise the same in any emergent case where there is a need to suspend the license. Hence, "emergent need" is the mandate for exercise of power under Regulation 16 of CBLR, 2018 which is absent in the present case. In the present case, the cause of action i.e., filing the Shipping Bill took place in May 2021, whereas the suspension was ordered in March, 2023. Therefore, there is no proximity in time between these two events, establishing no emergent need for suspension of Custom Broker license. The suspension order is contrary to the Regulation 16 of CBLR, 2018 and liable to be set aside on this ground itself..
3.1 The learned Counsel contended that the exporter was in existence at the time of export. He also submitted that the appellant has not cleared any consignment of said exporter after 15.05.2021 and till that date, the exporter was in existence at their registered Delhi premises. The learned Counsel further submitted that the Commissioner has ignored the fact that verification report is not in consonance with the fact that the exporter, alleged to be non-existent, was very much in existence at the time of exports. He contended that the exporter had also participated in the investigation as well as the adjudication conducted by the Preventative Customs formation. He emphasised that the statement of the exporter recorded under Section 108 of the Customs Act, 1962 provided various details 4 C/54865/2023 viz., Aadhar number, address of premises, residential address of partner of exporting firm etc. which makes it apparent at the time of export, the exporting firm was very much in existence.
4. The learned Counsel stated that even the cancellation of GST registration retrospectively of the exporter after the export does not support the case of respondent. The Commissioner has passed the suspension order dated 13.02.2023 erroneously, harping on the point that the exporter has two GSTIN and amongst those one issued by Delhi North Commissionerate had been suo-moto cancelled on 23.07.2020 (the date of issuance of GSTIN) and second GSTIN issued by Gurugram on 16.03.2022, though active but was non-functional on the registered place of business. The Department had failed to appreciate that the returns had been filed by the exporter in respect of the cancelled GSTIN till 22.07.2021 i.e., which was much after the date of export. The issuance of second GSTIN itself prove that the firm was very much in existence. He further submitted on the issue of issuance of the statutory documents, that it was not the responsibility of the appellant to find out whether the GSTIN had been issued correctly or not. Consequently, the appellant cannot be punished on the said ground. He submitted that the negative report submitted by jurisdictional GST officer regarding non- functioning of the assessee at their principal place of business is the responsibility of the officer who has issued the registration certificate to that assessee. Even the issuance of the registration certificate errantly is not the responsibility of Custom Broker, but 5 C/54865/2023 the responsibility of the concerned departmental authority. He further submitted that the Adjudicating Authority had failed to appreciate that all the export made by the exporter of the appellant was under LETTER OF UNDERTAKING (LUT) and procedure had been defined in CGST Act 2017/IGST Act 2017 and corresponding Rules. In this context, the learned Counsel further submitted that before opting for exports under LUT, the principal place of business of the exporter/assessee is duly verified by the jurisdictional officer. The exporter has to furnish the bond as well as the bank guarantee if directed by the jurisdictional officer. In the present case, all the exports had been made against LUT, therefore exporter would have furnished the bond with the jurisdictional GST Commissionerate for which physical verification of their business premises would have been done. Hence, the question of nonexistence of the exporter does not arise. He further submitted that during the pendency of the appeal, the Inquiry Officer had conducted the enquiry qua the show cause notice issued to the appellant and had exonerated the appellant from all charges alleged in the said show cause notice issued for the purpose of revocation of custom broker license. The enquiry report is itself made the prima facie case in favour of the custom broker/and provided sufficient ground for revocation of the suspension. He submitted that the Commissioner in his impugned order in paragraph 13 has categorically mentioned that due to limited time window available, it is not possible at this stage to go into expensive detail or nitty-gritty of KYC document 6 C/54865/2023 or other compliances required of the custom broker also about document are valid /not valid/not forged etc. and as whether the CB was in breach/not breach of any regulatory compliance can be established valid through the medium of enquiry. The said enquiry had not only been conducted but that appellant had been exonerated. Therefore, the continuance of the suspension has no reason to stay and the same should be set-aside. 4.1 Finally, the learned Counsel submitted that that the impugned order had affected the livelihood of not only the Customs broker but the other employees of the Customs Broker. He prayed that in the present facts and circumstances, the impugned order should be set-aside.
