2014 (6) TMI 86 - HC - Customs

Revocation of CHA License - Ex parte order - Denial of right to be heard - Held that - The reply though termed interim was given within the period prescribed. The noting sheet records an entry acknowledging that the reply was received by customs authorities; the noting was made on 03- 03-2014. The next day, i.e. 04-03-2014, a decision to forward the reply to the Inquiry Officer was taken. Unfortunately for the petitioner, that office prepared the report on 04.03.2014, after assuming that the petitioner had nothing to say - Regulation 22 mandates that the CHA should be given hearing before action is taken. In this case, the show cause notice was issued on 30-01-2014; 30 days time was given to the CHA to respond to the allegations. A reply was furnished. The respondent s argument that the reply had to be given directly to the Inquiry Officer is without merit, because it is upon receipts of reply by the Commissioner i.e. the notice issuing official and a further order by him, that the Inquiry Officer assumes power under Regulation 22(2) to proceed further. In this case, no such order was made; the Inquiry Officer s report is premised almost entirely on the investigation report and its allegations - The insistence upon giving an opportunity of hearing to a CHA whose license is suspended, is not an idle formality which sadly the impugned order assumes it to be. The impugned inquiry report, therefore, cannot be sustained - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the ex-parte inquiry report.
2. Compliance with the principles of natural justice.
3. Adherence to Customs House Agent Licensing Regulations (CHALR) and Customs Brokers Licensing Regulations (CBLR).

Issue-wise Detailed Analysis:

1. Legality of the ex-parte inquiry report:
The petitioner, a Customs House Agent (CHA), challenged the ex-parte inquiry report dated 4-3-2014, issued by the inquiry officer under Regulation 22 of the CHALR, 2004. The petitioner argued that the inquiry report was prepared in disregard of its written reply and request for a hearing. The court noted that despite the petitioner responding to the show-cause notice within the prescribed 30-day period, the respondents proceeded with an ex-parte inquiry. The inquiry officer assumed that the petitioner had nothing further to say and finalized the report on 4-3-2014. The court found this action to be in violation of the procedural requirements under Regulation 22, which mandates a hearing before taking action.

2. Compliance with the principles of natural justice:
The petitioner contended that the inquiry report violated the principles of natural justice as it was prepared without granting the petitioner a hearing. The court emphasized that the statute requires observance of a step, in this case, an opportunity of hearing, as a prelude to exercising power. The court stated that the insistence upon giving an opportunity of hearing to a CHA whose license is suspended is not an idle formality. The court held that the impugned inquiry report could not be sustained as it failed to comply with the principles of natural justice.

3. Adherence to Customs House Agent Licensing Regulations (CHALR) and Customs Brokers Licensing Regulations (CBLR):
The petitioner was accused of contravening Regulations 13(e) and 13(o) of the CHALR, read with Regulation 11(e) and 11(n) of the CBLR, 2013. The allegations included failure to exercise due diligence in verifying the antecedents of the importer and not adhering to the 'Know Your Customer' (KYC) norms. The court noted that the inquiry officer's report was based almost entirely on the investigation report and its allegations, without considering the petitioner's reply. The court directed that a proper hearing be conducted in accordance with Regulation 20(3) and that an order under Regulation 22(2) be passed before holding an inquiry.

Conclusion:
The court quashed the impugned inquiry report for being in violation of the principles of natural justice and directed the respondents to give a hearing to the petitioner within three weeks. The court also instructed the respondents to pass an order either confirming or revoking the suspension order within two weeks after the hearing. All rights and contentions of both parties were reserved and kept open. The writ petition was allowed, and the accompanying applications were disposed of.