2019 (2) TMI 508 - AT - Customs

Revocation of CHA License - forfeiture of security deposit - compliance of Regulation 11(d) and 11(e) of CBLR, 2013 - mis-match between the business place of transferors and account used for the transfer of money - Held that - It is evident from the records of the case that the appellants have obtained the duty free licence from M/s Him Logistics Pvt. Ltd. or through a broker Mr. Lalit Jain and utilised the same towards the payment of Customs duty for the consignment imported by their client. It was held in the inquiry report the appellant was responsible for utilisation of forged duty scrips for the payment of customs duty, and therefore, not observed due diligence in conducting their business as per the provisions of CBLR. In this regard, we find that free duty licences/ duty credit scrips have been registered at the various customs port other than ICD and available on EDI system. As per the procedure prescribed under EDI system, it is not possible for the appellant to temper with the data/ information contained in the EDI system which is fool proof and secured system is prescribed not by one or two but by five officers of the customs including the Joint and Additional Commissioner. The appellant as CHA is only required to verify the KYC norms as per the documents made available to him. And there is no requirement of physically verifying business or residential premises of the importers which also included the fraudulent obtaining of Licence/ duty credit scrips. Right of cross-examination - principles of natural justice - Held that - The inquiry officer has denied the right to cross examination to the appellant which is not negotiable under the Regulation and also various decisions of the higher judicial fora including the Supreme Court, the High Courts and the Tribunals. Similarly, giving three personal hearing vide the same letter while adjudicating the dispute is wrong and against the principle of natural justice. The vital rights that of cross examination and three personal hearing through single letter is not legal. The proceeding is thus vitiated, which out to have been considered by the Ld. Commissioner, while passing the impugned order. The impugned order suffers inherent legal infirmities and liable to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Revocation of CHA license.
2. Utilization of forged duty credit scrips.
3. Compliance with Customs House Agent Licensing Regulations (CHALR) and Customs Broker Licensing Regulations (CBLR).
4. Denial of cross-examination and violation of principles of natural justice.
5. KYC norms and verification of duty scrips.
6. Procedural irregularities in the inquiry process.

Issue-wise Detailed Analysis:

1. Revocation of CHA License:
The appeal was directed against the Order-in-Original which revoked the appellant's CHA license No. R-49/2012 and forfeited the security deposit of ?75,000. The appellant was accused of utilizing forged duty credit scrips for debiting customs duty.

2. Utilization of Forged Duty Credit Scrips:
The Department of Revenue Intelligence (DRI) revealed that the appellant, as a customs broker, used fake duty credit scrips for clearing various consignments. These scrips were re-registered fraudulently at ICD, Tuglakabad. The investigation indicated that the appellant, along with another customs broker, traded these forged scrips and used them without the importers' knowledge or consent.

3. Compliance with CHALR and CBLR:
The appellant was found to have contravened Regulations 11(d) and 11(e) of CBLR, 2013, by not exercising due diligence and utilizing forged scrips. The inquiry officer's report concluded that the appellant did not comply with the provisions of CBLR, 2013, and was liable for action.

4. Denial of Cross-Examination and Violation of Principles of Natural Justice:
The appellant contended that the statements recorded under Section 108 of the Customs Act could not be relied upon without cross-examination, as per the precedents set by various judicial decisions. The inquiry officer denied the appellant's request for cross-examination and did not provide the requested documents, violating the principles of natural justice.

5. KYC Norms and Verification of Duty Scrips:
The appellant argued that as a CHA, they were only required to verify KYC norms based on available documents and were not obligated to physically verify the business or residential premises of the importers. The Tribunal agreed, stating that the appellant was not required to verify the details of duty scrips from the DGFT site.

6. Procedural Irregularities in the Inquiry Process:
The Tribunal found that the inquiry officer did not follow the proper procedure as prescribed under CBLR. The officer denied the appellant's right to cross-examination and fixed three personal hearing dates in a single letter, which was against the principles of natural justice. The Commissioner failed to address the appellant's contentions regarding procedural lapses.

Conclusion:
The Tribunal concluded that the impugned order suffered from inherent legal infirmities due to procedural irregularities and violations of natural justice. The appeal was allowed, and the order revoking the CHA license and forfeiting the security deposit was set aside, with consequential benefits to the appellant.