2014 (7) TMI 815 - HC - Customs

Prohibition to operate as customs house brokers - license under the Customs Agents Licensing Regulations, 2004 - Pending the parent Commissionerate s action and under Regulation 20, the Commissioner of Customs (General) Mumbai, has chosen to propose a prohibition order. - Held that - When the proceedings are pending and the client is yet to be saddled with any liability of payment of duty, or penalty, then, the impugned order could not have been passed. Despite, such a matter being taken up with the parent Commissionerate, the Customs Commissioner at Mumbai, thought it fit to invoke Regulation 23 is something which has not been clarified leave alone explained to us. There was, therefore, a clear haste and arbitrariness in proceeding against the petitioner. There was no reason to keep aside the adjudication proceedings and only proceed in terms of Regulation 23. For all these reasons and finding that the action is only based on the allegations in the show cause notice issued to the importer/client that we are of the opinion that the impugned order cannot be sustained. The power under Regulation 23 which is discretionary and coupled with a duty could not have been exercised in the given facts and circumstances and for the reasons that we have set out above. The Commissioner is free to take such steps against the importer/client as also the petitioner in terms of the pending adjudication proceedings or otherwise but in accordance with law - parent Commissionerate at Cochin may take appropriate action - decided in favor of petitioner.

Issues Involved:
1. Prohibition of the petitioner from operating as customs house brokers.
2. Legality of the impugned order passed by the Commissioner of Customs.
3. Compliance with Customs Brokers Licensing Regulations, 2013.
4. Discretionary powers of the Commissioner of Customs under Regulation 23.
5. Pending adjudication and show cause notices against the importer and the petitioner.

Detailed Analysis:

1. Prohibition of the petitioner from operating as customs house brokers:
The petitioner, a company engaged in forwarding and clearing cargoes, was prohibited by the Commissioner of Customs from operating as customs house brokers within Mumbai Customs Zones I, II, and III. This prohibition was pending an inquiry under Regulation 20 of the Customs Brokers Licensing Regulations, 2013. The petitioner had been issued a license under the Customs Agents Licensing Regulations, 2004, which was valid until 26th July 2016.

2. Legality of the impugned order passed by the Commissioner of Customs:
The impugned order dated 9th June 2014, prohibiting the petitioner from operating, was challenged. The petitioner argued that the order was arbitrary and highhanded, as it was based on a single incident involving the import of a heavy-duty pipe-laying vessel by a client. The petitioner claimed that its role was limited to facilitating the submission of documents and that the request to amend the Bill of Entry was made based on the client's instructions. The petitioner contended that the order was issued without sufficient material and was an indirect attempt to force a decision on the parent Commissionerate at Cochin.

3. Compliance with Customs Brokers Licensing Regulations, 2013:
The petitioner was accused of violating Regulation 11(d), 11(m), and 17(9) of the Customs Brokers Licensing Regulations, 2013. However, the petitioner argued that these regulations did not envisage such a drastic action based on a single incident. The petitioner maintained that it had fulfilled its obligations and that any technical lapses did not warrant prohibition from operating as a customs broker.

4. Discretionary powers of the Commissioner of Customs under Regulation 23:
The respondent argued that Regulation 23 conferred independent power on the Commissioner of Customs to prohibit a customs broker from operating in one or more sections of the Customs Station if the broker had not fulfilled the obligations under Regulation 11. The court acknowledged that Regulation 23 empowered the Commissioner to issue such prohibitions, but emphasized that this power must be exercised based on requisite satisfaction and not arbitrarily.

5. Pending adjudication and show cause notices against the importer and the petitioner:
The court noted that the disputes between the importer and customs authorities were pending adjudication, and no final decision had been made. The petitioner had been issued a show cause notice on 14th April 2014, and the impugned order was passed on 9th May 2014. The court found that the prohibition order was issued in haste and was arbitrary, especially since the matter was three years old and closely related to the importer's case.

Conclusion:
The court quashed and set aside the impugned order, allowing the petitioner to continue operating as a customs house broker. The court clarified that the Commissioner could take steps against the importer and the petitioner in terms of pending adjudication proceedings or otherwise, but in accordance with the law. The parent Commissionerate at Cochin was also free to take suitable action against the petitioner. The court kept open all contentions of both sides and allowed the writ petition with the above clarifications. Rule made absolute accordingly. No costs.

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