By TIOL News Service

MUMBAI, MAR 26, 2015: ON specific information the DRI officials detained three consignments and found that one Shri Dhirubhai Shah is using the CHA licence of the appellant for clearance of the misdeclared goods. On the basis of enquiry report, proceedings were initiated u/r 22 and charges were framed under Regulations 12, 13(a), 13(d), 19(8) of CHALR 2004 against the appellant.

After the enquiry report, personal hearing was granted to the appellant by the Commissioner of Customs (General) who thereafter revoked the CHA licence on the premise that the charges levelled have been proved.

Aggrieved by the said order, the appellant is before the CESTAT.

The Member (Judicial) made the following observations against each of the charges leveled -

Regulation 12 : The appellant has produced the salary certificate, Books of Accounts and the Income Tax Returns showing that Shri Dhirubhai Shah was an employee of the appellant and the facts have not been controverted by the Revenue with any supporting evidence. Commissioner relied only on the statement recorded u/s 108 of the CA, 1962 by the DRI which statement was also retracted by the appellant at the earliest available opportunity within 24 hours and hence it cannot be relied upon. Charge stands not proved.

Regulation 13(a): All the documents have been seized and were taken away by the DRI and the same have neither been returned to the appellant nor produced during the inquiry proceedings. Therefore, the Revenue cannot take the benefit of their own wrong. As the Revenue has failed to produce the documents seized, in these circumstances, the contention of the appellant is that they were having proper authorization for clearance of the goods cannot be rebutted. Charge stands not proved .

Regulation 13(d) : as charge is consequent to Charge under Regulation 13(a) therefore Charge under Regulation 13(d) also stands not proved.

Regulation 19(8) :The appellant was having full control over Shri Dhirubhai Shah being an employee of the appellant who was drawing salary from the appellant. In the proceedings initiated under the Customs Act also, the appellant was not made a party. Moreover, the penalty of Rs. 20,00,000/- imposed on Shri Dhirubhai Shah has been stayed by this Tribunal on the premise that the appellant has not filled Bills of Entry for clearance of the goods. Therefore, the question of misdeclaration of goods does not arise. Charge stands not proved.

Holding that all the Charges leveled against the appellant stands not proved the order revoking the CHA licence No. 11/896 was set aside with immediate effect. The appeal was allowed with consequential relief.

The Member (Technical) had a differing view in the matter of certain charges framed. He observed thus -

Regulation 12 : Agreed

Regulation 13(a) : The appellant has not given any details about the seizure of the documents from his office/possession by DRI. …As per the Regulation 13(a), a Custom House Agent shall obtain an authorization from each of the companies, firm or individuals by whom he is for the time being employed as Customs House Agent and produce such authorization whenever required by the Deputy or Assistant Commissioner of Customs. Appellant has not been able to produce the said authorization. Their claim that such documents were taken away by the DRI is without any basis. There is no seizure memo or any other evidence to support the said contention. …It is not understood why the appellant could not get produced the duplicate copies of the said authorization for 8-9 years. Charge stands proved.

Regulation 13(d) : as charge under Regulation 13(a) stands proved the Charge under Regulation 13(d) also stands proved .

Regulation 19(8): The fact that in the proceedings initiated under the Customs Act, the appellant was not made a part is of no consequence inasmuch as in the view of the investigator, it was Shri Dhirubhai Shah who had done all the manipulation and the appellant has sub-letted his CHA licence. Moreover, the fact that this Tribunal has stayed the recovery of penalty of Rs.20,00,000/- on Shri Dhirubhai Shah is of no consequence as it is only a prima facie view and is not a final order. Moreover the action proposed against the appellant is not relating to the consignment seized by the Customs/DRI but is also in relation to past conduct. CHA has failed to make effective supervision of his employee Shri Dhirubhai Shah and the charge against the appellant under Regulation 19(8) stands proved .

It was, therefore, concluded by the Member (T) that as the three charges stands proved, invocation of the CHA licence and forfeiture of the entire amount of security is in order.

The matter, therefore, came to be referred to the third Member (T). This order is dated 19.08.2014.

The third Member (T) on reference made the following observations on the issues differed by the Division Bench members.

Regulations 13(a) and 13(d): Both charges arise from a finding about alleged misdeclaration of imported goods by the importers mentioned therein wherein the appellant CHA had filed the bills of entry and one of the employees of the CHA Mr. Dhirubhai Shah was found involved in the alleged misdeclaration. Surprisingly, the CHA was not made a party to the said adjudication proceedings. This is quite strange. If the CHA was a party to the transaction and a statement had been recorded to that effect, show cause notice should have been issued to the CHA for various omissions/commissions. This omission on the part of the department in incorporation of the CHA in the alleged transactions, weakens substantially the case of the department, in spite of the fact that separate proceedings can be initiated against the CHA under the CHALR.

The department has not produced either before the Inquiry Officer or before the adjudicating authority, copies of the bills of entry in respect of which the misdeclaration took place. … If the importers had signed the said bills of entry, then there was no requirement of producing authorizations separately by the CHA. Further from the records, it is seen that the CHA had in fact produced copies of the authorization letters from the importers. However, the adjudicating authority rejected the said evidence only on the specious ground that the same does not inspite confidence since they have been produced very late. I find the reasoning of the adjudicating authority quite absurd and irrational. When a documentary evidence is produced, even if belatedly, if the same has to be rejected, cogent reasons have to be given and rejection cannot be based on the subjective feeling of the adjudicating authority. In these circumstances, the benefit of doubt certainly has to be extended to the appellant. Charges not proved.

Regulation 19(8): There is some substance in this charge. Both Shri. Dhirubhai Shah and Shri. Vedkumar Kambil, in their respective statements given, have admitted that Mr. Shah was acting on his own and had not kept the employer informed of the various deals undertaken by him in respect of customs clearance of imported goods. In one case, Sri. Shah was imposed with a penalty of Rs.20 lakhs for his alleged involvement in misdeclaration of imported goods leading to evasion of duty vide order dated 26-11-2005. Therefore, there is sufficient evidence available on record to prove this charge against the appellant.

The third Member(T) on reference concluded - However, for a contravention of Regulation 19(8) alone, revocation of CHA licence is not warranted and the punishment suffered by the appellant of not being able to operate as a CHA for the last two years is sufficient.

Incidentally, the appellant had also taken the ground that CHALR, 2004 was not in force at the time of the alleged contraventions and, therefore, the proceedings are vitiated. The third Member(T) observed that the action done or omitted to be done under CHALR, 1984 was protected by way of a saving clause and hence the proceedings could have continued under CHALR, 2004 - moreover, the obligations of the CHA were also the same except that the corresponding provisions were 14(a), 14(d) and 19(7) under CHALR, 1984 as against the ones invoked.

The Majority decision, therefore, is - Revocation of the CHA licence is not warranted in the facts and circumstances of the case and the punishment suffered of not being able to operate as a CHA for the last two years is sufficient.

The appeal was disposed of.

In passing: References to referred regulations -

12. Licence not transferable.-

Every licence granted or renewed under these regulations shall be deemed to have been granted or renewed in favour of the licensee, and no licence shall be sold or otherwise transferred.

13. Obligations of Customs House Agent.- A Customs House Agent shall-

(a) obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as Customs House Agent and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs;

(d) advise his client to comply with the provisions of the Act and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs;

19. Employment of persons.-

(8) 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 agents and be held responsible for all acts or omissions of his employees in regard to their employment.

22. Procedure for suspending or revoking licence under Regulation 20.  

(See 2015-TIOL-558-CESTAT-MUM)