M/S. Tulip International vs Commissioner Of Customs (Airport & Administration), Kolkata

Rajeev Tandon, Member(T)

The present appeal has been filed by M/s. Tulip International assailing the Order-in-Original No.KOL/CUS/AIRPORT/ADMN/10/2013 dated 18.06.2013 passed by Commissioner of Customs (Airport & Administration), Kolkata. The subject issue concerns proceedings initiated against the appellant under the provisions of Customs House Agent Licensing Regulations, 2004.

Briefly stated the facts of the case are that the appellant was issued a Customs House Agent License to transact customs business in the name of M/s. Tulip International. The appellant states that following prescribed procedure in law they subsequently opened an office under Regulation 9(2) at Mumbai wherein one Manish Chatwani was engaged as Manager of the said office. The appellant is said to have issued a Power of Attorney in favour Manish Chatwani consequent to setting up of their Mumbai office (licence No.11/1395).

The appellant contends that the Mumbai Customs authority suspended the CHA licence granted at Mumbai vide Order No.56/2009 dated 26.10.2009 which was subsequently followed up with the suspension of their CHA license No.T-18 issued at Calcutta, vide order No.2/2010 dated 05.01.2010 under Regulation 20(2) of the CHALR, 2004. The appellants were subsequently issued show cause notice dt. 28. 05.2010 in terms of Regulation 22(1) alleging violation of Regulation 12, 13(a), 13(b), 13(d), 13(e) and 19(8) of the said Regulations (CHALR 2004).

The facts leading to the aforesaid cause of action relate to an investigation conducted by DRI, whereby it found that certain Mumbai based operators imported high end cars/SUVs in the name of third parties by resorting to fraudulent means in breach of the provisions of Foreign Trade Policy and the Customs Act. The vehicles such cleared were enabled by the appellant through their licencde No.11/1395 operating at Mumbai. The usual process of investigation and the rigmarole as enshrined in law was followed, statements were recorded both of Manish Chatwani as well as the appellant and others involved in the commissioning of the alleged fraud. Enquiry proceedings were conducted against the CHA. The appellant in defence had contended that out of the 11 such cases of imports adjudication was completed, and in 8 such cases the importers had paid duty and penalty as imposed subsequently, getting the imported vehicles cleared.

At the time of the oral hearing before us, in his defence, the appellant raised a feeble ground of jurisdiction pleading that the suspension of the Kolkata licence for breach of provisions of the Customs Act and the Foreign Trade Policy, for an offence conducted at Mumbai (Nhava Sheva) was in breach of the provisions of natural justice and Kolkata authorities had no jurisdiction in the matter. We are however not impressed with these arguments of the appellant as we note that the parent licence was issued to the appellant only by the Calcutta Customs House and it was subsequently as per the provisions of Regulation 9 of the CHALR that the appellant was permitted to transact business at Mumbai for which as stated by them, the aforesaid Power of Attorney was assigned in favour of Manish Chatwani.

As the issue concerns various obligations cast upon the CHA in law, for the sake of ready reference, the provisions which were held to be violated are enumerated hereunder:-

CHALR, 2004 : Regulation :

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.

Obligations of Customs House Agent. – A Customs House Agent shall –

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

(b) transact business in the Customs Station either personally or through an employee duly approved 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;

(e) exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage;

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.

We have heard the two sides and perused the case records.

We note from the proceedings that departmental proceedings as required in terms of the provisions of law were duly carried out. The appellant were given all reasonable opportunity to defend themselves. The charge against the appellant essentially concerns –

(i) Mis-declaration of new car as old, so as to claim substantial depreciation and lower the assessable value.

(ii) Mis-declaration of old car (duty @ 165%) as new car (duty @ 113%) to evade duty.

(iii) Mis-declaration of the model of vehicle with a view to import high end vehicles in the guise of low end vehicles e.g. Land Rover L 322 model 4.0 litre V8 Petrol declared as L 322 3.6 ligres Diesel V8, thus facilitating under valuation.

(iv) Suppression of value of accessories installed in the vehicle which subsequently enhances its value.

(v) Mis-use of cars imported under EPCG Scheme through certain operators.

