2019 (1) TMI 135 - HC - Customs

Validity of Proceedings initiated against CHA under Regulation 21 of CHALR, 2014 - it is alleged that the petitioners are in the know of the fraud committed by the Importer - prohibition on CHA to work in Tuticorin Customs Commissionerate with immediate effect under Regulation 21 of the CHALR, 2004, allegedly on the same issue that is pending adjudication before the CESTAT - Held that - 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. And 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-CHA.

Summary

Issues:
1. Challenge to an order under Regulation 21 of CHAL, 2014
2. Abetment charges against a Custom House Agent
3. Reduction of penalty on appeal
4. Stay application before CESTAT
5. Recovery actions by the department
6. Prohibition order under Regulation 21 of CHALR, 2004
7. Principles of natural justice in issuing orders
8. Cross-examination rights in proceedings
9. Multiplicity of proceedings and relief sought
10. Interpretation of Regulation 21 and its purpose
11. Suspension and revocation of CHA license under Regulation 22
12. Quashing of the impugned communication

Analysis:

1. The petitioner, a Custom House Agent, challenged an order under Regulation 21 of CHAL, 2014, seeking relief from proceedings initiated against them. The petitioner claimed they were wrongly implicated as an abettor in a case of undervaluation by an importer they represented.

2. The petitioner was accused of abetment in the undervaluation case by the Directorate of Revenue Intelligence (DRI). Despite the importer's involvement, the petitioner denied knowledge of the fraud and resisted vicarious liability, leading to penalties and appeals.

3. The penalty imposed on the petitioner for abetment was reduced on appeal, and further proceedings were pending before CESTAT, including a stay application and waiver of pre-deposit, which the department was pressuring for payment.

4. The department's insistence on penalty payment and refusal to wait for the outcome of the stay application led to recovery actions, impacting the petitioner's business operations.

5. Despite a stay granted by the court, the department issued a prohibition order under Regulation 21 of CHALR, 2004, affecting the petitioner's ability to work in a specific customs commissionerate, prompting legal challenges and relief from the court.

6. The petitioner highlighted the lack of adherence to principles of natural justice in issuing orders and sought cross-examination rights to defend their case effectively, especially concerning a show cause notice proposing license revocation.

7. The respondents defended the communication as a notice of personal hearing, denying the denial of cross-examination rights, citing the applicability of cross-examination in subsequent proceedings under Regulation 22 of CHALR, 2004.

8. The court acknowledged the multiplicity of proceedings and relief sought by the petitioner, emphasizing the need for proper consideration of merits by the appropriate authority, CESTAT, and criticized the continuous legal battles affecting both parties.

9. The court interpreted Regulation 21's purpose as a temporary measure post-offence, emphasizing that substantive investigations should precede any prohibitive actions, and highlighted the significance of Regulation 22 in determining CHA license status.

10. Consequently, the court quashed the impugned communication, focusing on procedural errors and refrained from opining on the pending case before CESTAT, allowing the writ petition and closing the associated miscellaneous petition.