2017 (12) TMI 624 - HC - Customs

Suspension of CHA License - Regulation 19(2) of the Customs Broker Licencing Regulation 2013 (CBLR) - the allegation against the petitioner in the instant case is that they have contravened Regulation 11(d) & Regulation 11(e). In as much as the petitioner did not advice their client to comply with the provisions of the Act and failed to exercise due diligence to ascertain the correctness of the information and even assuming ultimately, an order has been passed. Held that - There can be no dispute over the settled legal position that there is no res judicata in matters pertaining to tax for different assessment years. However, the facts of the present case, calls for a different approach. The allegation against the petitioner was that in the bill of entry, the word computer , was deliberately added to the item description of goods, at the behest of the importer in violation of Section 46(4) of the Customs Act, with a view to claim duty exemption benefit. At the first blush, it appears the insertion of word computer, in the bill of entry, though alleged to be deliberate, cannot be construed as a serious matter. The respondent stated that the petitioner failed in his obligations contemplated under Regulation 11 by adding the word computer , to the item description without seeking proper explanation from the importer, thereby violating Section 46(4) of the Customs Act. In such circumstances, it cannot be stated that the respondent did not properly exercise its discretion, while suspending the petitioner s licence under Regulation 19(1), nor it can be stated that the interpretation given by the respondent was either perverse or arbitrary not to bring the petitioner s case within the ambit of appropriate case in Regulation 19(1) . Considering the conduct of the petitioner and the facts, the first respondent has exercised his powers and found the petitioner s case to be an appropriate case for immediate suspension. After the petitioner was afforded an opportunity, he was given a hearing and the order of suspension has been directed to be continued and the reasons assigned in the impugned order are just and germane to the allegations made against the petitioner - Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Legality of the suspension of the Customs Broker Licence under Regulation 19(2) of the Customs Broker Licensing Regulation 2013 (CBLR).
2. Whether the petitioner's actions warranted suspension or merely a penalty.
3. Applicability of res judicata in tax matters.
4. Necessity and immediacy of the suspension under Regulation 19(1).
5. Obligations and duties of a Customs Broker under Regulation 11 and the consequences of their breach.

Detailed Analysis:

1. Legality of the Suspension of the Customs Broker Licence under Regulation 19(2) of the Customs Broker Licensing Regulation 2013 (CBLR):

The petitioner challenged the order dated 12.10.2017, which continued the suspension of their Customs Broker Licence. The suspension was initially ordered under Regulation 19(1) of the CBLR due to an ongoing enquiry. The petitioner argued that the suspension was an abuse of power and that an appeal to the Tribunal would not be efficacious. The court noted that Regulation 19(2) requires the Commissioner of Customs to give a hearing within fifteen days of suspension and then decide whether to continue or revoke the suspension. The court found that the respondent followed this procedure, thus upholding the suspension's legality.

2. Whether the Petitioner's Actions Warranted Suspension or Merely a Penalty:

The petitioner contended that their alleged violations of Regulation 11(d) and 11(e) should only result in a penalty not exceeding fifty thousand rupees, as per Regulation 18, and not suspension. The court disagreed, stating that Regulation 18 provides grounds for both revocation of licence and imposition of penalties. It is up to the adjudicating authority to decide the nature of the punishment. The court found the interpretation that violations of clauses (a) & (b) warrant only a minor penalty to be incorrect and unsupported by the Regulation's wording.

3. Applicability of Res Judicata in Tax Matters:

The petitioner argued that res judicata does not apply in tax matters for different assessment years. The court acknowledged this principle but noted that the facts of the case required a different approach. The petitioner was aware of a previous order rejecting their classification of goods, which had attained finality. Despite this, they filed a bill of entry with a similar incorrect classification, which was seen as a deliberate attempt to claim duty exemption benefits. Thus, the court found that the petitioner's actions warranted suspension.

4. Necessity and Immediacy of the Suspension under Regulation 19(1):

The petitioner argued that the suspension was not immediate, as it was ordered nearly three months after the goods were seized. The court interpreted "immediate" in the context of the CBLR, noting that the suspension was ordered after necessary investigations and statements were recorded. The court found no inordinate delay and upheld the suspension as necessary and appropriate under Regulation 19(1).

5. Obligations and Duties of a Customs Broker under Regulation 11 and the Consequences of Their Breach:

The court highlighted the significant role and trust placed in Customs Brokers, who must safeguard the interests of both importers and customs authorities. Regulation 11 obliges Customs Brokers to advise clients to comply with the Act and exercise due diligence. The petitioner failed to fulfill these obligations by adding the word "computer" to the item description without proper verification, violating Section 46(4) of the Customs Act. The court found that the respondent properly exercised discretion in suspending the petitioner's licence due to these breaches.

Conclusion:

The court dismissed the Writ Petition, directing the petitioner to submit their reply to the show cause notice within 30 days. The respondent was instructed to adjudicate the show cause notice expeditiously, preferably within two months, without being influenced by the court's observations. No costs were awarded, and connected Miscellaneous Petitions were closed.