Bombay High Court
The Commissioner Of Customs (General) vs Srinivas Clearing And Shipping (I) Pvt. ... on 27 August, 2021
Bench: Sunil P. Deshmukh, Abhay Ahuja
CUAPPL 3447-20.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally signed
by NIKITA
ORDINARY ORIGINAL CIVIL JURISDICTION
NIKITA YOGESH
YOGESH GADGIL
Date:
GADGIL 2021.08.27
CUSTOMS APPEAL (L) NO. 3447 OF 2020
13:33:05 +0530
The Commissioner of Customs (General)
Customs Broker Section, New Custom House,
Ballard Estate, Mumbai-400 001. ... Appellant
Vs.
Srinivas Clearing & Shipping (I) Pvt. Ltd.
Palkiwala Building, 296, Shahid Bhagat
Singh Road, Fort, Mumbai-400 001. ...Respondent
Mr. Pradeep Jetly, Senior Counsel with Mr. J. B. Mishra for the
Appellant.
Mr. Prakash Shah i/b Mr. Vinit Dubey, Advocate for the Respondent.
CORAM : SUNIL P. DESHMUKH &
ABHAY AHUJA, JJ.
RESERVED ON : 22TH JULY 2021
PRONOUNCED ON: 27TH AUGUST 2021
( THROUGH VIDEO CONFERENCING )
JUDGMENT :-(PER COURT)
1. This is an appeal filed by the Commissioner of Customs (General), Mumbai under the provisions of Section 130 of the Customs Act, 1962 ("Act") being aggrieved by order dated 21 st November, 2019 passed by Central, Excise and Service Tax Appellate Tribunal (CESTAT) in Customs Appeal No. 86403 of 2019 filed by Srinivas Clearing and Shipping (I) Pvt. Ltd.
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2. The appeal has been admitted by this Court on 22 nd October 2020 on the following substantial questions of law:-
"(a) whether, on the facts and in the circumstances of the case, the purported delay in completion of proceeding for revocation of license vitiates the Order-in-Original dated 28.03.2019 passed by the Commissioner of Customs (General)?
(b) Whether, on the facts and in the circumstances of the case, the CESTAT was right in holding that there is no link between the smuggling of red sanders by Shri Vijay Poojary with the activities for which the Respondent herein was licensed?"
3. Factual background is that the Respondent viz. M/s Srinivas Clearing and Shipping (I) Pvt. Ltd., was granted regular Customs Broker Licence under Regulation 10(1) of the Custom House Agent Licensing Regulations, 1984 (Now Regulation 7 (2) of Customs Brokers Licensing Regulations, 2013 ("CBLR")) in Mumbai. The Directorate General of Revenue Intelligence (DRI), Mumbai Zonal Unit, vide letter dated 16.05.2016 informed that during the investigation of a case related to large scale smuggling of Red Sanders to the tune of Rs.48 Crores by a smuggling cartel, it was revealed that one Shri Vijay Poojary, a 'G' Card Customs pass holder was a key member of the Nikita Gadgil 2 of 29 CUAPPL 3447-20.odt smuggling syndicate; that he was a Director of the Respondent and that he also had a Freight Forwarding Company in the name of Srinivas International.
4. It is submitted that investigations, inquiries, statements recorded revealed that Shri Vijay Poojary had played a key role in the smuggling of Red Sanders through export containers at Nhava Sheva Port, involving fraud/forgery, fake/fabricated export documents. That he had booked containers by sending emails from fictitious email addresses created by him. That Shri Vijay Poojary and his accomplices appear to have smuggled out 120 MTs of Red Sanders worth Rs.50 crore (approx) since September, 2014 and he was arrested on 09.12.2015 under the provisions of the said Act. On the subject issue, a Detention Order under the COFEPOSA Act, 1974 was also issued on 21.03.2016 and he was subsequently released on bail on 21.01.2016.
5. It is submitted that being a licensed Customs Broker, he had access to the knowledge of Customs procedure and functioning of related agencies like shipping lines, forwarding firms etc. which he used for ulterior purpose of smuggling activities. That Shri Vijay Poojary by virtue of being a Customs 'G' Card holder was required to abide by and uphold the provisions of the Customs Act, 1962 and the Nikita Gadgil 3 of 29 CUAPPL 3447-20.odt conditions on the basis of which the Customs Broker Licence was issued to the Respondent and by indulging in such activities the provisions of Customs Act and the allied Acts and also contravened the provisions of CBLR.
6. It is submitted that the Respondent is a company wherein Shri Vijay Poojary, a 'G' category Customs Pass holder is a Director and the key person handling day to day activities/operations of the firm and repeatedly indulged in smuggling activities and having violated Regulations 11(a), 11(d), 11(e), 11(j), 11(k), 11(m) & 11(n) of the CBLR, 2013, the inquiry report was served to the Respondent, vide letter dated 04.01.2019 and though personal hearings were fixed Respondent did not attend and requested for adjournments.
