Custom, Excise & Service Tax Tribunal
M/S Daroowala Brothers & Co vs Commissioner Of Customs (General), ... on 20 July, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. C/1147/08 (Arising out of Order-in-Original No. 32/2008 dated 23.07.2008 passed by the Commissioner of Customs (General), Mumbai). For approval and signature: Honble Shri A.K. Srivastava, Member (Technical) Honble Shri Ashok Jindal, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== M/s Daroowala Brothers & Co. Appellants Vs. Commissioner of Customs (General), Mumbai Respondents Appearance: Shri Anil Balani Advocate for Appellants Dr. T. Tiju JDR for Respondents CORAM: SHRI A.K. SRIVASTAVA, MEMBER (TECHNICAL) SHRI ASHOK JINDAL, MEMBER (JUDICIAL) Date of Hearing: 19.06.2009 Date of Decision: .2009 ORDER NO. WZB/MUM/2009 Per: Shri A.K. Srivastava, Member (Technical)
This is an appeal against the order of Commissioner of Customs (General), Mumbai suspending the CHA licence of the appellant M/s. Daroowala Bros. and Co.
2. Brief facts of the case are that the Directorate of Revenue Intelligence, Mumbai had an information that red sanders (red sandalwood), a prohibited item was being smuggled out of the country in the guise of Zinc Oxide using forged export documents. The CHA M/s. Daroowala Bros. and Co. had filed the documents in the name of M/s APW President Systems Ltd., Pune. The physical examination of goods confirmed the intelligence and 9.800 MTs of red sanders for export, valued at Rs.39.20 lakhs were found. The investigation revealed that all the documents including the signatures of the Excise/Customs authorities, signatures of the company authority etc. were forged.
3. The Commissioner (General) was informed about the conduct of the CHA vide letter dated 17.07.08 and on examination of the issue, the Commissioner came to the conclusion that the CHA has failed to discharge his obligations as a Customs House Agent under CHA Licensing Regulations, 2004, and pending enquiry under Regulation 22, an immediate action was required to prevent further misuse of the CHA Licence and he has suspended the operation of the CHA Licence under Regulation 20(2) of the CHALR, 2004 vide order dated 23/25.07.08.
4. The Ld. Advocate for the appellant submitted that the order of the Commissioner suspending the license was unwarranted and suffered from serious infirmities as under:
4.1 The Ld advocate for the appellant mainly contests the order on the ground of delay. He relied upon the following judgements of the Honble Bombay High Court in the case Commissioner of Customs vs International Shipping Agency as reported in 2008 (226) ELT 46 (Bom) and in the case of Commissioner of Customs (General) vs Buriegh International as reported in 2008 (226) ELT 49 (Bom), where the decisions of the Tribunal revoking the suspension were upheld. He also relied on the decision of the Tribunal in the case of National Shipping Agency vs. Commissioner of Customs (General) Mumbai as reported in 2006 (196) ELT 439 (Tri. Mumbai).
4.2 He also submitted that there was no urgency in suspending the license as there was no grave offence committed by the CHA. He submitted that the statement dated 23.5.08 of Shri Pervez Irani partner of the appellant is exculpatory; that one Shri Yogesh Rokade was known to the appellant since April, 2007 and was working with M/s N.G Joshi and Co; that earlier also Yogesh had brought three jobs of import; that Yogesh brought a job of M/s APW Presidence system Ltd. of export; that Yogesh showed him the invoice bearing the Central Excise examination with mention of the factory stuffing permission; that he (appellant) had verified the factory stuffing permission from factory stuffing cell for zinc oxide; that he (appellant) asked for the authorization letter from Yogesh. The learned advocate submits that the appellant had no knowledge about the attempted export of red sanders in the guise of zinc oxide; that Shri Rokade or Shri Sheikh have not alleged that the appellant was informed about the modus operandi; that he wasnt aware that the documents produced by Shri Yogesh were not genuine and as such the allegations that the appellant colluded with the smugglers by allowing the CHA licence to be used for monetary consideration was false and that he has acted bonafide in the normal course of business; that there was no urgency in suspending the license as there was no grave offence committed by him.
4.3 He submitted that the order had been passed directly in violation of the procedure prescribed vide Regulation 22 for suspending the CHA license under Regulation 20 in as much as he was not given a copy of the report of DRI, not given any hearing and hence the principles of natural justice have been violated.
