2015 (10) TMI 2330 - AT - Customs

Revocation of license - Misdeclaration of goods as scrap metal - Appellant contends that there was a lapse of two years in completion of proceedings whereas it should be within nine months from date of receipt of offence report as specified in Circular No. 9/10-Cus and order not in confirmity with Regulation 22 - In absence of any evidence of involvement in fraud and as appellant has already suffered huge loss, he should not be penalised and order needs to be set aside - Revenue contends that CHA violated conditions in bond executed under Regulation 10 of CHALR 2004 and failed to comply with Regulation 13(a) of CHALR, 2004 - Further contended that Regulation 13(d) and 13(e) violated and attempted clearance of mis-declared along with negligence in supervision to ensure proper conduct of employees. Held That - CHA got the endorsement for examination of goods from another D.C. Customs located at different CFS where goods were not lying and as such obtained examination report thus it clearly proves involvement of CHA and his employees and he cannot plead innocence - Applicant committed gross violation of Regulation 20 while acting as CHA and Applicant being experienced as a CHA when he paved way for his Power of Attorney to indulge in serious malpractices which ultimately resulted in loss of revenue to Custom House to the extent of more than 80 lakhs, Revenue is justified in revoking the license as it would be detrimental to interest of nation - Decison made in case of CC, Customs Vs. H.B. Cargo Services 2011 (3) TMI 816 - ANDHRA PRADESH HIGH COURT followed - Decided in favour of Revenue.

Summary

Issues Involved:
1. Revocation of Custom House Agent (CHA) license.
2. Forfeiture of security deposit.
3. Compliance with CHALR, 2004 regulations.
4. Procedural lapses and delays in proceedings.
5. Vicarious liability of CHA for employee actions.
6. Misdeclaration and fraudulent activities.
7. Adherence to "Know Your Customer" (KYC) guidelines.

Issue-wise Detailed Analysis:

1. Revocation of Custom House Agent (CHA) License:
The appellant's CHA license was revoked by the Commissioner of Customs, Tuticorin, due to alleged violations of CHALR, 2004 regulations. The revocation was based on findings that the CHA and its employees were involved in misdeclaration and fraudulent activities related to the import of goods. The Tribunal upheld the revocation, citing the CHA's failure to exercise due diligence and proper supervision over its employees.

2. Forfeiture of Security Deposit:
The Commissioner of Customs also ordered the forfeiture of the security deposit of Rs. 75,000/- submitted by the appellant. The Tribunal upheld this decision, emphasizing that the CHA's actions, including manipulation of documents and fraudulent examination reports, warranted such a penalty.

3. Compliance with CHALR, 2004 Regulations:
The Tribunal found that the appellant violated multiple regulations under CHALR, 2004, including:
- Regulation 10: Breach of bond conditions.
- Regulation 13(a): Failure to obtain proper authorization from the importer.
- Regulation 13(b): Signing blank documents and handing them over to unauthorized persons.
- Regulation 13(d): Not advising the client to comply with legal provisions.
- Regulation 13(e): Failing to verify the correctness of information provided.
- Regulation 13(f): Misdeclaration of imported goods.
- Regulation 19(8): Lack of supervision over employees.

4. Procedural Lapses and Delays in Proceedings:
The appellant argued that the proceedings took two years to complete, contrary to the nine-month period specified in Circular No. 9/10-Cus dated 08.04.2010. However, the Tribunal did not find this argument sufficient to overturn the revocation and forfeiture orders, given the severity of the violations.

5. Vicarious Liability of CHA for Employee Actions:
The Tribunal emphasized the principle of vicarious liability, holding the CHA responsible for the acts and omissions of its employees. The CHA's failure to supervise its employees and ensure compliance with regulations was a significant factor in upholding the revocation and forfeiture orders.

6. Misdeclaration and Fraudulent Activities:
The Tribunal found clear evidence that the CHA colluded with the importer to misdeclare the imported goods as scrap metal instead of used railway sleepers. The CHA's actions included preparing fraudulent documents and obtaining examination reports from unauthorized customs officials, which demonstrated their involvement in the fraudulent activities.

7. Adherence to "Know Your Customer" (KYC) Guidelines:
The Tribunal highlighted the importance of KYC guidelines for CHAs to prevent fraudulent activities. The appellant's failure to verify the antecedents and correctness of the importer's information was a significant violation of these guidelines, further justifying the revocation of the license.

Conclusion:
The Tribunal upheld the revocation of the CHA license and forfeiture of the security deposit, citing multiple violations of CHALR, 2004 regulations, involvement in fraudulent activities, and failure to supervise employees. The appellant's arguments regarding procedural delays and lack of direct involvement were not found sufficient to overturn the orders. The Tribunal's decision was supported by precedents from higher courts emphasizing the responsibility and due diligence required of CHAs. The appeal was rejected, affirming the Commissioner of Customs' orders.