In the High Court of Judicature at Madras
Dated: 03/02/2006
Coram
The Hon'ble Mr.JUSTICE P.D.DINAKARAN
and
The Hon'ble Mr. JUSTICE P.P.S.JANARTHANA RAJA
C.M.A.No.87 of 2006
and C.M.P.No.297 of 2006
M/s. Sindhu Cargo Services Ltd.,
Classic Towers, 1547, Trichy Road,
Coimbatore.
represented by its Director,
Sri G.Balraj ... Appellant
-Vs-
1. Commissioner of Customs
6/7, A.T.D. Street,
Race Course Road,
Coimbatore 641 018.
2. Customs, Excise and Service
Tax Appellate Tribunal
South Zonal Bench,
1st floor, Shastri Bhavan Annexe,
Haddows Road, Chennai 6
represented by its Registrar
.... Respondents
Civil Miscellaneous Appeal filed under Section 130A of the Customs
Act, 1962 against the order dated 08.12.2005 in final order No.1539 of 2005 on
the file of Customs, Excise and Service Tax Appellate Tribunal, South Zonal
Bench at Chennai received by the appellant on 9.12.20 05.
!For Appellant : Mr. Madhan Babu
^For Respondents: Mr.J. Ravindran, CGSC
:J U D G M E N T
(Judgment of the Court was made by P.D.DINAKARAN,J)
By consent of both parties, the Civil Miscellaneous Appeal itself is
taken up for final disposal.
2. This appeal is directed against the order dated 8.12.2005
communicated to the appellant by proceedings dated 9.12.2005 made in final
order No.1539 of 2005 raising the following substantial questions of law:
i) Whether the order of respondents ordering interim suspension of
Custom House agency license as punishment is ultra vires Regulation 2 0(2) of
the Customs House Agency License Regulations, 2004?
ii) Whether the Tribunal is correct in confirming interim suspension
of license in the absence of any immediacy for suspension as mandated in
Regulation 20(2) of the Customs House Agency License Regulations, 2004?
iii) Whether the respondents are right in interposing two basic
conditions of prima facie case and immediacy of action as mandated under
Regulation 20(2) of the Customs House Agency License Regulations, 20 04 for
ordering interim suspension of Customs House Agency License while the same are
independent factors?
iv) Whether the Tribunal was right in upholding the interim suspension
when the basic criteria for suspension as mandated under Regulation 20(2) of
the Customs House Agency License Regulations, 2004 is not satisfied?
3.1. The matter arises under the Customs House Agents Licensing
Regulations, 2004, Regulations framed exercising the powers conferred under
Section 146(2) of the Customs Act 1962, in the matter of granting licence to
the Customs House Agents, namely, a person licensed under these regulations 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.
3.2. As per Clause 3 of the Regulation, no persons shall carry on
business as a Customs House Agent relating to the entry or departure of a
conveyance or the import or export of goods at any Customs Station unless such
person holds a licence granted under the said regulation. Clause 4 of the
Regulation provides for invitation of applications for the grant of licence.
Clause 5 prescribes the details to be provided in the application. Clause 6
prescribes the conditions to be fulfilled by the applicant. Clause 7 provides
the procedure for scrutiny of the application for licence. Clause 8 empowers
the Director General of Inspection to conduct an oral examination of the
details prescribed by the applicant before granting licence with regard to the
subject matters mentioned thereunder. After following the said procedure, the
licence shall be granted by the Commissioner of Customs under Clause 9 as
required under Clause 11 of the said Regulation. Pursuant to which, the agent
is expected to execute a bond and furnish security.
3.3. As per clause 12, the licence thus granted under the Regulation
is not transferable. Clause 13 prescribes the obligations to be discharged
mandatorily by the agent. In the case of Agent or firm or company, as per
Clause 14,15 and 16, the change of Directors and the constitution are required
to be informed. Clause 18 requires the agent to maintain the accounts and
Clause 19 deals with the employment of persons.
4. For the purpose of the above appeal, it is relevant to extract the
following provisions, which deal with the suspension or revocation of the
licence:
20. Suspension of revocation of licence (1) The Commissioner of
Customs may, subject to the provisions of regulation 22, revoke the licence of
a Customs House Agent and order for forfeiture of part or whole of security,
or only order forfeiture of part or whole of security, on any of the following
grounds, namely:-
(a) failure of the Customs House Agent to comply
with any of the conditions of the bond executed
by him under regulation 10;
(b) failure of the Customs House Agent to comply
with any of the provisions of these regulations,
within the jurisdiction of the said Commissioner
of Customs or anywhere else;
(c) any misconduct on his part, whether within the
jurisdiction of the said Commissioner of Customs
or any where else which in the opinion of the
Commissioner renders him unfit to transact any
business in the Customs Station.
