By TIOL News Service

NEW DELHI, JUNE 06, 2018: THIS is a petition filed by the wife of the detenue seeking the quashing of a detention order issued by the Joint Secretary to the Government of India, COFEPOSA Unit, CEIB, MF, DR, GOI u/s 3(1) of the COFEPOSA Act.

Facts concerning the Detenue

The Detenue is a Customs House Agent (CHA) carrying on business in the name of M/s. Zealous International. He was working as a Sub-Agent of M/s Kirti Cargo and was a G-Card Holder in the said concern.

The Detenue also has other firms and companies i.e. M/s. Fiber Tech Impex, M/s. Fiber Tech Exim, M/s. Zealous Impex and M/s. Zealous Overseas Pvt. Ltd., which also trade in scripts and advance licenses. After purchasing scripts/advance licenses from various vendors in the open market, the Detenue would also use them for payment of duty for import of goods of his clients for whom he was undertaking the task of custom clearance as a CHA.

In September 2015, the Detenue came to know about the alleged fraud involving the scripts and the consequent initiation of enquiry proceedings by the customs officials regarding hacking of the customs system and passwords of the officers of the Customs Department. The Detenue, as a G-Card holder of M/s. Kirti Cargo, was informed by the customs officials about the fraudulent use and tampering of some of the scripts. He was advised by them to deposit some ad hoc duty which would be refunded after completion of enquiry. [In aggregate, a sum of Rs.2,59,04,500/- was deposited.]

On 16th November 2017, the Detenue was arrested. Inter alia the grounds of his arrest were that investigation in respect of 33 importers who had used fraudulent licences had concluded. Thirty three show cause notices ('SCNs') involving a custom duty of Rs.73.35 crores were issued. These included the Detenue as a noticee.

Grounds of detention

In the grounds of detention, the allegation against the Detenue is that he was engaged in utilizing the tampered, fictitious, non-existent licenses/scripts by hatching a scheme with Mr Vinod Kumar Pathror (PO). He was alleged to have fraudulently entered wrong details in the Customs EDI System after illegally gaining access to the system.

The High Court considered the submissions and inter alia observed thus -

Analysis and reasons

+ The allegation of the Department was that duty credit had been utilized in excess fraudulently. The said order of the Commissioner of Customs (General) mentioned that ten custom brokers ('CBs') associated with Kirti Cargo had been found to have cleared imported consignments of 27 importers using ab initio null and void licenses. These ten CBs included the Detenue and one Divakar Sharma. However, in the grounds of detention qua the Detenue, no mention is made of the said Divakar Sharma.

+ In view of the order dated 9th June 2016 [para 55.2 thereof] of the Commissioner of Customs, it becomes clear that it is not a simple case where the Detenue could have just hacked into the EDI System of Customs and tampered with the details of the licenses, as is alleged. Unless the officers of the Customs Department were themselves involved, which angle is still under investigation, it is difficult to accept that the Detenue was the one who was involved in the racket of tampering with the licenses. Further, co-accused Mr Vinod Kumar Pathror is still said to be a PO.

Absence of a live link

+ Another aspect is the absence in the detention order issued on 2nd January 2018 of any live link with the alleged tampering of the licenses which was discovered way back on 15th September, 2015. Between 15th September, 2015 and 2nd January 2018, there does not appear to have been any prejudicial activity undertaken by the Detenue which has been referred to in the grounds of detention. [T.A. Abdul Rehman v State of Kerala (1989) 4 SCC 741 refers.]

Relevant factors not taken into account

+ The first is about the payment of Rs.2.59 crores, made by the Detenue under protest in September, 2015 itself.

+ The second factor that was relevant was the revocation of the suspension of the Customs Broker License of M/s Kirti Cargo which notes that the suspension was on account of the payment of duty by M/s Shyama Corporation through the G-Card holder Mr Diwakar Sharma. Therefore, the concerned G-Card holder in that transaction was not the Detenue.

+ Thirdly, the numerous adjournments granted to the department in the said proceedings [CC No.10/2016] belie the case of the department that it was the Detenue who was deliberately avoiding appearance before it. Therefore, the case of the Respondents that the Detenue was deliberately avoiding summons and, therefore, it became necessary to invoke Section 3 of the COFEPOSA Act to pass a detention order is entirely without basis.

+ Fourthly, a vital document which was not placed before the detaining authority was the SCN dated 20th December, 2017 issued by the DRI which made a reference to the fact that the licenses for payment of duty was used by the G-Card Holder Mr Diwakar Sharma and not the Detenue. This vitiated the detention order [Sahil Jain v. Union of India - 2013-TIOL-903-HC-DEL-COFEPOSA, Ranu Bhandari - 2008-TIOL-178-SC-COFEPOSA relied upon]

Departmental Circulars not referred to

+ The sponsoring authority erred in not referring to the various circulars issued by the Commissionerate which demonstrates how the verification of the genuineness of the scripts was to be done. Without the participation of various customs officers, it would have not been possible to hack the system and tamper with the details concerning the scripts/licenses.

+ Further, since the investigation into the role of the Customs officers is still said to be underway, the only conclusion that can be drawn is that there is no material available with the Detaining Authority to justify the conclusion that the Detenue had the potential of continue to tamper with the licenses/scripts even in future, after his release.

No likelihood of continued violations

+ The alleged propensity of the Detenue to continue to commit any such fraudulent acts is also not convincing in view of the order of the Commissioner of Customs (Preventive) which acknowledges how difficult it is for any individual to simply hack into the EDI System.

+ It is not disputed that the scripts in question are valid only for a period of 18 months. No details have been given in the grounds of detention as to which of the scripts will continue to remain valid beyond 2nd January, 2018 which would warrant the continued detention of the Detenue.

+ Since no past antecedents of the Detenue have been pointed in the grounds of detention, there was no material to support the conclusion that the Detenue possesses the propensity or potentiality to indulge in smuggling activities in the future.

Conclusion

++ The impugned detention order number dated 2nd January, 2018 is held to be bad in law and is quashed.

++ The Detenue is directed to be released forthwith.

(See 2018-TIOL-1071-HC-DEL-CUS)