4.4 He also submitted that the appellant has been out of business since then and continued suspension would cause undue hardship. He submitted that the enquiry has been initiated. He submitted that the punishment has to be commensurate with the gravity of the offence and hence the license, which is suspended for the last one year, should be restored.
5.1 The Ld. JDR, on the other hand, submitted that there was no delay. He submitted that the moot point to be seen is as to when the Commissioner, who is a disciplinary authority and is different from the investigating agency booking the case, has been informed and whether there is a delay on his side. He submitted that in the case of Jasjeet Singh Marwaha vs Union of India and others (cited supra), the High Court has held that even a delay of 4= years cannot be considered fatal to the immediate suspension of the license. He invited our attention to the Calcutta High Court decision in the case of Orient Clearing & Forwarding Agency v. Union of India - 2001 (136) ELT 3 (Cal.), wherein the scope of words immediate action under Regulation 21(2) was considered and it was held that immediate does not mean as and when the consignment was imported as per the bills of entry alone. Word immediate cannot stop the authority concerned from taking steps during the pendency of the enquiry because the time has not stopped from running.
5.2 The Ld. JDR stated that the Commissioner, on receipt of the information about the misconduct of the CHA, has applied his mind and suspended the license within 7 days of the receipt of the letter. The Commissioners order does not suffer from any infirmity on that count.
5.3 The Ld JDR also relied on the judgement of the Honble High Court of Delhi in the case of Jasjeet Singh Marwaha vs Union Of India and others as reported in 2009-TIOL-87-HC-DEL-CUS, wherein the Court has, in a similar matter, framed 4 questions of Law. The relevant paras are reproduced below: -
2.1 By an order dated 12.11.2008, we had admitted the Appeal and framed the following substantial questions of Law: -
1. Whether any violation under the Customs Act, 1962 or imposition of penalty can be a ground to suspend Clearing House Agent License under regulation 20 of the Customs House Agents Licensing Regulation, 2004 without there being any violation of the provision of the said Regulations
2. Whether the suspension order can be sustained solely on the basis of the confessional statement recorded under Section 108 of the Customs Act. 1962
3. Whether the delay of 4= years on the part of the Department for not taking immediate action against the alleged violation would not cause the suspension order to be revoked
4. Whether the clearing House Agent can be penalized for the mis-declaration, if any even though it is not his duty / obligation under the Customs House Agents Licensing Regulation, 2004, while the importer is left free to work and the Honble High Court, after lengthy deliberations, has come to a conclusion as reproduced below on the questions of law:
7. In view of discussions hereinabove, our answer to the question of law framed are as follows: -
7.1 In so far as question no. I was concerned we are of the view that the licence of a CHA can be suspended where there is a violation of the provision of the Act or imposition of penalty, the power of suspension of licence is not confined to only those situations where there is a violation of the CHALR, 2004 Regulation.
7.2 In so far as question no. 2 is concerned, the CHAs licence can be suspended based on the confession made under Section 108 of the Act provided it is voluntary and the statement is truthful and is not the result of such inducement, threat or promise as mentioned in Section 24 of the Indian Evidence Act, 1872.
7.3 In so far as question no. 3 is concerned, in the given circumstances, we are of the view that there was no inordinate delay on the part of the respondents is suspending the licence of the CHA if one were to account for the fact the order of the adjudication was passed on 20.10.2006 and also the subsequent events which lead to the suspension of licence by an order dated 29.01.2007.
7.4 In so far as question no. 4 is concerned, we are of the view that since a CHA acts on behalf of the importer, it is not only his obligation to ensure that the entries made in the bill of entry are correct but also that a true and correct declaration of value and description of goods is made, and in the event of any infraction such as mis-declaration, he can be penalized under the Regulation 20 of CHALR, 2004 if it results in a misconduct which is of the nature which renders him unfit to transact the business of a CHA, at the Customs Station.
Ld JDR also submitted that the Honble High Court of Delhi judgement as cited supra has also come to a conclusion that the CHAs license can be suspended based on the confession made under Section 108 of the Act provided it is voluntary and the statement is truthful and is not the result of such inducement, threat or promise as mentioned in Section 24 of the Indian Evidence Act, 1872.
