2019 (10) TMI 504 - AT - Customs

Action against the Customs Broker (CB) - Time limitation - enquiry report was submitted after expiry of 90 days - SCN was issued on 10.08.2013 and the offence report was got prepared on 06.12.2013 - Diversion of goods stored in Custom Bonded Warehouses into domestic market - forged/fabricated documents to show the re-export of warehoused goods - evasion of Customs Duty. Whether the time frame prescribed in Regulation 20(5) is mandatory or directory i.e., whether the time therein be so strictly construed so as to result in declaring initiation of action itself invalid, if that is not adhered to? HELD THAT - It is mandatory for the Court to look into the nature of the statute and the consequences which would follow from construing it in one way or the other, the ambit of the other provisions, the necessity of compliance of the provisions in question. Above all, whether the object of the enactment is defeated by holding it to be directory and whether the object would be achieved by construing it to be mandatory has to be considered. For the object of time limit in Regulation 20 of CBLR, 2019/2018 we opine that said time limit is evolved so that the inquiry and proceedings are not delayed indefinitely as it hampers the brokerages of the customs broker. At the same time, the time limit should not be so strictly adhered to, even in cases of serious lapse on the part of the customs broker and where the inquiry involves certain complicated facts. Merely because the inquiry was not completed within a stipulated period, the customs broker may not be allowed to walk free, as his suspension cannot be continued beyond the period prescribed in the Regulation and his licences need not be restored. The judgments on which reliance had been placed by the appellant taking a view that the revocation of a CHA license is bad in law since the time limit for completion of inquiry in terms of Regulation 20(5)/22(5) of CBLR, 2013/2018 has not been adhered to, are not applicable to the facts of the present case as most of these cases have dealt with the extraordinary delay caused at the instance of the revenue in conducting inquiry against the custom house agent, depriving them of their means of livelihood and it was observed that the purpose of prescribed time limit was to safeguard the interest of the custom broker and smooth import and export of goods - Whereas, present is the case of alleged fraud on part of the appellant. Adjudicating Authority has clearly observed the delaying strategy of the appellant s Director. Section 17 of Limitation Act while talking about effect of fraud or mistake lays that the fraud vitiates the limitation prescribed. Thus, those are not applicable to the present case. The intention of CB to not to enable the Department to adhere to the impugned time limit despite that the illegal act of diverting the warehoused goods to domestic market was alleged against the said CB, the time line of Regulation 20(5) CBLR, 2013 is mere directory in nature and the non compliance thereof shall not vitiate the action taken against the defaulting CB. The cancellation of appellants licence with the forfeiture of the security deposit and the imposition of penalty upon the appellant is therefore, held to be sustainable - appeal dismissed.

Summary

Issues Involved:
1. Whether the time frame prescribed in Regulation 20(5) of CBLR, 2013 is mandatory or directory.
2. Whether the findings of the adjudicating authorities on the merits of the case were justified.

Issue-wise Detailed Analysis:

1. Time Frame Prescribed in Regulation 20(5) of CBLR, 2013:
The appellant argued that the findings about the violation of Regulations of CBLR 2018/2013 should be set aside on the ground of limitation alone, as the enquiry report was submitted after the expiry of 90 days from the issuance of the show cause notice. The appellant claimed that the delay in submitting the enquiry report violated Regulation 20(5) of CBLR, 2013. However, the tribunal observed that the Commissioner had considered the plea of limitation and noted that Mr. Sanjeev Maggu was deliberately buying time to disable the Directorate from unearthing the modus operandi and recovering the Customs duty. The tribunal emphasized that the intention of the legislature, the nature of the statute, and the consequences of construing the time frame as mandatory or directory must be considered. It was concluded that the time frame prescribed in Regulation 20(5) is directory, not mandatory. The tribunal noted that the purpose of the time limit is to ensure prompt action and avoid undue delay, but it should not be so strictly adhered to that it results in declaring the initiation of action invalid, especially in cases involving serious lapses or fraud. The tribunal drew support from various judgments, including the Hon’ble Supreme Court's decision in Govindlal Chhaganlal Vs. Agriculture Produce Market Committee and Topline Shoes Ltd. Vs. Corporation Bank, which emphasized that procedural time limits should be considered directory unless non-compliance causes prejudice. Therefore, the non-compliance with the 90-day time frame in this case did not vitiate the action taken against the appellant.

2. Findings on the Merits of the Case:
The tribunal examined the merits of the case based on the documents and statements recovered during the search of the residential and office premises of the appellant and associated firms. The evidence included statements from various individuals, including warehouse keepers, CHA company representatives, and others involved in the alleged illegal activities. These statements corroborated that Shri Sanjeev Maggu, despite being a Customs Broker, concealed his identity and projected himself as the owner of fictitious companies to divert warehoused goods to the domestic market without paying customs duty. The statements recorded under Section 108 of the Customs Act were considered admissible evidence, and there was no apparent retraction or rebuttal of these statements by the appellant. The tribunal held that the adjudicating authorities were justified in denying the opportunity to cross-examine these witnesses and in finding the appellant guilty of hatching a conspiracy for the clandestine removal of warehoused goods from public bonded warehouses to the domestic market without payment of customs duty. The tribunal concluded that the appellant had committed forgery of documents for this purpose, and the legal objections raised by the appellant were not sustainable due to the misrepresentation, fraud, and forgery involved.

Conclusion:
The tribunal found no infirmity in the order under challenge, which confirmed the violation of Regulations 10 (d), (g), and (q) of CBLR 2018/ Regulations 11 (d), (g), and (o) of CBLR, 2013 by the appellant. The cancellation of the appellant's license, forfeiture of the security deposit, and imposition of a penalty were held to be sustainable. The appeal was accordingly dismissed.