7. The Commissioner of Customs (General), Mumbai has passed order-in-Original dated 28.03.2019 and revoked the CB Licence and ordered forfeiture of the security deposit and also imposed penalty of Rs. 50,000/- on the Respondent. Paragraph 27.1 of the said order is quoted as under:-
"there is no denying that the Respondent has a history of being an offender and is thus as a chronic offender his continuation in business world would be detrimental to the national security, Government Revenue and environmental crimes such as export of red sanders which is violation of International Trade in Endangered Species of Wild Fauna Nikita Gadgil 4 of 29 CUAPPL 3447-20.odt and Flora which are major, serious and heinous crimes having both National and International ramifications".
8. Being aggrieved by the aforesaid order, the Respondent herein filed the appeal i.e. Customs Appeal No. 86403 of 2019 before the CESTAT, Mumbai.
9. The CESTAT, Mumbai vide order dated 21.11.2019 allowed the Respondent's appeal and ordered restoration of the Respondent's license.
10. Aggrieved by the aforesaid order that the Revenue is before us raising the aforesaid substantial questions of law on inter alia the following grounds :- (i) That the Impugned Order dated 21.11.2019, passed by the CESTAT, Mumbai is illegal, baseless, perverse and bad in law. (ii) That it is a non-speaking and cryptic order and is thus, liable to be set aside on this ground alone. (iii) That the Tribunal failed and neglected to appreciate the reasons given by the Principal Commissioner of Customs in the order impugned before the Tribunal, while holding in paragraph 6 of the Impugned order that the delay in commencement of the proceedings for revocation of the license does not command itself as indicative of proper undertaking of responsibility. (iv) The Tribunal ought to have appreciated that vide Order dated 28.03.2019 (which was under challenge before the Nikita Gadgil 5 of 29 CUAPPL 3447-20.odt CESTAT, Mumbai), the Principal Commissioner of Customs had given cogent reason for the purported delay in inquiry. However, the Tribunal has not given any finding on the same and has arrived at the finding contrary to the law and relevant facts of the case. (v) The CESTAT ought to have appreciated that DRI, Mumbai has also reported that Shri Vijay Poojary was earlier detained under COFEPOSA Act, 1972 under PSA-1205/18(1)/SPL-3(A) dated 17.02.2006 during the period 17.02.2006 to 20.10.2006 in a case investigated by DRI, Mumbai Zonal Unit vide F.No.MZU.D/PSA-12/2005- M/s Rama Creations and others related to fraudulent exports of garments and for obtaining undue benefits under the DEPB Scheme. During investigations, Detention order under COFEPOSA Act were issued to Shri Vijay Poojary, Shri Mohan Poojary and Shri Ramesh Reddy by the Detaining Authority vide Orders dated 17.02.2006 and were detained under COFEPOSA Act, 1974. (vi) The CESTAT ought to have appreciated that in the present case, Shri Balu Ramchandra Babar, 'H' category Customs Pass Holder of M/s Shrinivas Clearing & Shipping (I) Pvt. Ltd. had admitted vide statement dated 17.12.2015 recorded under section 108 of the Customs Act, 1962, that post shipments of all Customs documents were being destroyed on the instructions of Shri Vijay Poojary. (vii) The CESTAT ought to have appreciated that in the previous case, as per the statement of Shri Santosh D'Souza, employee of M/s Shrinivas Clearing Nikita Gadgil 6 of 29 CUAPPL 3447-20.odt and Shipping Agency was recorded on 19.07.2005, under Section 108 of the Customs Act, 1962, wherein, he interalia, confirmed the fact that the particulars of exports of M/s Aristo Export were not entered in the import-export register of M/s Srinivas Clearing and Shipping Agency. The CESTAT ought to have appreciated that the above statements i.e. Shri Balu Ramchandra Babar and Shri Santosh D'Souza, employees of M/s Srinivas Clearing and Shipping Agency are recorded under Section 108 of the Customs Act, 1962 are admitted as true and not retracted the same. The confessional statements made under section 108 of Customs Act, 1962 before Customs Officer is to be regarded as voluntary and not to be viewed with suspicion. Further, there is no evidence that in the instant case, any representation or complaint against any investigating officer who allegedly used threat, coercion or duress to record the statements and therefore the statements of Shri Balu Ramchandra Babar and Shri Santosh D'Souza should be taken as confessional statements. (viii) The CESTAT ought to have appreciated that Shri Vijay Poojary has forged and fabricated the documents and booking of freight for all the 18 consignments was done by him in benami names by making cash payments. The employees of the firm admitted that they have destroyed the documents at the instructions of said Vijay Poojary. The CESTAT failed and neglected to appreciate that the Respondent's director namely Vijay Poojary is an habitual offender Nikita Gadgil 7 of 29 CUAPPL 3447-20.odt and has been detained under COFEPOSA in the case of fraudulent exports of garments and for obtaining undue benefits under the DEPB. The CESTAT ought to have appreciated that Scheme. Consequently, this CHA license issued in the name of Kunverji Dharshi & Sons was suspended on 14.09.2005 and revoked on 06.11.2012. (ix) The CESTAT ought to have appreciated that the said Shri Vijay Poojary has admitted, in his statements recorded under section 108 of the Customs Act, 1962, that he is involved in smuggling of red sanders. (x) The CESTAT, Mumbai has failed to appreciate the order of the Commissioner of Customs (General) and the facts and circumstances in detail and ignored documentary evidence available on record and thus has not taken note of the same and orders for "License to be restored"."