The Ld DR pointed out the relevant portion of the statement u/s 108 of Customs Act, 1962 of Shri Yogesh Rokade, who was instrumental in processing of documents including the Annexure C and export declaration duly signed by the appellant, which is also discussed in the show cause notice F. No. DRI /MZU /NS /INV-1 /2008-09 dt.23.10.08 and also referred to in the suspension order, which is reproduced below:
Para 7.6.1: ..he has joined M/s N. G. Clearing and Forwarding, Mumbai as office peon in 2001 and was promoted as clerk in 2004; that he was allotted Dock Entry Permit No.N63Y021 valid upto 30.03.08..
..; that on 30th April, he had approached Shri Parvez Irani of CHA firm M/s Daroowala Bros. and Co. for getting the signature on Annexure C and Export declaration and that Shri Irani gave him 5 signed copies each; that he (Yogesh) had handed over Rs.10,000/- to shri Irani for using his (Iranis) C.H.A. license; that he (Yogesh) also had used his (Irani) license three times earlier for import of glass of M/s Royal Optics and on each occasion he had paid Rs.2500/- The learned DR submitted that this clearly shows that Yogesh was not the employee of the appellant. As per the CHALR, 2004 u/r 14 (b), a CHA can process the documents only through his own employee and not through a third person. He further submitted that for the consignment involved in the present case, for allowing to use his CHA licence to Shri Yogesh, Shri Irani received Rs.10,000/- as compared to Rs.2,500/- for other consignments. This shows that the appellant was aware of the risk involved in the consignment of sandal wood, which was banned for export and being cleared by Shri Yogesh.
The learned DR further submitted that in his statement recorded u/s 108 of CA, 1962, Shri Irani has admitted that he had not received authorization letter from the exporter. Shri Irani also lied before the Customs authority in the said statement that he had verified the factory stuffing permission from the factory stuffing cell. However, during the investigations, it was found that the factory stuffing permission extended to M/s APW President Systems Ltd., Pune was not for the Zinc Oxide. Thus he submitted that the statements corroborated with each other and with the facts on record.
The Leaned DR also informed that the investigations revealed that the name, address and other details of the said M/s APW President Systems Ltd., Pune as well as the signatures of the excise officers were used by the noticees to forge the export documents, which were signed by the Appellant in the capacity of the CHA.
5.4 The JDR also stated that in terms of the regulations, there is no need of any show cause notice or personal hearing to the CHA before suspension of his license provided the disciplinary authority i.e Commissioner of Customs (G) finds it to be a fit case for immediate action pending in contemplation of an enquiry. He has stated that there are catena of judgements of the Honble High Courts and the Tribunal, which have underlined this fact.
The Honble Bombay High Court, in the case of Commissioner of Customs (G), Mumbai Vs Raj Clearing Agency as reported in 2006 (199) E.L.T. 602 (Bom.) has held in a question of law raised whether it is mandatory that in all cases of suspension, Regulation 22(1) need to be followed. The relevant part of Para 3 is reproduced hereunder:
We make it clear that the observations of the CESTAT that in all cases of suspension the procedure under Regulation 22(1) ought to have been followed in the sense prior notice before suspension ought to be given cannot be sustained. A bare reading of Regulation 20(2) very clearly indicates that where immediate action is necessary the Commissioner of Customs has been granted such a power to suspend such licence where an enquiry against such agent is pending or even contemplated. Accordingly we answer the aforesaid question of law to the effect that it is not mandatory that in all cases of suspension, Regulation 22(1) ought to be followed. Whereas in cases where immediate action is necessary the Commissioner of Customs is fully empowered to suspend the licence where an enquiry against such an agent is pending or contemplated as per Regulation 20(2). Further, The Honble Bombay bench of CESTAT, in the case of A.R. Marines Pvt. Ltd. Vs Commissioner of Customs (General), Mumbai as reported in 2008 (227) E.L.T. 584 (Tri. - Mumbai) has followed the above said judgement of the Bombay High Court and decided as under: -
As regards grant of personal hearing as per the Regulation 22 before issuing the order of suspension under Regulation 20(2) it has been held by the Hon'ble Bombay High Court in the case of Raj Clearing Agency (supra) that where immediate action is necessary, personal hearing cannot be granted and grant of personal hearing is not mandatory in all cases. 5.6 It is also the contention of the Ld DR that hardship of the CHA cannot be a ground for revocation of suspension. He has invited our attention to the decision of the Honble High Court of Bombay in the case of Commissioner of Customs vs Worldwide Cargo Movers in the Customs Appeal No. 37 of 2006 and 39 of 2006, wherein it was held that:
Similarly, when one comes to the disciplinary measures, one must not lose sight of the fact that the appellant Commissioner of Customs is responsible for happenings in the Customs area and for the discipline to be maintained over there. If he takes a decision necessary for that purpose, the Tribunal is not expected to interfere on the basis of its own notions of the difficulties likely to be faced by the CHA or its employees. The decision is best to be left to the disciplinary authority save in exceptional cases where it is shockingly disproportionate or mala fide Ld. JDR submitted that on none of the counts above, does the Commissioners order suffer from any infirmity and considering the gravity of the offence, there is no reason to set aside the suspension order.