(2) Notwithstanding anything contained in sub-regulation (1), the
Commissioner of Customs may, in appropriate cases where immediate action is
necessary, suspend the licence of a Customs House Agent where an enquiry
against such agent is pending or contemplated.
21. Prohibition.- Notwithstanding anything contained in regulation
22, the Commissioner of Customs may prohibit any Customs House Agent from
working in one or more sections of the Customs Station, if he is satisfied
that such Customs House Agent has not fulfilled his obligations as laid down
under regulation 13 in relation to work in that section or sections.
22. Procedure for suspending or revoking licence under Regulation 2
0- (1) The Commissioner of Customs shall issue a notice in writing to the
Customs House Agent stating the grounds on which it is proposed to suspend or
revoke the licence and requiring the said Customs House Agent to submit,
within such time as may be specified in the notice not being less than
forty-five days, to the Deputy Commissioner of Customs or Assistant
Commissioner of Customs nominated by him, a written statement of defense and
also to specify in the said statement whether the Customs House Agent desires
to be heard in person by the said Deputy Commissioner or Customs or Assistant
Commissioner of Customs.
5.1. In the instant case, the first respondent by proceedings dated
10.10.2005 having satisfied that immediate action is necessary to suspend the
licence granted to the appellant, where an enquiry against the appellant is
contemplated, by exercising the powers conferred under Regulation 20(2) of the
said Regulations enclosing the grounds on which the suspension pending enquiry
is proposed, called upon the appellant to submit their written explanation and
also as to whether they wish to be heard in person in the matter.
5.2. In the order of suspension pending enquiry, even dated, made
under Section 20(2) of the said Regulation, as referred to above, it is
mentioned that the petitioner had violated Regulations 13(a)(d)(e) and 19(8)
and also prima facie satisfied that the appellant/agent have actively
connived, colluded and helped to defraud the Government to the tune of Rs.3.5
crores (approximately) by producing false documents, fraud certificates and
fradulent claims for non existing export companies. As the money is yet to be
recovered and the investigation has not yet completed, the Commissioner prima
facie satisfied that it is essential to cancel the licence.
5.3. It is further observed that in the investigation already carried
on reveals that
(i) the Customs House Agent has failed to obtain authorization from
his clients for processing documents in Customs, hence it appears that the CHA
has not complied with regulation 13(a) of CHALR, 2004.
(ii) the Customs House Agent failed to advice his clients to comply
with provisions of the Customs Act 1962 and thus failed to comply with the
obligation caused upon them in terms of regulation 13(d) of the CHALR 2004.
(iii) the Customs House Agent failed to exercise due diligence to
ascertain the correctness of any information with regard to work handled in
his name thus it appears that the CHA has failed to comply with the obligation
under regulation 13(e) of CHALR, 2004.
(iv) the Customs House Agent did not have control over the Customs
clearance work and there by failed to exercise supervision ensuring proper
contact of the persons who transacted business. Hence the CHA apparently
failed to comply with the provisions of regulation 19(8) of the CHALR, 2004
and thus the Customs House Agent had failed to comply with the above
regulations.
5.4. For these reasons, the Commissioner having satisfied that prima
facie case exists warranting immediate action against the Customs House Agent,
exercising the power conferred under Regulation 20(2) of the Customs House
Agents Licensing Regulations, 2004, passed an order of suspension pending
cancellation proceedings. Concededly, the appellant has also submitted their
written explanation to the notice dated 10.10.2005 on 10.11.2005 itself.
6. Aggrieved against the order of suspension dated 10.10.2005 pending
enquiry for the proposed cancellation of the licence, the appellant preferred
an appeal before the Customs, Excise, Service Tax Appellate Tribunal and the
Tribunal by an order dated 8.12.2005, which is impugned in the present appeal,
confirmed the order of suspension and directed the Commissioner of Customs to
pass final order within a period of four weeks from 8.12.2005 after duly
considering the explanation offered by the appellant on 10.11.2005. The
Tribunal also observed that if no final orders are passed as indicated above,
the order of suspension pending enquiry would stand set aside automatically.