11. Mr. Jetly, Learned Senior Counsel appearing on behalf of the Revenue, after taking us through the substantial questions of law as framed by this Court, reiterates the above grounds and takes us to the impugned order of the Tribunal starting from Paragraph 2 onwards. He refers to Paragraph 2 of the said decision and submits that in view of the Bombay High Court's decision in the case of Principal Commissioner of Customs (General), Mumbai Vs. Unison Clearing P. Ltd. (supra), the impugned order passed by CESTAT is bad in law.
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12. Mr. Jetly, submits that the aforesaid decision clearly lays down that the timelines referred to in Regulation 20 of the CBLR are directory and not mandatory.
13. He submits that vide impugned order, the Principal Commissioner of Customs had given cogent reason for the purported delay in inquiry, however, the Tribunal has not given any finding on the same and has arrived at the finding contrary to the relevant facts of the case as well as contrary to the settled law.
14. Mr. Jetly, Learned Senior Counsel next takes us through Paragraphs 19 to 28 of the order-in-original dated 29 th March, 2019. He submits that as can be seen from the said Paragraphs that after the receipt of the inquiry report and furnishing of the same to Respondent on 4th January, 2019, sufficient opportunities of personal hearing were granted on 11th January, 2019, 22nd January, 2019, 31st January, 2019, 7th February, 2019 and 12th February, 2019. He submits that even though Respondent was aware of these hearing dates, neither Respondent nor its advocate appeared, although the letters and representations have been submitted in their defence. It is submitted that Respondent was itself trying to protract the adjudication without Nikita Gadgil 9 of 29 CUAPPL 3447-20.odt any valid justification and had sought five adjournments. He submits that the licence of Respondent was suspended vide order dated 10 th June, 2016 / 24th June, 2016 under the provisions of Regulation 19(1) of CBLR, 2013 for violation of Regulations 11(a), 11(e), 11(j), 11(k) and 11(n) of CBLR, 2013. He submits that the suspension was based on the report from the DRI dated 16th May, 2016 and a post decisional hearing on 30th June, 2016. The suspension was continued till 14 th July, 2016, pending inquiry proceedings under Regulation 20 of CBLR, 2013. He submits that subsequently as appeal was filed in the CESTAT against the continuation order and pursuant to order dated 11th January, 2017 read with order dated 15 th January, 2018, Respondent's licence was restored. A show-cause notice dated 14 th May, 2018 was thereafter issued to initiate inquiry. This notice was challenged in a writ petition before this Court, which petition had been withdrawn.
15. It is submitted that the office of the Principal Commissioner of Customs (General) is a cadre controlling authority and not only deals with the personal matters and consequential litigations in various judicial fora, but also looks after Customs Broker Section, which deals with the licences and an offence and adjudication in respect of approximately 2500 Custom Brokers Licences. Learned Senior Counsel submits that all these matters require due application of mind and Nikita Gadgil 10 of 29 CUAPPL 3447-20.odt proper and justified examination of a large number of documents relating to the issues/matters and, therefore, sometimes the Principal Commissioner (General) or his office is not in a position to complete the inquiry/investigation within the prescribed limits as per CBLR. He submits that, therefore, there has been no deliberate attempt to delay inquiry and the delay was due to engagement of the office of the Principal Commissioner (General) as set out above. He submits that, therefore, the delay was without any malafide intention. Mr. Jetly, Learned Senior Counsel submits that this aforesaid submission is based on Paragraph 23.1 of the order-in-original and which explanation also meets the requirement of justification by giving reasons and causes on account of which the timeline could not be adhered to, as required in Paragraph 15 of the Principal Commissioner of Customs (General), Mumbai Vs. Unison Clearing P. Ltd. (supra).