6. We have carefully considered the rival submissions made by both sides and perused the records.
6.1 The appellants has a grievance on the ground of delay. The appellant has submitted the decisions of the Honble High Court of Bombay in the cases Commissioner of Customs vs National Shipping Agency as reported in 2008 (226) ELT 46 ( Bom ) and in the case of Commissioner of Customs (General) vs Buriegh International as reported in 2008 (226) ELT 49 (Bom) where the decisions of the Tribunal revoking the suspension were upheld. The appellant has also relied upon the decision of the Tribunal in the case of International Shipping Agency vs. Commissioner of Customs (General) Mumbai as reported in 2006 (196) ELT 439 (Tri. Mumbai). The Ld DR, on the other hand, has relied on the judgements of the Honble Delhi High Court in the case of Jasjeet Singh Marwaha vs Union Of India and others as reported in 2009-TIOL-87-HC-DEL-CUS and the Honble Calcutta High Court decision in the case of Orient Clearing & Forwarding Agency v. Union of India - 2001 (136) ELT 3 (Cal.) to counter the same.
6.2 The Ld advocate for the CHA has submitted that the judgement of the Honble High Court of Delhi should be considered per incurium as it does not discuss any of the Bombay High Court judgements mentioned above. It is also his argument that once there is a decision of the jurisdictional High Court, it has to be followed.
6.3 We find that the Tribunal, in the case of Central India Institute of Medical Science Vs C.C. (ACC), Mumbai as reported in 2008 (231) E.L.T. 113 (Tri. Mumbai), after lengthy deliberations on the issue, has held that the Lower Court does not have the authority to declare a decision rendered by a Higher court as per incurium. The relevant part of the order is as under: -
We find that it has been vehemently argued before us that the decisions rendered by the Bombay High Court in the Wockhardt Hospital and Bombay Hospital cases are per incuriam. In this regard we are convinced that a lower court does not have the authority to declare a decision rendered by higher court as per incuriam as has been clearly held by the Supreme Court in the case of Dunlop cited supra and the House of Lords decision in the case of Cassell v. Brooms as well as the Apex Court decision in the case of Kamlakshi Finance. Following the judgement cited supra, we hold that we cannot accept the contention of the Ld advocate for the appellant regarding the issue of per incurium.
6.4 Once we rule out the contention that the Delhi High Court judgement is per incurium, we have to see which of the judgements are applicable in the subject case, from which rationales can be drawn. We find that in both the decisions of the Honble High Court of Bombay, it was categorically held that The questions of Law would not arise whereas in the case of Jasjeet Singh Marwaha, the Honble Delhi High Court has framed 4 questions of law including whether the delay of 4= years on the part of the Department for not taking immediate action against the alleged violation would not cause the suspension order to be revoked and held that the Department could still go ahead with suspension. In the case of Orient Clearing and Forwarding agency Vs. Union of India cited supra, the Honble High Court has passed a judgement, wherein the scope of words immediate action under Regulation 21(2) was considered and it was held that immediate does not mean as and when the consignment was imported as per the bills of entry alone. It was clarified that the word immediate cannot stop the authority concerned from taking steps during the pendency of the enquiry because the time has not stopped from running.
6.5 We respectfully hold that the judgements on points of law of any Honble High Court on a Central legislation will have to be given precedence for arriving at the rationales compared to the decisions, where there is no question of law discussed.
6.6 We find that in the present case, on intimation by a letter dated 17.07.08 from DRI after examining the issue, the Commissioner has come to a conclusion that the CHA has failed to discharge his obligation as Customs House Agent under CHALR, 2004 and pending enquiry under Regulation 22, an immediate action was required to prevent further misuse of the CHA License and has suspended the operation of the CHA License under Regulation 20(2) of the CHALR, 2004 vide order dated 23/25.07.08 i.e within 7 days of receipt of the intimation.