The Power of Attorney holder - Manish Chatwani as brought out in the investigation is a key conspirator and an enabler. He has also admitted of his complicity in clearance of 11 vehicles through Nhava Sheva Customs House by filing Bills of Entry through CHA M/s. Tulip International (appellant). It is brought out on record that one Mr.Balu Patil, got the aforesaid job of clearance of the vehicle to Manish Chatwani for a consideration of Rs.6,000/- per job. Balu Patil in his statement had admitted and corroborated the statement of Manish Chatwani besides adding that he was assigned the said job by one Charanjit Singh for a consideration of Rs.10,000/-. The cycle therefore goes on. The Partner of the appellant firm Basant Babu, during investigation had also revealed that they had permitted Manish Chatwani the usage of the licence for a consideration of Rs.20,000/- per month and a payment of Rs.2,00,000/- (Rupees Two Lakhs) had since been made to them. He added that he was aware of the clearance of the aforesaid 11 vehicles at Nhava Sheva, utilizing their licence. He however stated that he was unaware of the importer’s identity for whom Manish Chatwani had taken up the said work of clearance of the high end imported cars.

In the backdrop of the aforesaid factual position, we find that the appellant is undoubtedly guilty of the offences as made out against him. Thus, it goes without any effort to point out that violation of Regulation 12 (transferability of licence) is clearly evident. It has been brought on record that Manish Chatwani had paid an amount of Rs.2.00 Lakh to the appellant as precautionary money besides making monthly payments of Rs.20,000/- for utilization of their said licence. The fact that a monthly consideration, irrespective of the volume of business is the determining remuneration, leaves nothing more to imagination, but for transferring or sub-letting of the CHA license. This therefore establishes the lending of the licences for a consideration in violation of Regulation 12. There is nothing to establish on record that Manish Chatwani was in any way concerned with the appellant as an employee. We note that there is nothing on record to indicate seeking of an authorization from the 11 importers of the said cars in the present matter and therefore Regulation 13(a) as incorporated in the notice has been clearly violated. It is an admitted position that Balu Patil had sourced to Manish Chatwani the impugned business who in turn had procured the business from Charanjit Singh. Thus the actual importers and their authorization are nowhere in picture. Further, they had not appeared anywhere during the enquiries conducted in question. Likewise we also note that Regulation 13(b) has been violated inasmuch as the business is sought to be conducted by a third person completely unknown to the appellant’s organization based on considerations of Power of Attorney and financial considerations. It is therefore established from records that the appellant had never transacted business personally or through their employees thereby violating the said provision of Regulation 13(b). The question of fulfilling the charter prescribed under Regulation 13(d) also does not arise inasmuch as there is nothing to indicate that the import business was being transacted through bonafide importers actually concerned with the imports. In so far as the Regulation 13(e) is concerned, the fact of mis-declared cargo and the stipulations violated referred to in earlier paras establishes the fact of lack of any consideration for exercise of due diligence in the matter. We also note that Regulation 19(8) of CHALR is also violated in the matter, as the appellant staying in Kolkata had no control and neither exercised supervision of business being transacted in their name and their licence registered at Mumbai, enabling them to transact business at Mumbai. On the grounds aforesaid we therefore are of the view that the appellant has certainly violated and committed breach of the provisions of law, as charged with. The adjudicating authority in his findings has however noted as under, in the context of the role of Manish Chatwani and the case laws relied upon by the appellants:-

“I agree with the spirit of these judgements that when an employee of a CHA firm has done something wrong and has done it in his own purely personal capacity without the knowledge of the CHA firm, the entire CHA should not be punished”.

We however note that the licence of the CHA firm was revoked vide Order dated 18.06.2013 and the Security Deposit furnished by the appellant, ordered to be forfeited. It has been brought to our notice that at least in 8 cases, any revenue loss caused to the department, was made good and the vehicles cleared upon payment of necessary dues. Though there is no denying the fact that the appellant had committed grave error in law, and we find them to have contravened the legal stipulations. We also note that the licence has now been revoked for nearly 10 years and more. This in itself, effecting the livelihood of the appellant, is considerable punishment and beyond what ought to have been imposed upon the appellant for the aforesaid breaches. We thus note that the appellant have undergone grave hardship. The consequences of the aforesaid violation have been significantly harsh vis-à-vis, the infringement in law made through Manish Chatwani by the appellant by way of lending out their licence for financial considerations. Under the circumstances we are of the view that the licence cannot be allowed to remain revoked in perpetuity. We feel that the ends of justice shall be met in this case by maintaining the order of the Ld.Commissioner in so far as forfeiture of the Security Deposit of Rs.50,000/- is concerned with. We also feel that it is now high time that the revocation of the licence be done away with and the licence restored to the appellants.

We therefore dispose of the appeal in the aforesaid terms.