16. Mr. Jetly submits that to the contrary, Respondent/its Director has been a habitual offender and deserves no leniency or benefit on account of this delay in concluding the inquiry, which is not only explained, but since the timelines are directory in nature as per the decision in the matter of Principal Commissioner of Customs (General), Mumbai Vs. Unison Clearing P. Ltd. (supra), as such there is no breach of Regulation 20 which would be fatal to the proceedings.
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17. Mr. Jetly, submits that therefore the argument of delay on behalf of Respondent in conclusion of inquiry cannot stand in the way of dispensation of justice as this is not a case of ordinary import or export, but relating to serious offence of illegal export of red sanders. He, therefore, submits that as such there is no breach of Regulation 20 of CBLR, the matter be remanded back to the Tribunal for consideration as impugned order has been passed without taking into account the various facts and aspects highlighted above.
18. He takes us through Paragraph 6 of the impugned order to submit that nowhere in the said impugned order, the Tribunal has dealt with the above submissions. and explanation given by Commissioner and submits that as such the order is perverse.
19. With respect to the second question, Learned Senior Counsel submits that the finding in paragraph 7 of the impugned order is completely cryptic and non-speaking.
20. Mr. Jetly reiterates the facts set out above. He explains that red sanders is a type of red wood and as per the Convention of International Trade in Endangered Species of Wild Fauna and Flora, Nikita Gadgil 12 of 29 CUAPPL 3447-20.odt 1973 (CITES), red sanders is an endangered species and export of red sanders is a serious crime having both national and international ramifications. He submits that there is no denial that Respondent's business is controlled and operated by Mr. Poojary, who has himself admitted his role in the smuggling of red sanders, and for which he was arrested under COFEPOSA. He submits that what is intriguing is that despite the admission by Shri Vijay Poojary vide statement recorded under Section 108 of the Act that he is involved in the smuggling red sanders, CESTAT has completely ignored this fact and the circumstances in detail as well as the documentary evidence on record thereby erroneously ordering restoration of Respondent's customs broker license. He submits that being the Director of the Respondent company he was the king pin and the key conspirator and perpetrator of the offence of exporting red sanders. The Commissioner of Customs (General) agreeing with the inquiry report submitted on 14th November, 2018, passed an Order-in-Original holding the allegations against Respondent as proved and inter alia revoked the custom broker licence of the Respondent.
21. Mr. Jetly also refers to the show-cause notice dated 14 th May, 2018 and takes us through Paragraph 2, where it is stated that based on letter dated 16th May, 2016 from DRI informing of the large scale Nikita Gadgil 13 of 29 CUAPPL 3447-20.odt smuggling of Red Sanders to the tune of Rs.48 Crores by a smuggling cartel revealing that Mr. Vijay Poojary was a key member who played a key role in the smuggling of red sanders through export containers at Nhava Sheva Port on the basis of fake/fabricated documents generated by him in the name of genuine SEZ exporters, booking containers by sending e-mail from fictitious e-mail addresses as well as Mr. Vijay Poojary's arrest and bail were also once again brought out. Mr. Jetly submitted that the fact that a container containing Red Sanders valued at Rs.3.12 crores was put to hold based on intelligence had a direct link with Mr. Vijay Poojary. He submits that moreover the statements of various persons as contained in Paragraphs 6 to 8 of the show-cause notice is corroborative evidence of the connection between Respondent and Mr. Vijay Poojary. Mr. Jetly submits that the statements made by Mr. Vijay Poojary and the other persons investigated in the matter of smuggling of red sanders are statements which are in accordance with the Customs Act, 1962 and can, therefore, be used as substantive evidence to hold that Respondent is in breach.
22. He also takes us through Paragraphs 2, 5, 7 and 8 of the impugned order and submits that without discussing any of the facts on merits as to the involvement of Mr. Vijay Poojary, as discussed in the order-in-original or those contained in the Show Cause Notice, the Nikita Gadgil 14 of 29 CUAPPL 3447-20.odt Tribunal has come to the conclusion that there is absence of a link between Mr. Vijay Poojary and Respondent herein in the context of established demeanour. Mr. Jetly submits that the Tribunal has failed to examine the order on the facts as set out in the order-in-original or in the proceedings preceding the same. He, therefore, submits that the Appeal be allowed and the matter be remanded back to the Tribunal for consideration of all the facts in the matter.
23. On the other hand, Mr. Prakash Shah, Learned Counsel appearing on behalf of Respondent denies the above contentions. He submits that there is delay not only in the commencement of proceedings but also in conclusion of the enquiry.
