2014 (1) TMI 1116 - AT - Customs

Fake CHA License - Laches on part of Revenue to issue show case notice - Without proper examination of Regulation and bringing out mala fide of CHA, impugned order forfeituring security was passed - Held that - while lapse at one end is noticeable on the other, the authority whether has made any investigation from 5-2-2009 to trace revenue loss, if any, by engagement of the employee remained in dark. It is high time that Central Board of Excise & Customs (C.B.E. & C.) should take appropriate steps to prescribe inbuilt provision of verification of certificates within a prescribed time and take action within a prescribed time without permitting aforesaid act. No one knows what sort of injury that shall be caused to revenue, if fake certificate holders enter into stream of Revenue Administration - Authority has not risen to the occasion expeditiously, it is the necessary to send a copy of this order to the learned Member (L&J), C.B.E. & C. for appropriate measure - Decided in favour of Assessee - Stay granted.

Issues:
1. Delay in issuing show cause notice and passing adjudication order.
2. Compliance with CHA Regulation, 2004 regarding employee eligibility and bond requirements.
3. Lack of proper examination of CHA's involvement and mala fide intentions.
4. Failure to investigate revenue loss due to employee engagement.
5. Recommendation for appropriate measures by Central Board of Excise & Customs.
6. Disposal of stay application and appeal.

Analysis:

Issue 1: Delay in issuing show cause notice and passing adjudication order
The judgment highlights a significant delay in the issuance of the show cause notice and subsequent adjudication order in the case. Despite the certificate produced by the Customs House Agent (CHA) for licensing its employee being verified by the Revenue, there was a delay of five months in issuing the show cause notice. The notice was finally issued on 14-7-2009, followed by the adjudication order after a year. The judgment criticizes the lack of prompt action by the Revenue administration and emphasizes the importance of timely proceedings to prevent any potential revenue loss.

Issue 2: Compliance with CHA Regulation, 2004
Regulation 19(1) regarding employee eligibility and bond requirements for a CHA is discussed in detail in the judgment. The CHA is required to execute a bond with the Revenue for the employment of individuals, with specific conditions outlined in the show cause notice. The judgment points out the significance of the CHA being liable for any actions as per the CHA Regulation, 2004, and the consequences, such as forfeiture or revocation of the license, for failure to comply with the bond conditions under Regulation 20.

Issue 3: Lack of examination of CHA's involvement and mala fide intentions
The judgment raises concerns about the lack of proper examination of the CHA's involvement and any potential mala fide intentions. It questions the adjudication order's basis for forfeiting a portion of the security deposit without sufficient evidence of the CHA's active involvement or conscious knowledge of any wrongdoing by its employee. The judgment emphasizes the need for a thorough examination of regulations and the CHA's actions before passing such orders.

Issue 4: Failure to investigate revenue loss due to employee engagement
The judgment criticizes the Customs Authority for failing to conduct an investigation from the date of knowledge about the employee's engagement until the issuance of the show cause notice. It highlights the importance of tracing any potential revenue loss resulting from the employee's actions and stresses the need for proactive measures to safeguard the revenue from potential risks posed by individuals with fake certificates entering the Revenue Administration.

Issue 5: Recommendation for appropriate measures by Central Board of Excise & Customs
In response to the shortcomings identified in the case, the judgment recommends that the Central Board of Excise & Customs (CBEC) take appropriate steps to ensure timely verification of certificates and prompt actions within prescribed timelines. It suggests notifying the relevant authorities within the CBEC to address the issues raised in the case and prevent similar delays or oversights in the future.

Issue 6: Disposal of stay application and appeal
Considering the delays and shortcomings in the proceedings highlighted in the judgment, it concludes by disposing of both the stay application and the appeal. The judgment emphasizes the need for vigilance on the part of the authorities to protect the interests of revenue through expeditious actions, indicating the importance of timely and efficient handling of such cases to prevent any potential revenue losses.

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