Custom, Excise & Service Tax Tribunal
International Cargo Agents vs Commissioner Of Customs And Service Tax ... on 10 March, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 20373 / 2014 Appeal(s) Involved: C/28578/2013-DB [Arising out of Order-in-Original No. 30/2013 dated 20/12/2013 passed by the Commissioner of Customs, Bangalore] International Cargo Agents No. 49/3, Nagappa Street, Sheshadripuram Bangalore - 560 020 Karnataka Appellant(s) Versus Commissioner of Customs and Service Tax - Bangalore C.R. Building, Queens Road, P.B. No. 5400, Bangalore - 560 001, Karnataka Respondent(s)
Appearance:
Mr. M.A. Narayana, Advocate Cusecs Consultants Flat 'A' Gr. Floor, "Seven Hills Excellency" #33, 2nd Cross, SBM Colony, Brindavan Nagar, Mathikere, Bangalore - 560 054 For the Appellant Mr. N. Jagdish, AR For the Respondent CORAM:
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 10/03/2014 Date of Decision: 10/03/2014 Order Per: B.S.V. MURTHY Brief facts of the case are as under:
M/s. International Cargo Agents, No. 49/3, Nagappa Street, Seshadripuram, Bangalore - 560 020, having PAN No. AAAF1620 Q are holders of CHA (now called Customs Broker) License No. R-9/89 (renewed up to 24.10.2021) under the provisions of erstwhile Custom House Agents Licensing Regulations, 2004. A show-cause notice bearing C. No. VIII/13/09/2006 CHAL dated 29.02.2008 was issued, against the said Customs Broker, by the Commissioner of Customs, Tuticorin. The matter was adjudicated vide Order-in-Original No. 13/2013 dated 28.06.2013, wherein the License issued to the Customs Broker was ordered to be suspended for a period of one month w.e.f. 01.07.2013 besides forfeiture of the security deposit of Rs. 75,000/- furnished by the said Customs Broker at the time of obtaining/renewing their License.
2. While the above matter was pending adjudication, the Central Board of Excise and Customs, vide Notification No. 65/2013 Customs-N.T. dated 21.06.2013, in supersession of the provisions of the erstwhile Customs House Agent Licensing Regulations, 2004, notified the Customs Brokers Licensing Regulations, 2013 (hereinafter referred to as the CBLR, 2013). As per Regulation 8 of the DBLR, 2013, an applicant for a Customs Broker License is required to furnish Security in the form of either Bank Guarantee/Postal Security/National Savings Certificate for an amount of Rs. 5, 00,000/- for carrying out business as a Customs Broker.
3. The said Customs Broker accepted the penalty imposed vide OIO No. 13/2013 dated 28.06.2013 and on completion of the suspension period of one month, made a request seeking restoration of the License and submitted a fresh Security deposit for an amount of Rs. 75,000/-. Since the provisions of CHALR, 2004, under which the original license was issued, had been superseded by the CBLR, 2013, notified under Notification No. 65/2013 Customs N.T. dated 21.06.2013, a reference was made to the Central Board of Excise & Customs, New Delhi, in a similar case, seeking specific clarification as regards the quantum of Security to be obtained upon restoration of the License issued in terms of CHALR, 2004. Pending clarification of the said issue by the Board, the Original Licence No. R-9/89, issued to the Customs Broker, which was valid up to 24.10.2021, was restored by taking a security of Rs. 75,000/- submitted by them.
4.1. The Central Board of Excise and Customs vide letter F. No. 502/07/2013-Cus. VI dated 06.09.2013, had clarified that, in terms of Regulation 8 of CBLR, 2013, a Customs Broker is required to furnish Security of Rs. 5 lakhs for issuance of suspended Customs Broker License.
4.2. Based on the clarification issued by the Board, the appellant was directed to deposit the balance amount of Rs. 4, 25,000/- as additional security by letter dated 20.09.2013. The appellant once again represented that the provisions of Regulation 8 are applicable only in respect of licence issued under Regulation 7 of the CBLR 2013 and in their case licence was issued under the provisions of CHALR 2004. Since it was only a suspension for a specified period and thereafter the licence continued, CHALR 2004 would be applicable and not CBLR 2013. Further he also relied upon a clarification issued by the Board under Circular No. 42/2004 dated 10.06.2004 wherein Board had clarified in point No. 5 under the heading Regulation 9 and point No. 1 under Regulation 10, the revised principles are applicable only in respect of licence issued under new regulations. Since the appellant did not furnish additional security, treating this as contravention of Regulation 8 of CBLR 2013 and considering that to be intentional and amounting to grave misconduct, the licence was once again suspended and a post decisional hearing was conducted and thereafter in the impugned order, the suspension of the appellant was ordered to be continued till completion of procedure specified under Regulation 20 of CBLR 2013.