24. Learned counsel for the Respondent submits that there has been a complete breach of Regulation 20 as Commissioner of Customs had not adhered to the time lines contained therein. He refers to Regulation 20(1) to submit that the said Regulation requires the Commissioner to issue a notice to the Customs Broker within a period of 90 days from the date of offence report, whereas as is evident from the dates, the said notice has been issued after two years after receipt of the offence report. He submits that a two year delay for the commencement of proceedings is not reasonable. He submits that in Nikita Gadgil 15 of 29 CUAPPL 3447-20.odt accordance with the Regulation 20 (5) at the conclusion of the inquiry, report of the inquiry and the findings thereon are to be submitted in the form of a report within a period of 90 days from the issue of notice under Regulation 20(1), whereas that has also been breached. It is submitted that the overall delay is 976 days which includes further delays as well.
25. Mr. Prakash Shah also refers to the appeal that was filed by the Respondent before the CESTAT in support of his contention that the delay and the breach was by the Revenue authorities. Mr. Shah takes us through paragraphs 7 to 10 of the said Appeal.
26. He submits that approximately three and a half months after restoration of the license, inquiry proceedings were initiated by notice dated 14th May 2018. The inquiry officer submitted his inquiry report on 4th January 2019. Thereafter, personal hearings notices were issued on 11th January 2019, 22nd January 2019, 7th February 2019 and 12th February 2019, but no effective hearings could take place on any of the dates in view of the reasons stated below:-
"(i) PH on 11-01-2019-reply dated 10.01.2019 was submitted to the department informing that the Advocate on record was scheduled to appear before Hon'ble CESTAT.
(ii) PH on 22.01.2019-Letter received on 21.01.2019 to the Appellant reply sent on 22.01.2019 informing that Nikita Gadgil 16 of 29 CUAPPL 3447-20.odt arrangement at such short notice is not possible.
(iii) PH on 07.02.2019-Letter served on same day.
(ii) PH on 12-02-2019-Phone Call to Appear-request was made to keep the hearing at afternoon follow-up letter on 13.02.2019."
Mr. Shah submits that there have been no hearings after 12 th February 2019. Besides it took more than a month to pass the order.
27. It is submitted that several submissions were made explaining the above situation. It is also submitted that by a communication dated 14th February 2019 to the Commissioner, it was submitted that the delay in inquiry procedure could not be attributed to the Appellant since the communication for hearing was sent to the wrong address by the department.
28. He submits that the allegation that Respondent had not been cooperating and has sought five adjournments is not correct as Respondent had applied only for two adjournments and not five. He submits that this consideration for revoking the license or imposing penalty is incorrect ground and ought to be rejected.
29. He submits that though no specific ground has been taken for revocation of Respondent's license, it appears that the same has been Nikita Gadgil 17 of 29 CUAPPL 3447-20.odt done under Regulation 18(b) which reads as under:-
"REGULATION 18. Revocation of licence or imposition of penalty. - The Commissioner of Customs may, subject to the provisions of regulation 20, revoke the licence of a Customs Broker and order for forfeiture of part or whole of security, or impose penalty not exceeding fifty thousand rupees on a Customs Broker on any of the following grounds, namely:-
(a).....
(b) failure to comply with any of the provisions of these regulations, within his jurisdiction or anywhere else;
(c).....
(d)....
(e)....
(f)...."
29A. Mr. Prakash Shah, learned counsel for Respondent submits that the Customs Broker has complied with all his obligations under the CBLR. He refers to Regulation 11 with respect to obligation of Customs Broker and submits that the Respondent has whenever required by the Customs authorities obtained and produced the authorisation from the persons who have employed the Respondent as Customs Broker.
30. With respect to the second question, Mr. Shah submits that there is no connection between the Respondent and Shri Vijay Poojary and the alleged act of smuggling by Shri Vijay Poojary and reiterates what is stated in paragraph 7 of the Impugned order.
31. Mr. Prakash Shah takes us to the paper-book of the documents Nikita Gadgil 18 of 29 CUAPPL 3447-20.odt referring to letter dated 16 th May 2016 from the DRI to the Commissioner of Customs (General) to submit that it is recorded in paragraph 4 thereof that Shri Vijay Poojary has not used the Respondent's name in booking of containers where forged/fake documents were used for loading shipments. Paragraph 4 of the said letter is reproduced as under:-
"4. M/s Srinivas Clearing and Shipping Agency (I) Pvt. Ltd., is the firm in which Vijay Poojary, "G" CATEGORY Customs Pass holder is Director and key person handling day to day activities /operations of the Broker firm. It is learnt that the other two Directors of CB firm viz. Shri Mota and Shri Navin Poojary are namesake Directors in the said broker firm. Shri Vijay Poojary in his capacity as the Director of said Customs Broker firm has repeatedly indulged in smuggling activities. Investigations have revealed that Shri Vijay Poojary not only facilitated the booking of containers but also forged/created fake documents and arranged loading of shipments etc. His staff member Shri Balu R. Babbar, a H-Customs Pass holder, admitted in his statement that post shipments he used to destroy all customs documents on the instructions of Shri Vijay Poojary. Though Shri Vijay Poojary has deliberately refrained from using the name of his own Customs Broker firm, his activities as a Director of Customs Broker firm appears to be in violation of the Regulations 11(a), 11(c), 11(j), 11(k) and 11(n) of the Customs Brokers Licensing Regulations (CBLR), 2013."
