2018 (11) TMI 244 - HC - Customs

Scope of Regulation 21 of CHAL, 2014 - Role of CHA - The petitioner submits that the declaration in the bill of entry was signed by the Importer. - forbearance to the 1st respondent from proceeding against the petitioner-CHA under Regulation 21 of CHAL, 2014 - vicarious liability in the proceedings - Penalty - grievance of the petitioner arise from the multiplicity of proceedings initiated by the respondents at varying times in consequence of the offence case booked by DRI against one of their clients and arrayed as an abettor for his role in the clearance of the disputed goods. Held that - The perennial litigations from 2009 in the attempt at enforcing the punitive provisions under the CHALR, 2014 against the petitioner is a classic case of cat and mouse game between the Department and petitioner that is nobody s cause. A cursory reading of regulations 13 and 21 indicates that the prohibition contemplated under Regulation 21 is aimed at separating the CHA from access to offices and sections connected to the offence to prevent unwanted influence or sabotage - This order is normally passed immediately after the commission of any offence. In other words, Regulation 21 will outlive its purpose once substantive investigations in the offence case is over. The consequences of wrong doing for a CHA licensee is in the suspension and revoking of the license of the CHA under Regulation 22 - also, once proceedings under Regulation 22 is initiated which is normally done after the completion of investigations in a case, the proceedings under Regulation 21 go redundant. The entitlement to do the business of CHA is to be tested in a proceedings under Regulation 22 of CHALR, 2014. And Regulation 21 cannot be used as a tool to prevent the CHA from doing business. Petition allowed - decided in favor of petitioner.

Summary

Issues:
- Challenge to impugned order under Regulation 21 of CHAL, 2014
- Vicarious liability of Custom House Agents
- Penalty imposition and appellate process
- Recovery actions and stay application
- Prohibition order under Regulation 21 of CHALR, 2004
- Denial of cross-examination and principles of natural justice
- Multiplicity of proceedings and relief sought
- Purpose and implications of Regulations 13, 21, and 22 of CHALR, 2014

Analysis:
1. Challenge to impugned order under Regulation 21 of CHAL, 2014:
The writ petition sought to quash an order dated 01.01.2013 under Regulation 21 of CHAL, 2014, preventing the petitioner from proceeding further. The court examined the nature of the communication and concluded that it was not an order but a notice for a personal hearing, allowing the petitioner to present their case before the 1st respondent.

2. Vicarious liability of Custom House Agents:
The petitioner, a Custom House Agent, faced abetment charges in a case of undervaluation by an importer. The petitioner denied knowledge of the fraud and resisted vicarious liability. The court noted the petitioner's submissions regarding their lack of involvement in the alleged undervaluation and emphasized the importance of establishing liability in such cases.

3. Penalty imposition and appellate process:
A penalty of ?3 lakhs was initially imposed on the petitioner, which was later reduced to ?2,20,000 on appeal. The petitioner further appealed to CESTAT, seeking a stay and waiver of pre-deposit. The court acknowledged the ongoing appellate process and refrained from expressing any opinion on the merits of the case pending before CESTAT.

4. Recovery actions and stay application:
The petitioner faced recovery actions despite pending appeals and stay applications. The court intervened to stay the recovery actions, emphasizing the need to await the outcome of the appellate process before enforcing penalties or prohibitive measures.

5. Prohibition order under Regulation 21 of CHALR, 2004:
The petitioner was prohibited from working in a specific Customs Commissionerate under Regulation 21, based on the pending case. The court, in a previous order, had set aside this prohibition order due to procedural irregularities and non-compliance with principles of natural justice.

6. Denial of cross-examination and principles of natural justice:
The respondents argued that cross-examination was not necessary under Regulation 21 proceedings. However, the court emphasized the importance of providing a fair opportunity for defense, including cross-examination, especially when significant consequences such as prohibition orders are at stake.

7. Multiplicity of proceedings and relief sought:
The petitioner faced multiple proceedings stemming from the same case, leading to prolonged litigation. The court highlighted the need for a streamlined approach and emphasized that the appropriate forum for considering the merits of the case would be CESTAT, where the matter was already pending.

8. Purpose and implications of Regulations 13, 21, and 22 of CHALR, 2014:
The court analyzed the purpose of Regulations 13, 21, and 22, noting that Regulation 21 aimed to prevent unwanted influence or sabotage immediately after an offense, while Regulation 22 dealt with the suspension and revocation of licenses after investigations. The court clarified that Regulation 21 should not be misused to impede a Custom House Agent's business activities.

In conclusion, the court quashed the impugned communication of 01.01.2013 under Regulation 21, emphasizing the need for procedural fairness and adherence to principles of natural justice. The judgment underscored the importance of a coherent and just approach in enforcing regulatory provisions without unduly burdening the concerned parties with prolonged litigations.