4.3. The impugned order is under challenge and the appellant sought early hearing of the appeal which was allowed by this Tribunal on 13.02.2014.
5. At the outset it has to be stated that in the normal course, normally this Tribunal would not have allowed early hearing in the proceedings since a suspension is required to be followed by enquiry and it may not be appropriate to interfere at this interim stage. However because of arguments advanced by the learned counsel and because of peculiar circumstances in this case and also because of the fact that basically the issue involved is a legal one and as far as the findings part is concerned, the impugned order ordering suspension for one month and forfeiture of security deposit, the appellant can be said to have suffered the punishment for that offence.
6. The issues raised by the learned counsel are discussed and considered one by one.
6.1. The first submission was that the Commissioner has relied upon the classification issued by the Board on 06.09.2013 which is basically a correspondence between the Commissioner and the Board and cannot be said to be in public domain. As submitted before the Commissioner, the Boards Circular dated 10.06.2004 has to be preferred to the internal correspondence. Moreover the Boards circular specifically covers the appellants case and therefore the benefit should be allowed. In the Boards circular, the appellants are relying on two clarifications issued by the Board. The first clarification was issued with reference to Regulation No. 9 and Board clarified that the submissions of fresh financial viability certificate/proof and bonds, security etc. are required only in respect of fresh licences issued under Regulation 9 of CHALR 2004 w.e.f. 23.02.2004. It was also clarified under Regulation 10 that for existing licences bond, security etc. need not be taken as per CHALR 2004. However, it was submitted by the learned AR that the clarification issued by the Board on 06.09.2013 was with reference to the specific case of the appellant and this was followed up by issue of public notices by the Bangalore Commissioner on 20.01.2014 wherein procedure for renewal of Customs Broker Licence was prescribed. Therefore he submits that the submission of the appellant that the clarifications issued in 2004 should be preferred to the subsequent clarification and public notice is not correct. The learned AR also relied upon the decision of the Honble High Court of Bombay in the case of Shri Venkatesh Shipping Services Pvt. Ltd. Vs. Union of India [2013 (287) E.L.T. 266 (Bom.)]. He submits that in that case the Honble High Court of Bombay had treated the revocation of licence for the period from 19.03.2008 to 30.09.2012 as suspension and ordered the revocation of the same subject to the condition that the appellant therein deposited the security deposit as per the present rules and regulations with the proper officer. We find considerable force in the arguments advanced by the learned AR for the following reasons:
a) Even though the clarification dated 06.09.2013 issued by the Board is with reference to a specific case and is a result of internal correspondence, yet the fact remains that the issue raised by the appellant was considered by the Board and a clarification was given. What is required to be examined is whether such clarification is legally correct and just because it is internal correspondence, it does not loose its validity. Similarly just because Board has clarified, that does not become the correct principle or essentially to be followed. This may be so for the Commissioner but not for the Tribunal. Therefore we consider that the public notice as well as the clarification issued by the Board need not be considered by us for arriving at our conclusion and therefore we do not take this into account so that the appellant need not feel that we are prejudiced by the clarification issued by the Board.
b) Coming to the clarification issued by the Board it has been relied upon by the appellant, we consider that in view of our observations above, this also has to be ignored.
c) We find that the case under consideration by the Honble High Court of Bombay is appropriate and applicable to the facts of this case. In that case the Honble High Court had considered the CHA regulations in detail and modified the order of revocation to one of suspension and directed the appellant to deposit fresh security. In the case before us also, the Commissioners order prescribed a period of suspension and forfeited the security deposit. The consequences of the order of the Honble High Court of Bombay as well as the order of the Commissioner are same. The conclusion is that after the decision of the High Court of Bombay as well as the decision of the Commissioner, the appellants will have to provide security afresh since in both the case security had been forfeited and is not available with the Government. Honble High Court of Bombay took the view that security deposit has to be made in accordance with present Rules and Regulations. We cannot ignore the precedence value of this decision and we respectfully follow this and consider that this decision is squarely applicable to the case of the appellant.