He, therefore, submits that the Tribunal order ought to be sustained.
32. We have heard Mr. Pradeep Jetly, Learned Senior Counsel on behalf of Appellant as well as Mr. Prakash Shah on behalf of Nikita Gadgil 19 of 29 CUAPPL 3447-20.odt Respondent. We have, with their able assistance, perused the Appeal papers and proceedings.
33. With respect to the first question, we observe that the CESTAT has referred to the decision in the case of Principal Commissioner of Customs (General), Mumbai Vs. Unison Clearing P. Ltd. (supra) to give a finding that the delay in commencement of the proceedings for revocation of licence does not command itself as indicative of proper undertaking of responsibility and that the delay in commencement of the proceedings for revocation of licence was not justifiable. It has also observed that there is an implicit responsibility on the part of the competent authority to adhere to the timelines with acceptable justification for delays, if any. The Tribunal has referred to that although the suspension was withdrawn on 11th January, 2017, another 15 days had elapsed for inquiry proceedings to commence and, thereafter there was a lapse of more than six months in completion of inquiry and a further lapse of more than two months in revocation of the licence, whereas the incident had its origin in November, 2015. We firstly observe that Tribunal has only dealt with the delay in commencement of the proceedings but nowhere dealt with submissions on delay in conclusion of the proceedings. We also observe that the Tribunal has failed to consider the submissions on timelines as Nikita Gadgil 20 of 29 CUAPPL 3447-20.odt canvassed by the parties nor the explanation for delay furnished by the Revenue. In any event, we are unable to agree with the CESTAT's interpretation as from a plain reading of the decision in the case of Principal Commissioner of Customs (General), Mumbai Vs. Unison Clearing P. Ltd. (supra), where after considering the provisions of CBLR in detail as well as the Customs Act, the background, object and the scheme of the CBLR and in particular Regulation 20, this Court had concluded that the timelines contained in Regulation 20 cannot be construed to be mandatory but are directory. This conclusion was arrived at by this court after deliberating on various Supreme Court decisions and jurisprudence on the subject. Paragraphs 14 and 15 of the said decision are apt and are quoted as under:-
"14. Adherence to the time schedule prescribed in the Regulation 20 in a rigid way would lead to a situation where non-compliance with the time frame and even deviation by a single day would resultantly invalidate the entire action and the licence which is under suspension or which is revoked, is liable to be restored. The procedural formality as required to be complied within the time frame prescribed in the regulation, even if it is deviated for whatsoever reason beyond the control of the revenue or the Custom House Agent would result into consequences of declaring the entire action invalid if the provision is construed as mandatory. On the other hand, if the provision the construed as directory, the Custom House Agent would be deprived of his licence for considerable long time, if the time schedule is not adhered to the Revenue at its Nikita Gadgil 21 of 29 CUAPPL 3447-20.odt sweet choice would prolong the procedure and which is a likely situation, no attempts would be made to complete the inquiry within the stipulated period.
This is what has weighed in the mind of the High Courts while dealing with the said regulation and holding the same to be mandatory.
The catena of judgments on which reliance has been placed to declare the provision as mandatory have referred to the extraordinary delay caused at the instance of the revenue in conducting inquiry against the Custom House Agent, depriving them of their means of livelihood and it was observed that the purpose of prescribed time limit was to safeguard the interest of the Custom Broker and smooth import and export of goods. By relying on a celebrated principle, when a statute prescribes a thing to be done in a particular manner, it must be performed in such a manner, the use of the word "shall" in the Regulation has been construed as mandatory.
