2014 (9) TMI 237 - HC - Customs

Revokation of CHA license - allegation that the petitioner misdeclared the country of origin and under-valued the goods so as to evade payment of higher Customs Duty - Regulation 22 - period of limitation of 90 days - the main importer has gone before the settlement commission and got favorable order - Held that - it is not the contention of the respondents that the time limit prescribed in Regulation 22(1) is only directory and not mandatory. It is not even the contention of the respondents that the time limit prescribed in Regulation 22(1) need not be strictly adhered to. On the question that the first respondent is duty bound to initiate proceedings within 90 days from the date of receipt of offence report, there are no two opinions, at least before me. Therefore, the decision of the Division Bench of the Delhi High Court is of no assistance to the respondents. - Decided in favor of CHA. The first respondent has rejected the Second contention on the ground that the Settlement Commission settled the case upon confirmation of additional amount of Customs Duty, interest and nominal fine and penalty based upon the true and the full disclosure. Therefore the first respondent has concluded that the importer was guilty of undervaluation and that consequently, the petitioner cannot escape liability. But, what the first respondent has failed to take note of, is the fact that the revocation of licence now ordered by the first respondent, throws the petitioner out of business once and for all and deprives them of their very livelihood. Once the importer has escaped with a nominal fine on the ground that a true and full disclosure had been made, it would be unfair to impose the extreme penalty upon the petitioner. - petitioner is entitled to succeed on both grounds. - impugned order set aside - Decided in favor of CHA.

Issues Involved:
1. Timeliness of proceedings under Regulation 22(1) of the Customs Brokers Licence Regulations, 2013.
2. Impact of the importer's settlement with the Settlement Commission on the petitioner's liability.
3. Alleged violation of principles of natural justice.

Issue-wise Detailed Analysis:

CONTENTION NO. 1: Timeliness of proceedings under Regulation 22(1)

11. The petitioner contended that the proceedings under Regulation 22 were initiated beyond the 90-day period prescribed by Regulation 22(1). To test this contention, it is necessary to examine the relevant regulations.

12. The Customs House Agents Licensing Regulations 2004, issued under Section 146 of the Customs Act, require a licence to operate as a Customs House Agent. Regulation 20 empowers the Commissioner of Customs to revoke the licence on specific grounds, and Regulation 22 prescribes the procedure for such revocation.

13. The power to revoke the licence is found in Regulation 20, and the procedure is detailed in Regulation 22. The key provision, Regulation 22(1), requires the Commissioner of Customs to issue a notice in writing within 90 days from the date of receipt of the offence report.

14. The petitioner argued that if a notice is not issued within 90 days from the date of receipt of the offence report, the proceedings under Regulation 22(1) are vitiated. The dispute centered on defining an "offence report" and calculating the 90-day period.

15. The petitioner claimed that the Directorate of Revenue Intelligence's show cause notice dated 18.05.2010 or the Order-in-Original dated 31.01.2011 should be considered the date of receipt of the offence report. The respondents calculated the 90-day period from the date of the prohibition order issued on 06.09.2012.

16. The respondents' counter affidavit stated that the Commissioner of Customs, Tuticorin, forwarded the case to the Commissioner of Customs, Chennai, on 06.09.2012, and the show cause notice was issued within 90 days of this date.

17. The regulations do not define "offence report" or prescribe how it should be sent. The term is not used elsewhere in the regulations, and the grounds for revocation in Regulation 20(1) do not include an "offence report."

18. The court concluded that any communication indicating a failure to comply with bond conditions, regulations, or misconduct should be considered an offence report. The date of such communication should be the date of receipt of the offence report.

19. The interpretation sought by the petitioner was deemed more acceptable given the lack of clarity in the regulations.

20. The strict time schedule in the regulations supports the petitioner's interpretation. The show cause notice dated 18.05.2010 marked to the first respondent should be taken as the date of receipt of the offence report, making the proceedings initiated beyond the 90-day period.

21. The respondents relied on a circular from the Central Board of Excise and Customs, which required the Commissioner of Customs at the licensing station to be informed of violations. The first respondent received the show cause notice on 18.05.2010 and the Order-in-Original on 31.01.2011.

22. The court agreed with the petitioner that the show cause notice and Order-in-Original were received by the first respondent, who should have issued the show cause notice within 90 days.

23. The respondents' reliance on the Supreme Court decision in Sambhaji vs. Gangabai was rejected as the case concerned procedural law, not a period of limitation prescribed by regulation.

24. The Delhi High Court's decision in Aval Exports vs. Union of India was also deemed irrelevant as it concerned a different context.

25. The court upheld the first contention, agreeing that the proceedings were initiated beyond the 90-day period prescribed by Regulation 22(1).

CONTENTION NO. 2: Impact of the importer's settlement with the Settlement Commission

26. The petitioner argued that the importer had settled the dispute with the Settlement Commission, which found the importer had made a true and full disclosure. Therefore, the petitioner, as a broker, should not be penalized.

27. The first respondent rejected this contention, stating that the Settlement Commission's settlement was based on the confirmation of additional Customs Duty, interest, and nominal fine and penalty, indicating the importer's guilt of undervaluation.

28. The court found that revoking the petitioner's licence would deprive them of their livelihood. Since the importer escaped with a nominal fine for making a true and full disclosure, it would be unfair to impose an extreme penalty on the petitioner. The court allowed the writ petition, setting aside the impugned order.

Conclusion:

The writ petition was allowed, and the impugned order revoking the petitioner's licence and forfeiting the Security Deposit was set aside on the grounds that the proceedings were initiated beyond the prescribed period and it was unfair to penalize the petitioner when the importer had settled with the Settlement Commission. No costs were awarded, and the Miscellaneous Petition was closed.

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