Ajay Clearing Enterprise vs Commissioner of Customs (General)

Having heard both sides, we are of the opinion that the appeal raises substantial questions of law. The appeal is admitted on the following substantial questions of law :

(1) Whether in the facts and circumstances of the case, the Appellate Tribunal was right in sustaining the revocation of the appellants� CHA Licence relying upon the alleged report of the enquiry submitted after the lapse of more than four years of the initiation of the enquiry?

(2) In any event, whether in the facts and circumstances of the case, the enquiry report is vitiated by a gross delay of more than 4 years from the commencement of the enquiry?

(3) Whether in the facts and circumstances of the case, the Appellate Tribunal was right in holding that the findings recorded by it in its earlier order dated 29-2-2008 is not binding on it in the present proceedings?

This appeal of the assessee is directed against the order passed by the Customs, Excise & Service Tax Appellate Tribunal, Western Zonal Bench dated 29th October, 2014 [2016 (343) E.L.T. 475 (Tribunal)].

Ordinarily, this Court would not have interfered in findings and of fact but as we will demonstrate hereafter, the entire matter and pertaining to the revocation of Customs House Agent Licence has been approached and decided casually and light-heartedly. If the charge against the appellant was indeed serious, then, one fails to appreciate the lapses on the part of the authority.

CHA Licence No. 11/803 was issued to the appellant. That licence was abused, according to the respondents in respect of an export transaction vide Shipping Bill No. 4339055, dated 2nd June, 2006, wherein the goods under export were declared as "furniture wood". On examination, it was found that the goods were, in fact, red sanders wood, an item banned for export. The appellant had filed a shipping bill on behalf of the exporter M/s. Angel Impex by declaring the goods under export as wood furniture valued at Rs. 1,26,927.60. On examination of the consignment, the goods were found to be 10,000 kgs. of red sanders wood valued at Rs. 75,00,000/- and which was seized. Further investigation revealed the role of the appellant in having not met the exporter and the export documents were received from one Baburao K. Chinta of M/s. Max Shipping Services, a freight forwarder, who had signed the documents on behalf of the exporter M/s. Angel Impex. The export firm was found to be fictitious. That is how the Customs proceeded against the appellant for contravention of Regulation 13(a), 13(d) and 13(e) of the Customs House Agents Licencing Regulations, 2004 (for short "the Regulations").

Initially there was a suspension of this licence, but it is common ground that this suspension order was set aside by the Tribunal on 29th February, 2008.

Thus, the licence stood restored after the suspension was set aside following the Tribunal�s order, but there is no explanation forthcoming as to why when the enquiry proceedings commenced on 19th November, 2008, but the report of such enquiry was not submitted till 4th January, 2013, by the Enquiry Officer, namely, the Assistant Commissioner of Customs, National Academy of Customs, Excise and Narcotics, Western Region, Bhandup, Mumbai. None pulled up this Enquiry Officer for this serious lapse and the Commissioner of Customs to whom the enquiry report was submitted, upon careful perusal, according to him, of the same, proceeded to impose a penalty and that is of revocation of the Customs House Agent Licence.

The Commissioner�s order-in-original dated 28th March, 2013, proceeds on the footing that though the Enquiry Officer may not have followed the principles of natural justice, that error on his part does not vitiate the ultimate conclusions and in any event, the Commissioner would grant full opportunity to the appellant. It is based on that finding that on 28th March, 2013, the order-in-original was passed by the Commissioner of Customs and he ordered revocation of the licence with immediate effect.

The assessee challenged this order by filing an appeal before the Tribunal and which has been dismissed.

Mr. Shah appearing for the appellant would submit that the questions of law formulated at pages 12 and 13 of the paper book are substantial questions of law. Mr. Shah would submit that the revocation could not have been sustained by the Tribunal without adverting to the grounds of appeal. There was a specific ground raised that the suspension was revoked by the Tribunal, once there was a suspension and which was revoked but with full liberty to hold an enquiry, then, the enquiry should have been held and concluded expeditiously. The delay of nearly four years in concluding and submitting a report of that enquiry vitiates the exercise of power and prejudicially affects the appellant. Mr. Shah would submit that during the pendency of the enquiry, the licence expired by efflux of time but unmindful of the enquiry, the same was renewed. That was renewed simply because the authorities did not notice any lapses on the part of the assesse-appellant. Further, without in any manner admitting the alleged guilt it is apparent that the licence was initially suspended but that suspension was set aside. Subsequently, from 28th March, 2013, till date, the appellant is without any licence. He has suffered immensely by loss of business. The appellant is, therefore, ready and willing for a substitution of the penalty by that of revocation of licence for three years and forfeiture of security deposit. That is how the appellant intends to close the chapter. The Court may take a lenient view of the matter for there are no other lapses, deficiencies or breaches of the Regulations on the part of the appellant, save and except the noticed one.

Mr. Shah would submit that there is no question of the Commissioner, who is a Disciplinary Authority, allegedly complying with the principles of natural justice and condoning serious defect in the enquiry. Such a defect of non-compliance with the principles of natural justice at the stage of enquiry goes to the root of the matter and the enquiry proceedings should fall to the ground. They must, therefore, be set aside.

