2019 (5) TMI 1521 - HC - Customs

Forfeiture of security deposit - Authorized Courier or not - principal allegation against the petitioner is that he is not performing functions of a courier but is merely acting as a Custom Clearing Agent - whether the petitioner falls within the definition of an Authorized Courier under the 1998 Regulations and the 2010 Regulations and whether the petitioner has complied with his obligations under those Regulations? HELD THAT - The petitioner had confined himself to custom clearance of shipments and had no operational responsibility for either interfacing with the customers or international partners. Thus, in view of this Court, there can be no doubt that the petitioner was not engaged in the business of acting as a courier as contemplated under the 1998 Regulations or the 2010 Regulations. The contention that the petitioner had merely outsourced some of its non-core activities as a courier, is unmerited. Admittedly, the agreement between the petitioner and Budget (MoU) was on a principal to principal basis. It is also brought on record that the petitioner used to also raised invoices on Budget for the activities performed by it (Custom clearance). It is, thus, apparent that the petitioner also performed the service of custom clearance for Budget - Budget had outsourced the activities performed by the petitioner to it. If the activities carried on by Budget and the petitioner are examined, it is at once clear that the role of the petitioner was not that of a courier agency but merely of a service provider engaged in the activity of custom clearance. The activity of a courier includes that of delivery of goods / shipments to customers, and clearance of customs is only an incidental part of the said business. In the present case, the principal business of the petitioner is assistance in custom clearance and not of collection and delivery of goods on a door to door basis. The purpose of framing the 2008 Regulations and 2009 Regulations is to extend expeditious clearance facilities to couriers on the premise that couriers have an elaborate infrastructure for knowledge and information management and such courier companies used their inhouse mechanism to guard against use of supply chain by unscrupulous elements. Plainly, if the petitioner was not in touch with the customers and was merely acting in a custom clearance agent, the question of extending expeditious clearance facilities on reliance of the petitioner s infrastructure and knowledge of its customers, does not arise. This Court finds no infirmity with the order dated 27.01.2017 passed by respondent no.2 and the impugned order passed by respondent no.3. It is, at once, clear that the import of the said Circular is to exempt courier agencies from seeking permission to outsource certain non-core activities; is not to enable a person carrying on the activity of custom clearance to masquerade as a courier. Outsourcing of activities, essentially means, that a person carrying on a business is not required to perform all activities himself. However, it is essential that the person outsourcing the activities maintains the integrity of the business - In the present case, it is difficult to accept that the petitioner was carrying on the business of a courier and had outsourced certain components of his business. The petitioner was merely involved in custom clearance; he had no interface with customers using courier services and was also not involved with other business activities. Petition dismissed.

Summary

Issues Involved:
1. Whether the petitioner qualifies as an "Authorized Courier" under the 1998 and 2010 Regulations.
2. Whether the petitioner complied with the obligations of an Authorized Courier.
3. The validity of outsourcing non-core activities without permission.
4. The impact of Circular No. 59 of 2016 on the requirement for permission to outsource non-core activities.

Issue-wise Detailed Analysis:

1. Qualification as an "Authorized Courier":
The primary issue was whether the petitioner qualifies as an "Authorized Courier" under the 1998 and 2010 Regulations. According to Regulation 3(a) of the 1998 Regulations and Regulation 3(1)(b) of the 2010 Regulations, an Authorized Courier must be engaged in the international transportation of goods on a door-to-door delivery basis. The court noted that the petitioner was confined to customs clearance and did not engage in door-to-door delivery, which is a core function of an Authorized Courier. The petitioner outsourced the delivery and other operational responsibilities to Budget Courier Pvt. Ltd., which indicated that the petitioner was not performing the essential functions required under the regulations.

2. Compliance with Obligations:
Regulation 13 of the 1998 Regulations and Regulation 12 of the 2010 Regulations outline the obligations of an Authorized Courier, including obtaining authorizations, exercising due diligence, and maintaining records. Clause (j) of Regulation 13 of the 1998 Regulations specifically prohibits outsourcing functions without written permission from the Commissioner of Customs. The petitioner admitted to outsourcing without such permission, which the court found to be a violation of the regulations. The petitioner’s role was limited to customs clearance, and the operational responsibilities were handled by Budget, indicating non-compliance with the obligations of an Authorized Courier.

3. Outsourcing Non-Core Activities:
The petitioner argued that outsourcing non-core activities did not disqualify him from being considered an Authorized Courier. However, the court found that the petitioner had outsourced core functions and was not involved in the door-to-door delivery process. The petitioner’s agreement with Budget was on a principal-to-principal basis, and invoices were raised for customs clearance services, indicating that the petitioner was acting as a service provider rather than an Authorized Courier. The court concluded that the petitioner’s primary business was customs clearance, not courier services, and thus did not meet the regulatory requirements.

4. Impact of Circular No. 59 of 2016:
The petitioner contended that Circular No. 59 of 2016 exempted the need for permission to outsource non-core activities. The court examined paragraphs 4 and 5 of the circular, which allowed for the outsourcing of certain non-core activities without permission but required prior intimation. However, the court clarified that the circular did not permit a person engaged solely in customs clearance to masquerade as a courier. The petitioner’s lack of involvement in core courier activities and reliance solely on customs clearance meant that the circular did not apply to his case. The court found that the petitioner was not carrying on the business of a courier and had not maintained the integrity of the courier business, rendering the circular inapplicable.

Conclusion:
The court upheld the orders dated 27.01.2017 and 15.09.2017, revoking the petitioner’s Authorized Courier license, forfeiting the security deposit, and imposing a penalty. The petition was dismissed as unmerited, with the court finding no infirmity in the respondents' actions. The petitioner failed to qualify as an Authorized Courier, did not comply with the regulatory obligations, and improperly outsourced core functions without permission.