5. The learned Authorised Representative reiterated the discussions and findings given in the impugned order. The learned Authorised Representative submitted that the appellant had provided export services to M/s Shree Enterprises despite the information that its Aadhar verification was not done was in public domain and the information was available to the appellant. The learned Authorised Representative stated that the appellant had filed 132 shipping bills having FOB value of Rs.144,05,67,230/- and claimed drawback amount of Rs.3,43,53,506/- & ROSTEL/RODTEP amount of Rs.24,01,945/- on behalf of a non- existent firm i.e., M/s Shree Enterprises registered with GSTIN NO. 07ABDES0914GIZA. On receipt of the DGARM report, prima facie it was observed that the appellant had not complied with the provisions of CBLR, 2018 and accordingly CB licence had been 7 C/54865/2023 suspended on 13.02.2023 vide order No. 06/ZR/ Suspension/Policy/2023 dated 13.02.2023 and the suspension is confirmed on 02.03.2023 order No. 18/ZR/ Suspension- Confirmation/Policy/2023 after giving appropriate opportunity as per principles of natural justice.
5.1 The learned Authorised Representative further submitted that that proper procedure has been prescribed under law which had not been completed. Therefore, the balance of judgement, at this stage, was not in favour of the appellant, as they had provided export services to a non-existent entity M/s Shree Enterprises, even though the information that its Aadhar verification was not done was in public domain and available to the appellant.
6. We have heard the Learned Counsel for the appellant and the learned Authorised representative. The issue for consideration before us is:
"Whether the Customs Broker License of the appellant was suspended correctly or not?
7. In order to appreciate the arguments, we need to refer to the Regulation 16 of the CBLR, 2018. It has been vehemently contended before us by the Learned counsel that there was no emergency or needed action requiring suspension of license under Regulation 16(1) and its confirmation under Regulation 16 which reads as under:
8 C/54865/2023 "16. Suspension of license. - (1) Notwithstanding anything contained in regulation 14, the Principal Commissioner or Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the license of a Customs Broker where an enquiry against such Customs Broker is pending or contemplated:
Provided that where the Principal Commissioner or Commissioner of Customs may deem fit for reasons to be recorded in writing, he may suspend the license for a specified number of Customs Stations.
(2) Where a license is suspended under sub-regulation (1), the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, shall, within fifteen days from the date of such suspension, give an opportunity of hearing to the Customs Broker whose license 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 Broker :
Provided that in case the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, passes an order for continuing the suspension, further procedure thereafter shall be as provided in regulation 17."
(Emphasis supplied)
8. We note that in the present case, the cause of action i.e., filing the Shipping Bill was in May 2021, whereas the suspension has been ordered in March, 2023. Therefore, there is no proximity in time between these two events, to establish any emergent need for suspension of Custom Broker license. Further, the Commissioner in the order has recorded as follows:
"17. Given the facts of the case, I'm of the view that issue of nonexistence and declared please of business in respect of the exporter M/s Shree Enterprises particularly [GSTIN 07AEDFS0914GIZA] made further enquiry. The balance of judgement, at this stage, is not in favour of CB, as they are provided export services to M/s Shree Enterprises even though the information that its Aadhar verification was not done was a 9 C/54865/2023 public domain and available to see the period thus there is a case for continuation of the suspension of the CB licence."
9. From the findings recorded in the impugned order we are not in position to decipher any cause of immediate need for suspension of the CB license. The Revenue has not brought forward any evidence that the earlier export documents filed by the appellant are fabricated or manipulated. The Revenue has also not been able to lead any evidence that the said exporter was not existent at the time of export, and the CB had connived in any fraud to defraud the Government exchequer. It has also been brought on record that one of the GSTINs was still in existence at the time of suspension of the appellant's license. We are in agreement with the contention of the learned counsel that the physical verification of the exporter's premises was not the responsibility of the appellant, and infact is the responsibility of the authority approving the GSTIN. Under such circumstances, the action initiated against the appellant CHA cannot be said to be on any solid foundation. Therefore, such an action of suspension of CB license after two years of export cannot be sustained under Law. We find that in case of Sai Datta Shipping [2019-TIOL- 2298-CESTAT-Mum. = 2019 (369) E.L.T. 954 (Tri. - Mumbai)], this Tribunal held as follows :
"5. The relationship of a custom broker with a licensing authority is one of 'near employment' as a facility for smooth clearance of cargo on behalf of importers/exporters who may be at other locations. Unlike tax disputes, the consequence of detriment under the Licensing Regulations has a bearing on the lives of the brokers as well as their dependents. There can be no doubt that suspension for long periods of time or disprop
10 C/54865/2023 ortionate penalties impact these persons. It is in acknowledgement of the criticality of expeditious action that the Regulations contemplate prescription of timeline, without which an atmosphere of lack of accountability would pervade the entire exercise.