Mr. Bharti on the other hand would submit that the charges are indeed serious. Red sanders is not an item which is permitted to be exported out of India. It is extremely valuable and smuggling of red sanders is a rampant act. The enquiry proceedings could not conclude expeditiously on account of the administrative and other difficulties of the Enquiry Officer. Hence it cannot be said that the principles of natural justice are violated or that the resultant prejudice is such that the enquiry proceedings must fall to the ground. In such circumstances, Mr. Bharti would submit that the appeal be dismissed.

With the assistance of both advocates, we have perused the order passed by the Tribunal and all other annexures in the paper book. The Tribunal specifically notes the argument of the appellant that earlier when the Customs House Agent Licence was under suspension, that was revoked on 29th February, 2008, by the Tribunal with a speaking order. The Tribunal agreed with the contention of the appellant�s advocate that it had not contravened the provisions of Regulation 13(d) and 13(e) and only the charge of violation of Regulation 13(a) stands proved. Thus what was attributed to the appellant was an act of not obtaining proper authorisation from the exporter whereas all other charges had no basis. Secondly, there was an argument raised specifically that revocation of the licence for contravention of Regulation 13(a) is a penalty/punishment disproportionate to the alleged lapses. A third argument was noted that the enquiry proceedings were not conducted properly and the appellant was not given adequate opportunity to make submissions.

At page 36 in paragraph 5.1 the Tribunal purports to deal with the enquiry proceedings and the defect therein. The report, according to the Tribunal, indicates the date-wise hearings, the details of the departmental witnesses examined and cross-examined. A copy of the report has also been given to the appellant. Thus, one can understand that the enquiry proceedings cannot be held to be vitiated for want of alleged non-compliance with the principles of natural justice also because there is no prejudice established and proved.

However, in paragraph 5.2, the Tribunal brushes aside its own earlier speaking order on the ground that the observations therein are made prior to the conduct of the enquiry proceedings. The enquiry proceedings, on the own showing of the Tribunal, were conducted during June to November, 2008 and a report submitted in June, 2013.

Thus, the Tribunal may not be influenced by its own order though it is a speaking one, but passed at the stage of suspension. We do not find any advertence by the Tribunal to the argument that a period from June to November, 2008 for conduct of the enquiry and submission of the report in June, 2013, has not been explained. There is absolutely no discussion in the Tribunal�s order as to why this delay occurred and whether that could be said to be fatal to the proceedings. The Tribunal also does not consider the fact that during this period the licence of the appellant was renewed when it expired by efflux of time. Thus, the Tribunal should have noted that if the penalty is imposed on 28th March, 2013, from 29th November, 2008 to 28th March, 2013, the petitioner was merrily carrying on the business as a Customs House Agent and was also obtaining renewal of the licence which expired by efflux of time. Mr. Bharti does not dispute that such a licence is issued initially for a period of five years and renewable by efflux of time. Thus when the licence was suspended on 29th February, 2008, it was still in force. If the enquiry was continuing and the period of the licence expired allegedly by efflux of time during such enquiry, then, there is no explanation forthcoming as to why the licence came to be renewed. Once the facts are so glaring, the lapse on the part of the appellant was serious and it actively associated itself with smuggling of the red sanders, then, all the more the Tribunal should have considered this aspect a little more carefully. We have also perused the enquiry report and we find besides reproduction of the charge and version of the Presenting Officer and some statements of witnesses, the Enquiry Officer has not come to any independent conclusion as to how the charge stands proved.

In the order of the Commissioner as well, we do not find any reference being made to the aspect of delay in enquiry or the renewal of the Customs House Agent licence. Thus, the Customs House Agent never met the exporter but was dealing with an intermediary. It is a lapse on his part of not being acquainted with the exporter, but dealing with one M/s. Max Shipping and Baburao Chinta. If failure to exercise due diligence and lack of care are the real charges, then, we do not see how the appellant is held to be actively involved in attempting to smuggle or smuggling of red sanders. Baburao Chinta was definitely involved as such. Mere inaction on the part of the appellant and by not obtaining the credentials of Baburao Chinta, would prove aiding and abetting the smuggling is something which we do not find to be a reasonable and justifiable conclusion. Something more is required to establish and prove aiding, abetting and actively assisting in smuggling of red sanders. Once the appellant was guilty essentially of not contacting and obtaining authorizations from the exporter, but relying upon some middlemen, then, we find that revocation of licence was not a penalty which could have been imposed for this act. The Commissioner was aware that there were shipping bills and indicating the name of the exporter and that of M/s. Max Shipping. The proprietor of M/s. Max Shipping who was dealing with the appellant was Baburao K. Chinta. The appellant�s witness in his statement had stated that he had collected the invoice and check list from this Chinta on 2nd January, 2006 along with a covering letter. Thus, not knowing the exporter, but having signed and filed the Shipping Bill on the basis of the documents received from M/s. Max Shipping was the real charge and held to be proved.

It is in these circumstances that we are of the opinion that sending the matter back to either the Commissioner or the Tribunal would serve no purpose. We accept the stand of the appellant that at best he could be held to be guilty of this charge and for the same the penalty that he has suffered of loss of licence as a Customs House Agent from 28th March, 2013, till today should be sufficient. Further, the forfeiture of security deposit in addition to the above can also be ordered. Ordered accordingly.

Thus, substituting the final penalty of revocation of licence under the Commissioner�s order with that of the above, we allow this appeal partially. The substantial questions of law on which the appeal stands admitted are answered accordingly.