6.2. We could have rejected this appeal only on this ground but nevertheless we consider it appropriate that other grounds canvassed also should be considered and dealt with.
6.3. The second submission was that there was no renewal of the licence in this case and it is also in the ground of fresh licence. Only in the case where a fresh licence is granted or a licence comes up for renewal, the question of execution of a fresh bond and provision of fresh security would arise.
6.4. For better appreciation we reproduce Regulations 7, 8 and 9 which are as under:
7 Grant of licence. (1) The Commissioner of Customs shall, on payment of fee of five thousand rupees grant licence in Form B to an applicant who has passed the oral examination within two months of the date of declaration of the said results.
(2) The applicant who has been granted licence under sub- regulation (1) shall be eligible to work as Customs Broker in all Customs Stations subject to intimation in Form C to the Commissioner of Customs of the Customs Station where he intends to transact business. A copy of this intimation shall also be sent to the Commissioner of Customs who has issued the licence in Form B.
8. Execution of bond and furnishing of security.-
(1) Before granting the licence under regulation 7, the Commissioner of Customs shall require the successful applicant to enter into the bond in Form D and where specified a surety bond in Form E for due observance of these regulations and furnish a bank guarantee, a postal security or National Saving Certificate in the name of Commissioner of Customs for an amount of five lakhs rupees for carrying out the business as Customs Broker.
(2) In cases where a postal security or National Saving Certificate is furnished, the benefit of interest accruing thereon shall accrue to the Customs Broker concerned.
9. Period of validity of a licence. (1) A licence granted under regulation 7 shall be valid for a period of ten years from the date of issue and shall be renewed from time to time in accordance with the procedure specified in sub-regulation (2):
Provided that a licence granted to a Customs Broker, authorised under the Authorised Economic Operator Programme referred to in Boards Circular No. 28/2012-Customs dated 16.11.2012, shall not require renewal till such time the said authorisation is valid.
(2) The Commissioner of Customs may, on an application made by the licensee before the expiry of the validity of the licence under sub-regulation (1), renew the licence for a further period of ten years from the date of expiration, if the performance of the licensee is found to be satisfactory with reference, inter alia, to the obligations specified in this regulation including the absence of instances of any complaints of misconduct.
(3) The fee for renewal of a licence shall be five thousand rupees.
6.5. Under regulation 7 the Commissioner has been empowered to issue or grant a fresh licence for which an amount of Rs. 5,000/- is fixed. Execution of bond and execution of security are as per regulation 8 which again requires the Commissioner to ensure that a bank guarantee or security to the extent of Rs. 5 lakhs is provided by the applicant. The situation in which the appellant is found is not covered by both the regulations if we go strictly by the words used therein. Regulation 9 speaks of period of validity of a licence and again speaks of renewal after the specified period therein. In the case of renewal also, there is no mention of a fresh bond or security to be taken. The regulation only speaks of a renewal fee of Rs. 5,000/-. Therefore when we strictly go by the regulation 7 to 9, we find that whether it is the case of renewal or the case of the appellant, there is no specific provision to provide that a security has to be taken in terms of the individual regulation except in the case of grant of a new licence. However if we take a view that appellant or any CHA whose security becomes non-existence for any reason or bank guarantee expires, there will be no security at all. Obviously the regulation requires the security to be available at all times with the Government. This is the only interpretation which would ensure that the regulations are interpreted in letter and spirit. Therefore where the security becomes non-available for any purpose, it becomes necessary for the Commissioner to obtain fresh security. Having come to this conclusion, we have to examine on what basis the Commissioner could fix fresh security amount.
6.6. It was submitted by the learned counsel that even though CHALR has been superseded, as per the provisions of Section 159A of Customs Act 1962, effect of amendment, repealment, supersession or rescinding of any rule, regulation, notification or order so amended or issued under this Act would not affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, regulation, notification or order so amended, repealed, superseded or rescinded. Therefore this submission that the appellant had acquired the right of acting as a CHA under the old CHALR and under the old CHALR he was required to furnish security of only Rs. 75,000/- and therefore just because the old CHALR was superseded, the right/privilege which had accrued to the same to act as CHA by paying security of Rs. 75,000/- cannot be forfeited. Therefore fixing of the security deposit afresh under CBLR 2013 is not correct.