6. In the present instance, it is seen that the gap between the original order of suspension on 12th July, 2018 and confirmation of the said suspension is close to two months. The Regulations prescribe that the offer and completion, of post decisional process be limited to 15 days from the date of the first suspension. It would, therefore, be reasonable to expect such confirmation order soon after the hearing, however much the delay is attributable to the broker, instead of it being much delayed even further. On ascertainment of the present status of the proceedings, Learned Authorised Representative is unable to assure us that the proceedings under Regulation 19 of Customs Broker Licensing Regulations, 2018 would commence in the near future. All that is available on record is that the investigation in a major fraudulent activity is still under way. It is not the case of the respondent-Commissioner that any act on the part of the appellant has delayed the initiation of proceedings. The explanation that investigation is pending is also not readily acceptable. It would appear that either the evidence required to sustain the proceedings is not available or that the role of the customs broker may not have been so critical in the transaction to fraudulently claim the drawback. Either way, the continuation of suspension in such circumstances does not, in our opinion, appear to be in concord with the principles of accountability or of prompt response. There is no evidence of any lack of cooperation on the part of appellant herein.
7. In these circumstances, the cause of justice cannot be further enabled except by an immediate revocation of the suspension and reinstatement of the license. Needless to say, this is without prejudice to continuation with other proceedings permissible under the Customs Brokers Licensing Regulations, 2018."
10. Although there is enough power vested in the Commissioner to suspend the license of Custom Broker, in terms of Customs Brokers Licensing Regulations, 2018, however the said power which impacts the livelihood of the person and his employees needs to be exercised with caution and in accordance with the inbuilt safeguards, to prevent the arbitrary and reckless use of the 11 C/54865/2023 power. In our view, in the present case, Commissioner has not recorded any reason for the cause of immediate suspension. Infact, there is no cogent reason or finding recorded by the Commissioner to suspend the license of the appellant two years after the date of export. In this regard, we note that the Hon'ble Madras High Court has in case of Thiru Rani Logistic Pvt. Ltd. [2019 (365) E.L.T. 856 (Mad.)] has laid down the law as follows :
"9. Perusal of the above said provision would show that the Commissioner of Customs is empowered to suspend the approval granted to Customs Cargo Services Provider in appropriate cases where immediate action is necessary, pending enquiry or where the enquiry is contemplated. Therefore, it is evident that action under Regulation 11(2)of erstwhile Regulations can be taken only when the Commissioner of Customs is of the view that immediate action is necessary for suspending the license. Needless to say that such consideration must explicitly available in the order of suspension. Certainly, the order of suspension made by exercising the power under Regulation 11(2), an ex parte action, is not a punishment by itself, but a preventive action before passing a final order either imposing a punishment or otherwise. At this juncture, it is relevant to note that Regulation 11(1) empowers the very same Commissioner to suspend or revoke the license and the procedure to be followed for suspension or revocation of the license is contemplated under Regulation 12. Perusal of the Regulation 12 would show that before doing so, the licensee should be put on notice and he must be heard. However, Regulation 11(2) can be invoked for suspending the license only when the Commissioner of Customs feels and comes to a conclusion that immediate action is necessary to suspend the license. Thus, the materials to be relied on for initiating and taking action under Regulation 11(1) cannot be the sole basis for taking action under Regulation 11(2). On the other hand, when an action under Regulation 11(2) is contemplated, there must be other reasons available before the authority for his consideration to the effect that unless such immediate suspension is ordered, the damage already caused would either continue or likely to continue. In other words, the suspension to be made by invoking Regulation 11(2) must be on the known principle that "prevention is better than cure". Therefore, it is not only necessary to state the intention of the authority to prevent the illegality from its continuance, and also there exist the circumstances of continuance of illegality. Such
12 C/54865/2023 continuance of illegality cannot be presumed as a matter of course in every case. On the other hand, it has to be stated in clear and categorical terms in each and every case, where action under Regulation 11(2) is invoked, that immediate action is required based on the reasons supporting such apprehension of the authority of continuance of illegality. Hence, there is a clear distinction between the nature of action taken under Regulations 11(1) and 11(2), while the former is a punitive, the later is a preventive. Perusal of the impugned order in this writ petition would show that no such consideration was made by the Commissioner of Customs except extracting Regulation 11(2) and stating that an enquiry is contemplated in this case and that allowing the petitioner to continue for work will seriously jeopardize the Customs duties and security of Cargo. The respondent has not stated any other reason anywhere as to why an immediate action is required in this case.
10. This Court has considered the similar provision made under Regulation 21(2) of the Customs House Agents Licensing Regulations, 1984 in W.P. No. 17363/1994, dated 28-11-1994 reported in 1995 (77) E.L.T. 79 (Madras) [East West Freight Carriers (P) Ltd. v. Collector of Customs, Madras]. At paragraph Nos. 7 to 9 of the said decision, it has been observed as follows :
"7. I have considered the submissions made by the Learned Counsel for the parties. The power of the Collector to take action under Regulation 21(1) is not questioned in the writ petition. It cannot also be disputed that under Regulation 21(2) the Collector has the power to suspend licence of a Customs House Agent when enquiry against such agent is pending or contemplated where immediate action is necessary.
