Custom, Excise & Service Tax Tribunal
A B Paul And Company vs Commissioner Of Customs-Mumbai - ... on 2 June, 2023
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
CUSTOMS APPEAL NO: 86451 OF 2022
[Arising out of Order-in- Original No: 11/CAC/PCC(G)/SJ/SBS Adj. dated 13th
May 2022 passed by the Principal Commissioner of Customs (General),
Mumbai.]
AB Paul & Company
Vikas Building, 4th Floor, Unit No.403
11th Bank Street, Mumbai - 400003 ... Appellant
versus
Principal Commissioner of Customs (General)
New Custom House, Ballard Estate Mumbai - 400001 ...Respondent
APPEARANCE:
Shri Anil Balani, Advocate for the appellant Shri Ram Kumar, Assistant Commissioner (AR) for the respondent CORAM:
HON'BLE MR S. K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) FINAL ORDER NO: A / 85907 /2023 DATE OF HEARING: 05/12/2022 DATE OF DECISION: 02/06/2023 PER: C J MATHEW Under consideration in this appeal of M/s A B Paul & Company, (holder of customs broker licence no. 11/543 issued under C/86451/2022 2 Customs House Agents Licensing Regulations, 1984), against order1 of Commissioner of Customs (General), New Customs House, Mumbai, is their plea that, notwithstanding shipping bills having been filed to enable 14 entities in export of 'cut and polished diamonds' o which only four alleged to be existing, their role in the narrative did not justify revoking of customs broker licence, along with forfeiture of security deposit, and further imposition of penalty of ₹ 50,000/- under regulation 18 of Customs House Broker Licensing Regulations, 2018. Besides the statement of several persons whose identity had been allegedly misused to secure 'importer exporter code (IEC)' numbers and claimed to have nothing to do with the consignments., those of the representatives, including the proprietor and manager, of the appellant herein had been relied upon to impose the detriments on the appellant, formed the basis for initiating proceedings mandated by regulation 17 of Customs House Broker Licensing Regulations, 2018.
2. Before proceeding to deal with the submissions, on merit and on procedure, preferred on behalf of the appellant by Learned Counsel, it may not be amiss to tarry awhile on the substantive distinction between penal proceedings arising directly from infringement of provisions of Customs Act, 1962 and that which is in pursuance of monitorial oversight of conduct of customs broker by the licencing authority. Unlike the former which are episodic, by 1 no. 11/CAC/PCC(G)/SJ/SBS Adj. dated 13th May 2022 C/86451/2022 3 impinging on a specific consignment without any consequence to future transactions of international trade, the livelihood of the broker and employees are in jeopardy on conclusion of proceedings under Customs House Broker Licensing Regulations, 2018 and, normally, as a fallout of the former in which the principal beneficiary of the alleged misdemeanor is the importer/exporter. The latter is, therefore, is akin in nature to proceedings under service law warranting the same cautious approach as intended by the scheme devised in the Regulations in terms of specific norms of conduct.
3. There is design in the logic and sequential arrangement of obligations devolving on 'customs brokers' under regulation 10 of Customs House Broker Licensing Regulations, 2018 implying that each of the enumerations therein is unique and mutually exclusive and not amenable to multiple deployment to evince breach of the normative prescription therein. The factual context of each charge - with a charge arising from breach of obligation - will vary according to the expected behavior articulated in each in the said Regulation.
4. We are constrained to take cognizance of this fundamental as we do not remain unaware of 'knee jerk reaction' in incidents of illegality in imports and exports to initiate proceedings without investigation that elicits the manner in which 'customs brokers' have breached conduct expected of them. It appears to us that, deferring to C/86451/2022 4 the judicious determination of appeals of 'customs brokers', the licencing authority is tempted, as it were, to allow the factual narrative of the cross-border transaction in its entirety to impress its gravity while obfuscating the reality of respective roles of persona as limited to their assigned tasks owing to which flexibility permissible in enlarging upon the generality of penal provisions in Customs Act, 1962 is not contemplated in the scheme of regulation 10 of Customs Broker Licencing Regulations, 2018.
5. In the proceedings here, the trigger for detriment under the penal alternatives incorporated in Customs Act, 1962 is not of concern; only such of those facts that evince breach of the obligations enumerated in regulation 10 of Customs Broker Licencing Regulations, 2018 are and only to the extent that these are relatable to identified breaches. Narration facts, sometimes even before confirmation in adjudicatory proceedings, to be drawn upon by inquiry authority or licencing Commissioner in any order without respect for causal linkage is akin to a buffet that is oblivious to the sequence of courses or even palatability.