6.7. The result of the Commissioners order is that the CHA would be entitled to perform CHA service after the period of suspension is over. However as already observed by us above, the security provided by the CHA has to be available with Government when the CHA is performing his obligation since the bank guarantee or security deposit is related with the activity of the appellant as a CHA. Therefore if no security is available because it has been forfeited in this case, Commissioner has to determine the amount of security payable. For determination he has to refer to the regulation. When he has to refer to the regulations, the only regulations available would be CBLR 2013. While renewal of a licence issued under the old CHALR and continuation of a person as a CHA under CBLR 2013 would be automatic even if no fresh licence is granted under CBLR (this is in view of the provisions of Section 159A of Customs Act 1962), the determination of security which becomes not available for any reasons has to be under new CBLR 2013 only. It cannot be said that he acquired the right or privilege of continuing as a CHA with the same amount of security which was required as per the old regulations because of Section 159A of Customs Act 1962. The security deposit is taken to ensure that a CHA performs his function in accordance with regulations and Government will have control over a certain amount for any omission/commission that may be made by him. This amount has to be naturally determined and Government may from time to time revise the same. Therefore we find that in this case the action of the Commissioner requiring the appellant to deposit additional security and because of failure to deposit the same suspending the licence once again cannot be found fault with.
6.8. In fact if the Commissioner was to specifically order that appellant has to provide security deposit of Rs. 5 lakhs in the order itself in accordance with new CHALR 2013, it would have been difficult to contest the same. Just because the Commissioner did not mention it in the order, if the legal position requires the appellant to deposit the amount, which is the situation in this case, the revised security is to be deposited. We recall the fact that Honble High Court of Bombay had held in the case of mandatory penalty under Section 11AC of Central Excise Act 1944 that option to pay 25% of the duty demanded within one month need not be specifically mentioned and even if it is not mentioned in the order-in-original, it is the responsibility of the assessee to ensure that the payment is made within 30 days and if such option is not mentioned in the order also and if the assessee did not pay the amount within one month as specified under Section 11AC of Central Excise Act, no appellate authority can subsequently take a view that in the absence of option, a fresh opportunity can be given by the appellate authority. This is a contrary view taken by the Honble High Court of Bombay vis-`-vis the decision of the Honble High Court of Gujarat on the same issue. Therefore what is required to be examined is whether in terms of regulations amount is required to be paid or not and not the question as to whether any clarification has been given by any authority or whether any public notice has been issued or whether in the order any specific mention has been made and if no specific mention has been made also subsequently what is statutorily required has to be implemented. There is no estoppel in law. Therefore in whatever manner we look at the issue, we cannot find fault with the view taken by the Commissioner that appellant has to deposit an additional amount of Rs. 4.25 lakhs for allowing him to continue his activity as a CHA.
6.9. Another submission was made that for mere non-furnishing of the additional security suspension under regulation 19 is not warranted. When statute fixes a specific amount as a security deposit, not providing such security deposit on the ground that would not prejudice the department cannot be accepted. What can be examined is whether security deposit is required to be made in accordance with regulation or not. We cannot go into the question whether the Customs Department is prejudiced by such non-deposit. We are unable to consider this submission at all. Whatever reason Commissioner adopted for rejecting the submission, in our opinion is not relevant and we need not go into it.
7. Under these circumstances the ground taken by the appellant that requirement of additional security deposit has to be held as incorrect and suspension to be held as incorrect and therefore the suspension has to be revoked cannot be accepted. We are making it clear that we are not going into the question as to whether appellant has committed an offence or not in view of the fact that the enquiry proceedings is already over and Commissioner is expected to pass an order after completion of enquiry in the case of the appellant. Therefore we are not recording any views on the correctness of the proceedings initiated by the Commissioner and whether there was any findings or not etc. The only view we have taken is that there nothing wrong in asking the appellant to deposit the additional amount by the Commissioner. In the result the appeal is rejected.
(Order dictated and pronounced in open court) (S.K. MOHANTY) JUDICIAL MEMBER (B.S.V. MURTHY) TECHNICAL MEMBER iss