Custom, Excise & Service Tax Tribunal
M/S Baraskar Brothers vs Commissioner Of Customs (General), ... on 16 July, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. C/1119/08 (Arising out of Order-in-Original No. 38/2008 dated 30.7.2008 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 Baraskar Brothers Appellant Vs. Commissioner of Customs (General), Mumbai Respondent Appearance: Shri S.N. Kantawala Advocate for Appellant Dr. T. Tiju JDR for Respondent 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. Baraskar Brothers.
2. Brief facts of the case are that the Directorate of Revenue Intelligence had detected a drawback fraud pertaining to exports made from JNPT port, wherein drawback had been fraudulently availed in Import Export Codes obtained on fictitious addresses and in the names of persons, who were found to be non existent. In these cases, drawback amounts sanctioned were immediately siphoned off, but no foreign exchange remittances were received. In a statement under Section 108 of the Customs Act 1962, Shri Vijay Ananat Baraskar, Partner of the CHA firm, M/s Baraskar Brothers (CHA No. 11/97) admitted that they had cleared the consignments on behalf of the exporters, though they had never met the actual IEC holders or verified their genuineness at the time of filing the Shipping Bills.
3. The Commissioner (General) was informed about the conduct of the CHA vide letter dated 28.07.2008 and on examination of the issue, the Commissioner came to the conclusion that the CHA has failed to discharge his obligations as a Custom 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 30.07.2008.
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 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 the DRI, not given any hearing and hence was violative of the principles of natural justice.
4.2 There was no urgency in suspending the license as there was no grave offence committed by him. He also submitted that there was a delay of more than 2 years and that such delay snaps the live link between the illegal activity and the necessity of its prevention. He relied on the judgements of the Honble Bombay High Court in the case 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. He also relied on 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).
4.3 The CHA had checked the details of the exporter from the DGFT website and thus had taken enough precautions to verify the genuineness of the exporter.
4.4 The CHA has been out of business for the last 11 months and the issue involved is also of livelihood of many people dependent on the CHA firm. He submitted that in the case of International Shipping Agency (cited supra), the suspension was vacated taking into consideration the issue of livelihood also. He also submitted that the enquiry is already initiated against the CHA and hence the suspension should be set aside pending final orders of the Commissioner after the enquiry proceedings were over.
5.1? The Learned JDR submits that the role of a CHA should be seen in a macro perspective. He submits that as per the Customs Act, 1962 and the regulations made thereunder (CHALR, 2004), the Customs House Agent is the person licensed to act as agent for the transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any Customs Station. The license is granted to a person on fulfillment of a variety of conditions like his educational qualifications, experience in Customs related work, reliability and financial status, lack of criminal background etc and the persons so screened will have to pass an examination, both written and oral, conducted by the Director General of Inspection, which, interalia, tests his knowledge not only in the fields of Customs law and various Customs procedures but also about the provisions in other areas and allied Acts as prescribed in the Regulations in so far as they are relevant to the clearance of the goods through Customs. The successful persons are granted a non transferable license allowing them to work as CHAs in the Customs stations all over India after necessary procedural formalities are completed. Further, every CHA is supposed to strictly abide by the roles and responsibilities cast on them by law. The subletting and allowing unauthorised persons to attend clearance work is strictly frowned upon by the law. He also stated that the regulations also stipulate that the Customs House Agent shall exercise such supervision as may be necessary to ensure the proper conduct of any such employees in the transaction of business as agent and be held responsible for all acts or omissions of his employees in regard to their employment.
5.2? He submits that this rigorous selection process as envisaged in the Act and the Regulations and the clearly defined obligations cast on the CHA are the main mechanisms to see that only genuine people enter and remain in this field, which is very important as far as the Customs administration, Central Government revenue collection and Economic & National security of the country are concerned.
5.3? The Learned DR submits that in case of infraction of any of the obligations, the Commissioner of Customs can suspend or revoke the license or order, forfeiture of whole/part of the security deposit. In cases, where immediate action is necessary, the Commissioner has the power to suspend the license of a Customs House Agent under Regulation 20(2), where an enquiry against such agent is pending or contemplated 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 answers to the questions 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.
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 Commisioner 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. 5.5 He also submitted that just because the case was detected 2 years before, the CHA cannot claim that there is no immediate action warranted. 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.
