2015 (8) TMI 626 - HC - Customs

Prohibition to work as CHA Non-compliance of Regulation, 2004 Violation of principle of Natural Justice Petitioners who were granted license to function as Customs House Agent, were prohibited from functioning as such, by way of orders of prohibition, issued under Regulation 21 of Regulations, 2004 which alleged to have been passed with utter disregard to principles of natural justice Whether Regulation 21, ultra vires powers of Board under Section 146(2) of Customs Act,1962 Held that - Section 146 mandates that CHA is required to be licensed; and no person is entitled to carry on business as agent unless he holds license Regulation 21 give powers to Commissioner to prohibit any CHA of working in any section or sections of Customs Station on being satisfied that such CHA has not fulfilled his obligations laid down under Regulation 13 This power of prohibition appears to be essentially that of preventive measure rather than punitive one Proceeding on guiding principles of scheme of Act, 1962 and Regulations,2004, Regulation 21 cannot be said to be invalid and ultra vires when Board was invested with powers to make regulations generally for purpose of regulating license of CHA. Impugned order was challenged only on ground that before passing prohibitory order, opportunity of hearing was not given to petitioner On consideration, impugned order cannot be sustained as said order was final Well-settled law that even administrative orders which affects rights of party can be passed only by following principles of natural justice Order under Regulation 21 was passed in violation of principles of natural justice on face of it was arbitrary and thus not sustainable in law Petition allowed Impugned order set aside Decided in favour of Petitioners.

Issues Involved:
1. Validity of Regulation 21 of the Customs House Agents Licensing Regulations, 2004.
2. Adherence to principles of natural justice in issuing prohibition orders under Regulation 21.
3. Specific allegations and procedural fairness in individual cases of prohibition orders.

Issue-wise Detailed Analysis:

1. Validity of Regulation 21 of the Customs House Agents Licensing Regulations, 2004:

The petitioners challenged Regulation 21 as ultra vires, arguing that Section 146(2) of the Customs Act, 1962 does not empower the Board to make regulations for "prohibition." The court held that the argument is more a matter of form rather than substance. Section 146 mandates licensing for Customs House Agents (CHAs) and empowers the Board to make regulations for granting, suspending, or revoking licenses. Regulation 21, which allows prohibition of CHAs from working in certain sections of the Customs Station, is seen as a preventive measure rather than a punitive one. The court concluded that Regulation 21 is within the powers of the Board and is not ultra vires.

2. Adherence to principles of natural justice in issuing prohibition orders under Regulation 21:

The petitioners argued that the prohibition orders were issued without pre-decisional hearings, violating principles of natural justice. The court acknowledged that ordinarily, pre-decisional hearings are required, but in cases where immediate action is necessary, post-decisional hearings can suffice. The court referred to various judgments, including those from the Supreme Court and other High Courts, to support this view. It was emphasized that even preventive measures like prohibition orders should adhere to principles of natural justice, either through pre-decisional or immediate post-decisional hearings.

3. Specific allegations and procedural fairness in individual cases of prohibition orders:

CWP No. 7266/2013:
The petitioner-company was prohibited from functioning as a CHA due to alleged contraventions related to the export of prohibited goods (Red Sanders Logs). The petitioner argued that the prohibition order was issued without a show cause notice or an opportunity to explain, violating principles of natural justice. The court noted that the petitioner had discontinued its work in Rajasthan six months prior to the order, questioning the urgency of the prohibition.

CWP No. 7896/2013:
The petitioner, another CHA, was prohibited for alleged involvement in importing misdeclared goods (Glass Chatons Grade B). The petitioner contended that he was not an expert in valuation or quality of gemstones and had relied on documents provided by the importers. The court highlighted that a show cause notice had been issued by DRI, and the matter was pending adjudication, questioning the necessity of the prohibition without a hearing.

CWP No. 7345/2013:
The petitioner, a Director of a company, was prohibited due to alleged involvement in smuggling Red Sanders Logs. The petitioner argued that the prohibition order was based on extraneous reasons and that there was no obligation under the regulations to verify the antecedents of the overseas buyer. The court noted that the petitioner had always exercised due diligence and verified the correctness of the information provided.

Conclusion:
The court concluded that while Regulation 21 is valid, the prohibition orders issued under it must adhere to principles of natural justice. The court directed the Commissioners to extend an adequate opportunity of hearing to the petitioners within four weeks and pass appropriate speaking orders. The prohibition orders were limited to remain operative for four weeks from the date of the judgment, allowing the petitioners to seek further remedies if necessary.

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