6.7 In view of the facts above and the legal position brought to our notice, we hold that there was no delay on the part of the respondent.
6.8 The JDR has brought out the role of the CHA in the instant case of Customs fraud in detail along with the corroboration of the various inculpatory statements under Section 108 of the Act. We agree with the Learned DR on his submission that allowing a third person to use the CHA licence for monetary benefit by the Appellant was itself violative of CHALR, 2004 inviting suspension. We also observe that the appellant has neither obtained any authorization letter from the exporter nor tried to verify genuineness of the exporter or the documents. Moreover, the appellant has tried to misguide the officers of DRI by saying he has verified the factory stuffing permission. We also find the Honble High Court of Delhi has in the case of Jasjeet Singh Marwaha vs Union Of India and others as reported in 2009-TIOL-87-HC-DEL-CUS (cited supra) had held that the license of a CHA can be suspended where there is a violation of the provisions of the Act or imposition of penalty, the power of suspension of license is not confined to only those situations where there is a violation of the CHALR, 2004. Again, the High Court has held that since a CHA acts on behalf of the importer, it is not only his obligation to ensure that the entries made in the bill of entry are correct but also that a true and correct declaration of value and description of goods is made, and in the event of any infraction such as mis-declaration, he can be penalized under the Regulation 20 of CHALR, 2004 if it results in a misconduct which is of the nature which renders him unfit to transact the business of a CHA, at the Customs Station. We find that the allegations raised against the CHA in this case are grave enough to initiate action under CHALR, 2004.
6.9 The appellants has also contended that the procedure prescribed vide Regulation 22 for suspending the CHA license under Regulation 20 was not followed. On a plain reading of the regulations, we do not find any requirement prescribed to that effect. We also find that in the case of Commissioner of Customs (G), Mumbai Vs Raj Clearing Agency (cited supra), the Honble Bombay High Court, in a question of law raised whether it is mandatory that Regulation 22(1) needs to be followed in all cases of suspension, has held that it is not mandatory that in all cases of suspension, Regulation 22(1) ought to be followed and that in cases where immediate action is necessary, the Commissioner of Customs is fully empowered to suspend the license where an enquiry against such an agent is pending or contemplated as per Regulation 20(2). Further, in the case of A.R. Marines Pvt. Ltd. Vs Commissioner of Customs (General), Mumbai (cited supra), the Tribunal has followed the above said judgement of the Bombay High Court and decided that grant of personal hearing is not mandatory in all cases.
We rely on the above said judgements to hold that the grant of personal hearing and issue of notice is not mandatory and will not be violative of the principles of natural justice in the cases of suspension, where the disciplinary authority i.e. Commissioner of Customs finds it to be a fit case for immediate action, when an enquiry is pending or contemplated 6.11 The party has pleaded hardship as they have been out of business for the last one year and it is a question of livelihood of many people dependent on the CHA firm. But we are unable to consider this plea in the light of the decision of the Honble High Court of Bombay in the case of Commissioner of Customs Vs Worldwide Cargo Movers, the relevant portion of which read as under:
Similarly, when one comes to the disciplinary measures, one must not lose sight of the fact that the appellant Commissioner of Customs is responsible for happenings in the Customs area and for the discipline to be maintained over there. If he takes a decision necessary for that purpose, the Tribunal is not expected to interfere on the basis of its own notions of the difficulties likely to be faced by the CHA or its employees. The decision is best to be left to the disciplinary authority save in exceptional cases where it is shockingly disproportionate or mala fide
7.1 We fully agree with the submissions of the learned DR, wherein he has elaborately submitted the importance of the role and the responsibilities of a CHA under the Customs Act, which have been buttressed by the decisions of the Honble High Court (cited supra) and various decisions of the Tribunal cited supra. Since we find major lapses in the conduct of the CHA, we find that there is no reason made out to set aside the order of suspension passed by the Commissioner of Customs (General), Mumbai.
7.2 However, we find that the enquiry has already been initiated against the CHA under CHALR, 2004 and the same may be completed within a period of six months
8. In view of the discussions in the preceding paragraphs, we uphold the Commissioners order and direct the Revenue to complete the enquiry within a period of six months from the receipt of this order (Pronounced in Court on ) (Ashok Jindal) (A.K. Srivastava) Member (Judicial) Member (Technical) Sinha 1