Hence, the present appeal.
7. At the risk of repetition, we extract the substantial questions of
law raised by the appellant in this appeal.
i) Whether the order of respondents ordering interim suspension of
Custom House agency license as punishment is ultra vires Regulation 2 0(2) of
the Customs House Agency License Regulations, 2004?
ii) Whether the Tribunal is correct in confirming interim suspension
of license in the absence of any immediacy for suspension as mandated in
Regulation 20(2) of the Customs House Agency License Regulations, 2004?
iii) Whether the respondents are right in interposing two basic
conditions of prima facie case and immediacy of action as mandated under
Regulation 20(2) of the Customs House Agency License Regulations, 20 04 for
ordering interim suspension of Customs House Agency License while the same are
independent factors?
iv) Whether the Tribunal was right in upholding the interim suspension
when the basic criteria for suspension as mandated under Regulation 20(2) of
the Customs House Agency License Regulations, 2004 is not satisfied?
8. Mr.Madhan Babu, learned counsel appearing for the appellant
raising the above substantial questions of law submits that the impugned order
of suspension amounts to an order of punishment by itself. Incidentally, the
learned counsel submits that the procedure contemplated under Regulation 22 of
the said Regulation, namely, a notice in writing is required to be given
before passing an order of suspension, has not been complied with by the
respondent. He also contends that the order of suspension pending enquiry
suffers from non application of mind by the respondents with regard to Reg
ulation 20(2) of the said Regulation, viz. whether an immediate action for
initiating such order of suspension pending enquiry is necessary under the
facts and circumstances of the case.
9. In this regard, reliance is placed on the decision of this Court
in the case of East West Freight Carriers (P) Ltd. V. Collr. Of Customs,
Madras reported in 1995 (77) E.L.T. 79 (Mad.)
10. There cannot be any dispute as to the proposition of law laid
down in the case of East West Freight Carriers (P) Ltd. V. Collr. Of
Customs, Madras reported in 1995 (77) E.L.T. 79 (Mad.), that the commissioner
should satisfy himself that too apply his mind before passing an order of
suspension under Regulation 20(2) as to whether immediate action is necessary
or not, where enquiry against the Agent is pending or contemplated.
11. In the instant case while the first respondent proposed to pass
an order of suspension has clearly observed in paragraph 10 and 11 of the
order what facts and circumstances of the case warranted the first respondent
to initiate the proceedings for suspension of the licence, which warranted the
first respondent to pass an order of suspension pending cancellation
proceedings under Regulation 20(2). Once the respondents are satisfied that
prima facie case is made out to initiate cancellation proceedings under
Regulation 22(1), consequently an order passed under Regulation 20(2) for
suspending the licence pending such cancellation proceedings cannot be
construed as a punishment by itself, inasmuch as the power conferred under
Regulation 20(2) empowers the first respondent to pass an order of suspension
pending enquiry, having satisfied that an immediate action is necessary for
the reasons mentioned in the order itself.
12. An order of suspension, pending enquiry, passed under Regulation
20(2) cannot be construed as an order of punishment nor as an order of
suspension, which deals only the substantial punishment, intended in
Regulation 22(1) nor such an order of suspension, pending enquiry, would stand
as a stigma on the appellant while the respondent proposed to pass final
orders by following the procedure prescribed under Regulations. Therefore,
the reference to Section 22(1) of the said Regulation and the context made in
that regard by the learned counsel for the appellant is totally misnomer,
inasmuch as the interim suspension passed under Regulation 20(2) pending
cancellation proceedings shall not an order of punishment.
13. Accordingly, answering all the questions of law, we do not see
any reason to interfere with the order of the Tribunal dated 8.12.200 5. The
appeal stands dismissed. However, the dismissal of this appeal in any event
will not be construed as prejudicial to the appellant in the proceedings
pending before the authorities. No costs. Consequently, C.M.P.No.297 of 2006
is also dismissed.
Index :Yes
Internet:Yes
sl
To
1. Commissioner of Customs
6/7, A.T.D. Street, Race Course Road,
Coimbatore 641 018.
2. The Registrar
Customs, Excise and Service
Tax Appellate Tribunal
South Zonal Bench,
1st floor, Shastri Bhavan Annexe,
Haddows Road, Chennai 6