6. The cavil about the shipments is that sale proceeds of exports were not received through formal banking channels and that effecting such exports, nominally through holders of 'importer-exporter code (IEC)' numbers, enabled diversion of sale proceeds received from C/86451/2022 5 abroad. On the other hand, the primary submissions of the customs broker is that, as far as 'cut and polished diamonds' are concerned, their responsibility is restricted with the goods, in accordance with prevailing special procedure, are personally handed over to customs officers for assessment and that the time-lines in Customs House Broker Licensing Regulations, 2018, prescribed for completion of each stage of proceedings under regulation 17 therein, have not been adhered which remained untenable even within the framework laid down by the Hon'ble High Court of Bombay in Principal Commr. Of Cus. (General), Mumbai v. Unison Clearing P Ltd [2018 (361) ELT 321 (Bom).
7. The appellant herein has been charged, in show cause notice dated 17th August, 2021, with breach of regulation 10(a), 10(d), 10(e), 10(k), 10(m), 10(n) and regulation 13(11) of Customs Broker Licencing Regulations, 2018 which, in the enquiry report dated 27th January 2022, were held as proved by the designated officer nominated to determine factual veracity. It is also seen that the exports had been sought to be effected in October 2020 and the appellant claims to be in possession of evidence of the licencing authority not being unaware that, in connection with either the transaction itself or the investigations thereto, every one of the exporters had responded to customs authorities which, probably, was cause for conducting the proceedings in a prejudicial manner. The C/86451/2022 6 impugned order evinces that the licensing authority was not inclined to ascertain the plea about existence of the exporters but preferred to place emphasis on statement recorded from one Mr Suresh Rasiklal Joshi, proprietor of M/s Spam International (India), and that of Mr Mukesh Gautam Lal Kothari of M/s Star Gems. The submission of non-adherence to time-lines was discarded by the licensing authority on the finding that the customs broker had itself not considered the 'offence report' as the cause of action by not making reference to it at any stage prior. The delay in concluding of enquiry has been glossed over by factual representation of the show cause notice having originated on 17th August 2021 instead of 5th August 2021with actual issue on 2nd September 2021 and claiming sanction from the decision of the Hon'ble High Court of Bombay in re Unison Clearing P Ltd for deviation therefrom. Specifically, it was observed in the impugned order that '9. .......... In view of the above, I find that though the delay has occurred in completion of proceedings, the delay is owing to unavoidable administrative reasons such delay cannot be fatal to outcome of inquiry and cannot neutralize the acts of omission and commission already committed by the CB. Hon'ble High Court of Judicature at Bombay also observed that the time limit contained in Regulation 20 cannot be construed to be mandatory and is held to be directory.'
8. The licensing authority has then gone on to examine each of the C/86451/2022 7 charges individually and it would appear that, in relation to some of those, the appellant herein had sought cross-examination which was denied thus '15. In respect of Regulation 10(n) of CBLR, 2018, it has been alleged that the CB did not verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN), identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information.
15.1 The defense submission stated that not even one IEC or GSTIN were fake; that every statutory document is genuine; that the identity and functioning of each exporter was verified by using reliable documents and the allegations based on statements, which were not tested in the inquiry, do not hold water; that denial of cross-examination on the ground that there is no retraction is illegal and unlawful; that retraction can never be a precondition for cross-examination. The Customs Broker relied on following judgements wherein it is held that cross- examination is mandatory:
(1) Thakkar Shipping Agency-1994 (69) ELT 90 (Tribunal) (2) Smita International - 2008 (225) ELT 439 (Tribunal) (3) West End Shipping Agency - 2014 (302) ELT 94 (Tribunal) (4) Swadeshi Polytex Ltd. - 2000 (122) ELT 641 (SC);
(5) Lakshman Export Ltd,-2002 (143) ELT 21 (SC);
(6) Arya Abhushan Bhandar - 2002 (143) ELT 25 (SC);
C/86451/2022 8 (7) Shalimar Rubber Industries- 2002 (146) ELT 248 (SC).
