2018 (3) TMI 289 - HC - Customs

Validity of SCN - Revocation of CHA License - forfeiture of security deposit - Department of Revenue Intelligence (DRI) initiated investigation on the allegation of undervaluation - whether the impugned show cause notice dated 31.10.2014 is liable to be set aside on the ground that it still continues to have the inherent defects, which were pointed out by this Court while setting aside the earlier show cause notice dated 02.07.2014, issued on identical grounds? Held that - What is to be remembered is that, both the show cause notices are issued on the same set of facts and therefore, there is bound to be repetition of the factual averments. Therefore, the petitioner cannot contend that both notices are verbatim repetition of each other. If it is not so, then also the respondent would be faulted. Therefore, I am not inclined to take note of the said submission for upholding that the impugned show cause notice is not sustainable. What is required to be seen is whether the respondent had borne in mind the object for issuing a show cause notice while issuing the impugned show cause notice. The purpose of issuing a show cause notice is to intimate the party, who has to show cause as to what is the allegation against the said noticee, for which he as to respond. Therefore, show cause notice apart from being clear and unambiguous and specific, it should also be issued with an open mind, which should be manifest on reading of the show cause notice. hat has been mentioned in the show cause notice is a proposal, whereby, the respondent proposed to take action in accordance with Regulation 20(1) of the CBLR. Thus, the petitioner has adequate opportunity to put forth all their contentions by answering to the show cause notice and on the grounds raised by the petitioner, the impugned show cause notice cannot be interfered with. Consequently, the writ petition is liable to be dismissed - petition dismissed. Renewal of CHA License - Held that - Admittedly, as on the date, when the petitioner s application for renewal of the custom broker licence was rejected, there was no conclusive finding rendered against the petitioner holding that their conduct was not satisfactory with relevant to the obligation mentioned in the CBLR - I am unable to agree with the conclusion recorded by the respondent while rejecting the application for renewal stating that the conduct of the custom Broker is not found to be satisfactory, with reference to the obligations mentioned in the CBLR. Thus, the petitioner s application for renewal is to be rejected on the ground that it would amount to pre-deciding the issue, which is subject matter of show cause notice dated 31.10.2014. Therefore, the order rejecting the petitioner s application for renewal of custom brokers licence has to be set aside petition allowed. Petition allowed in part.

Summary

Issues Involved:
1. Validity of the show cause notice dated 31.10.2014 under Regulation 20(1) of the Custom Broker Licensing Regulations, 2013 (CBLR).
2. Rejection of the petitioner's application for renewal of the Custom Broker Licence.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice Dated 31.10.2014:

The petitioner challenged the show cause notice dated 31.10.2014 on the grounds that it was a verbatim repetition of an earlier notice dated 02.07.2014, which had been quashed by the court for being pre-meditated and concluded. The petitioner argued that the new notice still contained the same inherent defects and thus should be quashed.

The court noted that while the allegations in both notices were identical, this was expected since they were based on the same set of facts. The court emphasized that a show cause notice should be clear, unambiguous, specific, and issued with an open mind. Upon reviewing the impugned notice, the court found that it used language indicative of a proposal rather than a predetermined conclusion, thus providing the petitioner with adequate opportunity to respond.

The court referenced several precedents, including the Delhi High Court's decision in KVS Cargo Vs. Commissioner of Customs (General) and the Supreme Court's ruling in Oryx Fisheries Private Limited Vs. Union of India, to support the principle that a show cause notice should not be pre-judged. The court concluded that the impugned notice was issued with an open mind and thus could not be interfered with. Consequently, the writ petition challenging the show cause notice was dismissed.

2. Rejection of the Petitioner's Application for Renewal of the Custom Broker Licence:

The petitioner also challenged the order dated 02.06.2015, which rejected their application for renewal of the Custom Broker Licence. The court found that the order was passed without affording the petitioner an opportunity to be heard, thus violating the principles of natural justice.

The court observed that as of the date of the rejection, there was no conclusive finding against the petitioner regarding their conduct under the CBLR. The petitioner's licence had been previously suspended but was later revoked by the Commissioner of Customs, indicating that the allegations were still under inquiry and had not been conclusively proven.

The court held that the respondent's decision to reject the renewal application on the grounds of unsatisfactory conduct was premature and amounted to pre-deciding the issue, which was still under adjudication. The court directed the respondent to renew the petitioner's licence for one year, subject to the outcome of the adjudication process of the show cause notice dated 31.10.2014.

Judgment:

(i) W.P.No.31596 of 2014 was dismissed. The petitioner was granted thirty days to file a reply to the show cause notice, after which the respondent should afford a personal hearing and adjudicate the notice in accordance with the law.

(ii) W.P.No.17196 of 2015 was allowed. The impugned order rejecting the renewal application was quashed, and the respondent was directed to renew the petitioner's licence for one year, subject to the outcome of the adjudication process of the show cause notice dated 31.10.2014. No costs were awarded, and connected miscellaneous petitions were closed.