The DR stated that the Commissioner, on receipt of the information about the misconduct of the CHA, has applied his mind and suspended the license within three days of the receipt of the letter. The Commissioners order does not suffer from any infirmity on that count and also on account of the above submissions and the judgments of the Honble Courts cited supra.
5.6 The Ld. JDR also submitted that the Honble High Court of Delhi judgement as cited supra has also come to a conclusion that 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. In the instant case, the partner himself has confessed in a statement under Section 108 of the Customs Act that he has not taken the precaution of meeting the exporter personally to verify the genuinity and that he signed the documents for export and that his employee had attended the export formalities i.e. shipping bill processing, examination and EP copy (export promotion copy) passing on behalf of his firm. It was argued by the Ld. JDR that the confession read with the Delhi High Court judgement cited supra was enough for a suspension and that the CHA cannot run away from the vicarious liability for the deeds of its employees in relation to clearance work.
5.7 It is also the contention of the Ld DR that hardship or issue of livelihood of the employees 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 dated 29.11.2006 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 main contention is regarding the violation of the procedure prescribed vide Regulation 22 for suspending the CHA license under Regulation 20. 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 is not mandatory and will not be violative of the principles of natural justice in 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.
6.2 The Ld advocate for the appellant has also contested the order 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. He 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.
We find that in both the decisions of the Honble High Court of Bombay cited by the Ld. Advocate, 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. Word immediate cannot stop the authority concerned from taking steps during the pendency of the enquiry because the time has not stopped from running.
We respectfully hold that the judgements on the points of law of any Honble High Court on a Central legislation will have to be given precedence for arriving at the rationale compared to the decisions, where there is no question of law discussed.
We find that in the present case, on intimation by a letter dated 28.07.2008 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 30.07.2008 i.e within 3 days of receipt of the intimation.
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.
6.3 The Learned JDR has elaborately submitted the importance of CHA in Customs matters and the roles and responsibilities of a CHA within the ambit of the Customs Act, 1962. There is no second opinion to the fact that the CHA is a very important component in the whole system of Customs administration, which has a major bearing on Customs revenue collection and national security. The CHAs cannot shy away from the responsibilities and obligations cast upon them by law. The JDR has brought out the role of the CHA in the instant case of Customs fraud in detail, along with his inculpatory statements under Section 108 of the Act and the violations, to which he is also made a party in the SCN under the said Act.
6.4 The Ld. JDR has also submitted that the CHA cannot find shelter in the submission that they had verified the IEC at the DGFT website. He submitted that this is not a substitute to physically verifying the existence of the exporter, when he acts as an agent for all purposes related to Customs. He also drew our attention to the fact that the CHA himself had admitted in his statement under Section 108 that he had not taken necessary precautions for identifying the exporters and such action/inaction has resulted in a huge loss to the exchequer. We are in agreement with his contention and hold that physical verification cannot be dispensed with by the CHA, when he acts for and on behalf of the importer or the exporter for all Customs matters.
6.5 He further submitted that had the CHA been cautious and verified the genuineness of the exporter, this export fraud would not have happened. On the other hand, the representative of the CHA has attended all the export formalities and has still not brought this fraud to the notice of the Customs Department, as required by law. The CHA has handled export goods worth more than Rupees six crores pertaining to two fictitious exporters. We also find that the CHA is also made a party to the original proceedings under the Customs Act and drawback has been demanded from him under Section 147 of the Customs Act. We also find 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 (cited supra) has 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 are grave enough to initiate action under CHALR, 2004.
6.6 The appellant has pleaded hardship as they have been out of business for the last 11 months and it is a question of livelihood of many people dependent on the CHA firm. We are unable to consider this plea in 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 are in full consonance with the submissions of the learned DR wherein he has elaborately submitted the importance of the role and responsibilities of a CHA under the Customs Act, which have been buttressed by the decisions of the Honble High Court (cited supra) and the various decisions of the Tribunal cited supra. Since we find glaring lapses in the conduct of the CHA, we find no reason to interfere with the suspension order passed by Commissioner of Customs (General), Mumbai.
7.2? However, we find that an enquiry has already been initiated against the CHA under CHALR, 2004 and the same can be expedited
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