15.2 In this context, I place reliance on the decision of Hon'ble High Court for the State of Telangana at Hyderabad in the case of Shasta Freight Services Pvt, Ltd. Vs. Principal Commissioner of Customs, Hyderabad reported in 2019 (368) E.L.T. 41 (Telangana). The relevant para of the judgement is as under:
"20. The second contention of the Learned Counsel for the petitioner is that no opportunity to cross-examine the witnesses was granted, despite the petitioner making a request. We have already seen that under Regulation 20(4) a Customs. Broker is entitled to cross-examine the witnesses. But Regulation 20(4) is carefully worded. The entitlement of the Customs Broker to cross-examine, is confined only to "persons examined in support of the grounds forming a basis of the proceedings". The Inquiry Officer viz., the Deputy Commissioner or Assistant Commissioner is entitled under Regulation 20(4) to decline to examine any person on the ground that his evidence is not relevant or material. But he shall record his reasons in writing for so doing. Keeping this in mind, we shall now see the enquiry report to find out whether there was violation of Regulation 20(4)".
15.3 I find that the Inquiry Officer has observed that the facts emerging from statements of various persons correlate with each other and with the finding of the department officers; that there is no retraction filed by any of the persons whose statements were recorded under section 108 of the Act; that there is no need of the cross examination of the persons as was demanded by the advocate for the inquiry in the present matter; that It is not tenable under the purview of the Section 138B or any other section of the Customs Act, 1962 on the ground that Noticees failed to provide any cogent and valid reason for the cross-examination.
15.4 The Inquiry officer relied on the following judgement to deny the request made by the Noticee:
C/86451/2022 9 i. In the case of Kanungo & Co. Vs. Collector of Customs, Calcutta & Others [1993(13) E.L.T. 1486 (S.C.)], wherein it was unequivocally held that for proceedings under Customs Act, the right to compliance to the principles of natural justice does not cover the right to cross examination witnesses. Relevant Para 12 is reproduced wherein the Hon'ble Supreme Court observed as follows -
"In our opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities. Accordingly, I hold that there is no force in the third contention of the appellant."
ii. In the case of Fortune Impex Vs. Commissioner of Customs, Calcutta [2001(138) E.L.T.556 (Tri. -Kolkata)], Hon'ble Tribunal observed at Para 12 that:
"...it is not required that in each and every case, cross- examination should necessarily be allowed. There is no absolute right of cross-examination provided in the Customs Act. The Advocate had given a list of 26 persons for cross-examination without indicating the specific reasons for cross-examining the...it cannot be said that there was violation of principles of natural justice by not allowing the cross-examination of the persons sought by him." This view taken by the Tribunal has been affirmed by Hon'ble Supreme Court - 2004 (164) E.L.T. 4 (S.C.) & 2004 (167) E.L.T.A. 134 (S.C).
15.5 I find that the Inquiry Officer has recorded the reasons for denial of cross-examination in the Inquiry Report. Hence, the Inquiry Officer has rightly denied the cross-examination as per the provisions of Regulation 17(4) of the CBLR, 2018.'
9. We have heard Learned Counsel for the appellant and Learned Authorised Representative at length.
10. In the light of specific submissions made by Learned Counsel, we propose to deal with the preliminaries of adherence to time-lines and denial of opportunity to cross-examine persons whose testimony was relied upon by the enquiry authority but not tested for accuracy C/86451/2022 10 through cross-examination, and propose to look into merit only if necessary.
11. We find that the Hon'ble Supreme Court, in Principal Commissioner of Customs v. Shasta Freight Service Pvt Ltd [2022 (381) ELT 436 (SC)], had dismissed special leave petition (SLP) against order of the Hon'ble High Court of Telengana only owing to stated disinclination of appellant to pursue the dispute and that the Hon'ble High Court of Telangana had held that '24. Therefore, it is clear that there was a gross violation of the principles of natural justice. Unfortunately for the Department, the principles of natural justice have also been in-built into Regulation 20(4). Therefore, the Enquiry Officer could not have violated the mandate of law. It would have been a different matter if the Enquiry Officer had chosen not to rely upon the statements of those two witnesses, but to proceed only on the basis of other available documents. But in more than one place, the Enquiry Officer affirmed his reliance upon the statements of witnesses, among other things. Therefore, the impugned order based upon such an enquiry report is contrary to the procedure prescribed by Regulation 20(4) and clearly in violation of the principles of natural justice.' Furthermore, reliance was placed on the decision of the Tribunal in Thakkar Shipping Agency v. Collector of Customs, Bombay [194 (69) ELT 90 (T)] which held that '11. For the purpose of holding enquiry under the C/86451/2022 11 Regulations, specific procedure has been provided for in Regulation 23. When specific procedure is provided for, the general procedure provided for, for holding adjudication proceedings under the Customs Act, would not stand attracted. Clauses 3 and 4 of Regulation 23 of the Regulations read thus : -
"(3) The Assistant Collector of Customs shall, in the course of inquiry, consider such documentary evidence and take such oral evidence as may be relevant or material to the enquiry in regard to the grounds forming the basis of the proceedings and he may also put any question to any person tendering evidence, for or against the Customs House Agent, for the purpose of ascertaining the correct position.