8. In my opinion, the power to suspend the licence is to be exercised where immediate action is necessary. A plain reading of the impugned order does not show that the Collector applied his mind to consider whether immediate action was necessary in the case. The order also does not state that the licence was suspended before immediate action was necessary. I do not express here one way or the other as to whether on the facts of the case immediate action was necessary or was not necessary because it is for the Collector to take decision in that regard.
9. In the absence of any indication that there was application of mind by the Collector on the aspect as to whether immediate action was necessary, in my opinion, the impugned order cannot 13 C/54865/2023 be sustained. The Collector gets jurisdiction to suspend the license in cases where immediate action is necessary. In this view, I consider it just and appropriate to pass the following order :-
The writ petitions allowed and the impugned order dated 26-9- 1994 issued by the respondent is quashed. It is open to the respondent if so desired to exercise the power under Section 21(2) and pass appropriate orders."
11. Similar findings were recorded by the the Calcutta High Court in its decision N.C. Singha & Sons v. Union of India (Cal.) (1998 (104) E.L.T. 11) wherein the very same Regulation 21(2) of the Customs House Agents Licensing Regulations, 1984, was considered. Paragraph Nos. 4 and 5 are reproduced as follows :
"4. We have heard the Learned Advocates for the parties and considered the rival contentions. Regulation 21(2) of 1984 Regulations read thus:
"21(2). Notwithstanding anything contained in sub-regulation (1), the Commissioner may in appropriate cases, where immediate action is necessary, suspend the licence of a Custom House Agent where an enquiry against such agent is pending or contemplated."
5. A Perusal of the order dated 9th June, 1998 passed by the respondent No. 2 clearly suggests that the power under Regulation 21(2) was resorted to apparently without spelling out in the impugned order as to whether any immediate action was necessary so as to suspend the licence of the appellants with immediate effect. Undoubtedly a plain reading of the Regulation 21(2) clearly stipulates that the requirement to take immediate action is a sine qua non to the suspension of a licence under Regulation 21(2) because such suspension is not by way of any punishment, as is contemplated by Regulation 21(2), but is required to cater to a situation warranting immediate action. The purpose of resorting to immediate suspension of a licence because of some immediate action is to immediately stop the activities of the clearing agent so as to disable him from taking any further action in the matter since, under a particular situation and under some given set of circumstances, the requirement of immediate action may demand that the clearing agent may be immediately required to be prevented from working any further. The minimum that is required by the Commissioner to enable him to exercise 14 C/54865/2023 such power is the spelling out of the circumstances in the order warranting the need to take such immediate action and to actually say that immediate action is indeed required in the matter. What we see from the impugned order dated 9th June, 1998, is that the expression "immediate action" itself is missing. That apart, what we find from the preamble, recitals and facts stated in the order is that the circumstances did not warrant the taking of immediate action in terms of Regulation 21(2) of the 1984 Regulation."
12. In view of the above discussions and findings, it is evident that the present impugned order passed under Regulation 16 is without there being any finding as to why immediate action is necessary to suspend the license. In addition, it has also been brought on record by the appellant that the Inquiry Report dated 21.07.23 under Rule 17 of CBLR, 2018 has been submitted, which has exonerated the appellant from the said allegations. In para 12 of the said report, the Inquiry Officer has concluded as follows:-
"12. The Regulation 10(n) states that the CB should verify correctness of IEC number, GSTIN, identity of his client and functioning of Skype that the declared address by using reliable, independent, authentic documents, data or information. I find that CB has submitted KYC documents pertaining to the exporter. The CB has also submitted that has taken reasonable steps to verify the working of the exporter. It can be said that the documents submitted is not time sensitive as it does not disclose whether the KYC documents were taken for the exporter after the export but it is the CB's defence that KYC documents were taken before the consignment was exported. This defence of the CB ought to be accepted as there is no evidence on record which suggests anything contrary to the stand taken by the CB.
13. In view of above analysis and asked findings of the Commissioner of Customs (Airport & General) recorded in para 11- para 15 of Order-in- Original 18/ ZR /Suspension/ Confirmation/Policy/2023 dated 02.03.23, it does not appear to be me that M/s Shakti Cargo Movers, the CB has violated the provisions of Regulation 10(d), Regulation 10(e) and Regulation 10(n) of Customs Broker Licensing Regulation, 2018."
15 C/54865/2023
13. In view of the decisions and discussions above, we do not find any merits in the impugned order to sustain. The same is hereby set aside. Consequently, the appeal is allowed.
(Pronounced in the open Court on 27.09.2023 ) ( DR. RACHNA GUPTA ) MEMBER (JUDICIAL) ( HEMAMBIKA R PRIYA ) MEMBER (TECHNICAL)