With due respect to the finding so recorded in the judgment of the Madras Court in case of Masterstroke Freight Forwarders P. Ltd. v. C.C.(I), Chennai-I, reported in 2016 (332) E.L.T. 300 (Madras) delivered by the Learned Single Judge, the parameters of construing a provision as mandatory or directory, when it deals with a discharge of a public duty and a resultant consequence has not been specifically taken into consideration. The salutary principle, whether statute imposes a public duty and lays down the manner and time within which the duty shall be performed, the injustice or inconvenience resulting from a rigid adherence to the statutory prescription, is a relevant factor for holding such provision only as directory has been completely overlooked. As observed by Justice Denman in Caldow v. Pixell, (1877) 2 CPD 562, "in considering whether the statute is imperative, Nikita Gadgil 22 of 29 CUAPPL 3447-20.odt the balance may be struck between inconvenience or sometime rigidly adhered to, or sometime departure from this direction". In that case, it was held that where a public officer was directed by statute to perform a duty within a specific time the case is established that the provisions are only directory, as already discussed above. There might be reason why such time limits cannot be adhered to and these reasons may be at times attributable to the revenue and some time to the Customs house agent. Strict adherence to the said time limit and not making it even slightly flexible would warrant a situation where even one day deviation from the time line would be equally fatal as a delay of one year. This surely is not the intention in framing the Regulation. Undisputedly, the intention is to curb the delay in concluding the inquiries, however, it should not be stretched to an extent where it would defeat the very purpose of the Regulation, being to enforce a regime of discipline in the custom arena and it would result in letting the miscreant set loose by taking benefit of deviation of the time schedule. The said CESTAT West Zonal Bench, Mumbai in Unison Clearing Pvt. Ltd. v. Commissioner of Customs (General), Mumbai (supra) has in detail dealt with the Regulation 22 and has examined whether it has to be construed as mandatory or directory. Relying on catena of judgments delivered by the Hon'ble Apex Court, and specifically in Delhi Air Take Services Pvt. Ltd. and Another v. State of West Bengal and Another, CESTAT has concluded that while deciding whether the time period is directory or mandatory, it would be seen that the purpose of law prescribing it as mandatory and consequently the absence of provisions of consequences in case of non- compliance with the requirement would indicate that the provisions are directory irrespective of use of the word "shall". The CESTAT has concluded that if the time limits are construed as mandatory and the matter is put Nikita Gadgil 23 of 29 CUAPPL 3447-20.odt to an end, the purpose of Regulation would be defeated and so would be the intention behind framing such a Regulation. On the other hand, if there is no consequence stated in the regulation for non-adherence is a time period for conducting the inquiry, the time line cannot be proved to be fatal to the outcome of the inquiry. Based on these observations the Tribunal had held the Regulation is directory in nature. However, in the present judgment which is impugned before us, the CESTAT has taken a view contrary to its earlier view in Unison Clearing Pvt. Ltd. (supra) and after referring to certain precedents where a view was taken that the regulations are mandatory delivered by the Tribunal itself, the Tribunal was pleased to quash and set aside the impugned order being not sustainable and allowed the appeals. It is to be noted that the Member Judicial (Ramesh Nair) who is a party to the judgment delivered by the said CESTAT in Unison Clearing Pvt. Ltd. v. Commissioner of Customs (General), Mumbai.
15. In view of the aforesaid discussion, the timelimit contained in Regulation 20 cannot be construed to be mandatory and is held to be directory. As it is already observed above that though the time line framed in the Regulation need to be rigidly applied, fairness would demand that when such time limit is crossed, the period subsequently consumed for completing the inquiry should be justified by giving reasons and the causes on account of which the timelimit was not adhered to. This would ensure that the inquiry proceedings which are initiated are completed expeditiously, are not prolonged and some checks and balances must be ensured. One step by which the unnecessary delays can be curbed is recording of reasons for the delay or non-adherence to this timelimit by the Officer conducting the inquiry and making him accountable for not adhering to the time schedule. These reasons can then be tested to derive a Nikita Gadgil 24 of 29 CUAPPL 3447-20.odt conclusion whether the deviation from the time line prescribed in the Regulation, is "reasonable". This is the only way by which the provisions contained in Regulation 20 can be effectively implemented in the interest of both parties, namely, the Revenue and the Customs House Agent.
34. The Tribunal completely erred in ignoring the true import and misread the binding decision of this court. We observe that the Tribunal has failed to consider the detailed submissions as sought to be made out on behalf of the parties and without even dealing with the detailed explanation as well as the necessary facts, allowed the appeal of Respondent. In our view, the Tribunal ought to have discussed each of the submissions before coming to any conclusion.
35. We note that the second question arises out of Paragraph 7 of the Tribunal Order, which is quoted as under :-
"7. There is nothing on record to arrive that the 'G' card-holder, who was investigated for his key role in the conspiracy to smuggle 'red sanders' out of India, was concerned with the activities for which appellant herein was licenced. The allegedly nefarious activities of such a pass-holder, although obtained through the licenced customs broker, cannot be visited upon the broker in the absence of a link between the two in the context of established misdemeanor. Perhaps, the unwarranted delay in completion of the proceedings arose from the lack of any such proximate participation in the said Nikita Gadgil 25 of 29 CUAPPL 3447-20.odt incident."
36. With respect to the second question, it has been submitted on behalf of Respondent that the activity of Respondent has nothing to do with the alleged smuggling activities of Shri Vijay Poojary, who was investigated for his key role of smuggling Red Sanders out of India and as such there is no link between the activities of Respondent and Shri Vijay Poojary.