(4) The Customs House Agent shall be entitled to cross-
examine the persons examined in support of the grounds forming the basis of the proceedings and where the Assistant Collector of Customs declines to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing."
From this, therefore, it is very clear that for the purpose of making use of any oral evidence, in these proceedings, such evidence has to be recorded by the Enquiry Officer, and the person giving such oral evidence has to be offered to the delinquent for cross-examination. There does not exist any provision which authorises use of statement recorded vide Section 108 of the Customs Act as an evidence here. True, statement recorded vide Section 108 of the Customs Act, has been given some special status as to its acceptability in relation to the proceedings under the Customs Act but there, no provision like the one found in clause (3) of Regulation 23, exist for the purpose of adjudication under the said Act. On the contrary, notice under Section 124 of the Customs Act, has to be served, based on evidence, which also includes the statements recorded under the provisions of Section 108 of the Customs Act, if recorded and the other side has an option C/86451/2022 12 to ask for production of such persons for cross-examination. Here, on the other hand, both recording of evidence and offering the persons for cross-examination has been made mandatory. The use of the word "shall" in clause (4) of Regulation 23, leaves no scope to hold otherwise. Non- examination of these two passengers and non-offering them for cross-examination to the delinquent, therefore, makes their statements recorded in other proceedings, not admissible. There is also no allegation that these two passengers have been intentionally kept away by the appellants and the only ground for non-examination mentioned is that they did not respond to the summons. It is true that there is no power in such authorities to enforce their attendance, but if their presence cannot be secured, their evidence has to be discarded and cannot be used in any manner. Any use of their statement would directly violate the provisions of Clause (4) of Regulation 23. The use of the statements of K. Gangadhar and C. Abdulla, even for the purpose of corroborating what Vijay Thakkar has said, is therefore not permissible. The statements obviously cannot fall within the category of "documents."
12. That therefore, leaves only the statement of Vijay Thakkar, recorded on 12-7-1990. Vide his letter dated 21-7- 1990 Vijay has retracted the same, and the statements recorded subsequently on two occasions, do not indicate that he has even re-confirmed his earlier statement. Assuming, that being a statement of the delinquent himself, recorded by a competent authority, the same can be made use of in drawing conclusion, with his retraction thereof, the same ought to get corroboration on material particulars.' and, in Smita International v. Commissioner of Customs (General), Mumbai [2008 (225) ELT 439 (Tri.-Mumbai)], that C/86451/2022 13 '2. We have heard both sides. We find force in the appellants' submission that statements relied upon against them were recorded under the provisions of Sec. 108 of the Customs Act, 1962, which cannot be relied upon in proceedings under the Customs House Agents Licensing Regulations, 2004, in the light of the ratio of the Tribunal's decision in Thakkar Shipping Agency v. CCE, Bombay [1994 (69) ELT 90], wherein it has been held that statement recorded under Sec. 108 of the Customs Act, 1962 cannot be used as evidence under CHALR and that recording of evidence and offering the persons for cross-examination is mandatory under Clauses 3 and 4 of the Regulation 23 of the CHALR, 1984 (the relevant provision is Regulation 22 of 2004 which is reproduced herein below and pari materia with the earlier Regulation 23 of the CHALR, 1984 Regulations :) "22. Procedure for suspending or revoking licence under Regulation 20 - (1) The Commissioner of Customs shall issue a notice in writing to the Customs House Agent stating the grounds on which it is proposed to suspend or revoke the licence and requiring the said Customs House Agent to submit, within such time as may be specified in the notice, not being less than forty-five days, to the Deputy Commissioner of Customs or Asstt. Commissioner of Customs nominated by him, a written statement of defence and also to specify in the said statement whether the Customs House Agent desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs.
(3) The Deputy Commissioner of Customs or Assistant Commissioner of Customs shall, in the course of inquiry, consider such documentary evidence and take such oral evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings, and he may also put any question to any person tendering evidence for or against the Customs House Agent, for the purpose of ascertaining the correct position.
(4) The Customs House Agent shall be entitled to cross- examine the persons examined in support of the grounds forming the basis of the proceedings, and where the Deputy Commissioner of Customs or Assistant C/86451/2022 14 Commissioner of Customs declines to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing."
3. In the Thakkar Shipping Agency case, the Tribunal set aside the vocation of the appellants' CHA Licence and allowed the appeal. The above decision has been followed in the case of Extin Shipping (India) Ltd. (Order No. A- 191/WZB/2005/C.I, dated 28-9-2005, and in J.B. Udani Co. v. CC (Gen.), Mumbai [Order No. A/1114/WZB/2006, dated 12- 9-06] in the context of the 2004 Regulations. The plea of the ld. SDR that these decisions which were rendered in the context of revocation of licence and cannot be made applicable to cases of suspension like the present one, is not tenable for the reason that Regulation 22 prescribes procedure both for suspension and revocation of CHA Licence.'
12. The proceedings under the Customs Act, 1962 emanated from alleged conspiracy to export 'cut and polished diamonds' through entities existing only on paper for the sole purpose of receiving proceedings for evading oversight and control by the agencies of the State. There is no dispute that the exports did occur; non-receipt of remittance in foreign exchange fall outside the obligation devolving customs brokers whose functioning, under the Regulations, is limited to filing of shipping bills and securing of 'let export orders' before outward transmission beyond customs area. In such circumstances, the sole responsibility that may be laid at the door of customs broker pertains to ascertainment of identity of the exporters.
C/86451/2022 15
13. The want of diligence in doing so has been held against the customs broker herein by relying upon the admissions of several of the 'importer-exporter code (IEC)' holders that denied connection with the export consignments and, more particularly, on that of an employee of the appellant on the specifics of the verification undertaken by the customs broker. As the case revolves around beneficiary exporter, operating under the cover of entities existing on paper' and evidence of existence of such operator being hearsay, it was behoved the licensing authority to allow cross-examination rather than deny solely on the ground that the statements had not been retracted. It would appear that the licensing authority has not appreciated that cross-examination in the event of retraction is one way of restoring the contents of the statement which may benefit customs authorities and that, correspondingly, it is the lack of retraction that warrants test of veracity. Failure to place the request in this perspective discredits the denial of cross-examination on the part of the licensing authority. That, of itself, should suffice to nullify the proceedings but we must also venture upon the correctness of the impugned order claiming not to be at variance with the prescription on adherence to time-lines in the decision of the Hon'ble High Court of Bombay in re Unison Clearing Pvt Ltd .
14. Though the said decision has categorically held that time-lines in the Regulations are to be deemed as 'directory', the context is not C/86451/2022 16 without significance. It was held that setting aside of revocation, at the appellate level, by resort to ascertainment of conformity with time- lines, would defeat the intent of Regulations that is substantively elaborate in enacting framework for supervisory oversight of customs brokers. Nonetheless, the Hon'ble High Court of Bombay also noted that, without justification for delay in completion of proceedings demonstrated by findings on the contributory negligence of the notice- broker, the licencing authority is not permitted to take shelter behind ' directory' nature of the time-lines. Impliedly, the time-lines are deemed to be directory at the appellate stage and an order of detriment under the authority of Regulations is, in circumstances of non- adherence to times lines, not tenable in the absence of justification for delay.
15. The impugned order is clearly bereft of such finding. Learned Authorised Representative has contended that the delay occurred owing to insistence on notice insisting upon cross-examination of their employee; an assertion of right to defence in proceedings is, of itself, not dilatory and, especially, in the light of our finding that no justifiable cause for rejection of cross-examination is available on record. In such circumstances, the decision of the Hon'ble High Court of Bombay in re Unison Clearing Pvt Ltd does not come to the assistance of the licencing authority. It is clear that the time-lines specified in regulation 17 of Customs House Broker Licensing C/86451/2022 17 Regulations, 2018 had not been adhered to. Consequently, no purpose would be served by directing cross-examination now because that will only approve non-adherence to timelines; we cannot condone that which is not condonable. We also do not find it necessary to delve further into the deviation from the specificity, warranted in show cause notice, by the arrangement of obligations in regulation 10 of Customs Broker Licencing Regulations, 2018.
16. Accordingly, impugned order is set aside and appeal allowed.
(Order pronounced in the open court on 02/06/2023) (S. K. MOHANTY) (C J MATHEW) Member (Judicial) Member (Technical) */as