37. We, however, observe that while arriving at the above conclusion, the Tribunal has nowhere discussed any of the factual aspects raised on behalf of the Revenue either as contained in the Show Cause Notice or in the Order-in-Original. There is no discussion on the alleged smuggling of red sanders nor any discussion in the various statements recorded under Section 108 of the Customs Act or the admission of Vijay Poojary or the modus operandi or as to Respondent's involvement, investigations on various firms alleged to be used for the alleged smuggling activities, the fact of detention of Shri Vijay Poojary under COFEPOSA Act, the investigation with respect to the DEPB Scheme, the involvement of various customs firms/companies and the statement of various persons recorded under Section 108 of the Customs Act 1962 regarding destruction of post Nikita Gadgil 26 of 29 CUAPPL 3447-20.odt shipment documents, the factum of unrecorded exports, the alleged forgery and fabrication of documents, the admission of Shri Vijay Poojary that he was involved in smuggling of red sanders.
38. It is incomprehensible as to how in the light of the factual submissions discussed above and without any discussion on the same, a factual finding is recorded stating that there is no link between the smuggling of Red Sanders by Shri Vijay Poojary with the activities for which Respondent was licenced.
39. It is also surprising that without any detailed discussion, absence of link is being given as the reason for the delay in completion of the proceedings.
40. On a query from the Court during the hearing, as to the shareholding pattern of the Respondent, we have been furnished with a certificate dated 23rd July 2021 issued by Chartered Accountant of the Respondent, where it is stated that out of total 5,00,000/- equity shares, Shri Vijay Poojary holds 4,99,900/- shares and the balance 100 shares are held by one Bhupendra K. Motta and Chandrahas L. Poojary. From the above information also prima facie it appears that Shri Vijay Poojary controls 99.9% of share holding of the Respondent which fact Nikita Gadgil 27 of 29 CUAPPL 3447-20.odt also needs to be considered while determining his link with the Respondent. The said certificate is reproduced as under :-
"TO WHOM SO IT MAY CONCERN This is to certify that the share holding pattern of Srinivas Clearing & Shipping (I) Pvt. Ltd. having its registered office 11, floor 3rd flr, plot-296, Palkhiwala, Shahid Bhagat sing marg, ballard estate Mumbai City MH 400001 IN as on July 23, 2021 is as under.
Authorised Capital Rs. 1,00,00,000
Issued and Paid-up Capital Rs.50,00,000
Face Value Rs. 10 each
Type of shares Equity Share
Sr. Foll Name of Shareholder And Father's/ No. of Total
No. o Address Husband's Equity Amount
No. Name Shares (In. Rs.)
1. 01 Vijay Subbanna Poojary Mr. 4,99,900 49,99,000/
Address: Flat No. 1001, Subbanna -
Tower No.8, Orchard Manjappa
Residency, Behind R-City Poojary
Mall, Ghatkopar West, (Father)
Mumbai, Maharashtra
400086 India
2. 02 Bhupendra Kuvarji Motta Mr. Kuvarji 50 500
Address: 255/10, Vinod Dharshi
Kund, 3rd Floor, Next To Motta
Krishna Gyan Mandir, (Father)
Wadala Station Road,
Wadala Maharashtra
400031, India
3. 03 Chandrahas Lokaya Mr. Lokaya 50 500
Poojary Rama
Address : Milapkunj Chs. Poojary
No.1, Room No.2, Karnik (Father)
Road, Chikanghar, Kalyan
West Thane, Maharashtra
421301, India
Total 50,00,000
M/s PRASS & ASSOCIATES LLP
Chartered accountants
FRN 107816W
Nikita Gadgil 28 of 29
CUAPPL 3447-20.odt
Partner
CA Sunil P Girwalkar
Mem. No. 139325
UDIN 21139325AAAACZ5312
dated July 23, 2021"
41. In our view, reliance by the CESTAT on the decision in the case of Principal Commissioner of Customs (General), Mumbai Vs. Unison Clearing P. Ltd. (supra) to restore the licence of Respondent is completely misplaced and a complete non-application of mind.
42. In accordance with the above discussion, we are of the view that the findings of the Tribunal are unsustainable and the matter is required to be sent back for reconsideration by the Appellate Authority taking into account all the aspects to arrive at a proper decision. We, therefore, set aside the order of the Tribunal dated 21 st November 2019. The matter is remanded back to the CESTAT for fresh adjudication.
43. The Appeal is accordingly disposed in the above terms. No order as to costs.
( ABHAY AHUJA, J. ) ( SUNIL P. DESHMUKH, J. ) Nikita Gadgil 29 of 29