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TMI Blog2015 (8) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act of 1962']. The petitioners submit that such prohibitory orders, which entail civil and evil consequences, have been passed in utter disregard to the principles of natural justice. Though the said Regulation 21 has also been questioned in these petitions as ultra vires but, for the Union of India having not been joined as party, the learned counsel appearing for the petitioners in CWP Nos. 7266/2013 and 7896/2013 did not press much on this issue of vires during the course of submissions. However, the learned counsel appearing in CWP No. 7345/2013 has pressed on the issue of vires too. Background aspects and stand of the respective petitioner : 3. Looking to the subject-matter of these writ petitions and the issues raised, dilatation on all the factual aspects does not appear necessary. In brief, the background aspects, so far relevant for the present purpose; and the stand of the respective writ-petitioners could be taken note of in relation to each of these petitions as follows: CWP No. 7266/2013 : 4. In this petition, the petitioner-company is aggrieved of the prohibition order dated 25-4-2013 (Annex. 7) issued against it in terms of Regulation 21 by the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the order dated 25-4-2013 has been passed on irrelevant considerations as also without application of mind to the factual aspects available on record, including the fact that Mr Ajay Vyas, the authorized representative of petitioner, has categorically stated in his various statements recorded under Section 108 of the Act that he had neither filed nor signed the impugned shipping bills and that somebody else had forged his signatures. 8. It is contended that the impugned order has been passed in gross violation of the principles of natural justice; and that no such order, which is of adverse civil consequences for the petitioner could have been passed without issuance of show cause notice and compliance of the principles of natural justice. It is further submitted that even otherwise, the order of prohibition could not have been passed in the fact situation of this case as six months prior to the impugned order, the petitioner had discontinued its work in the State of Rajasthan; and hence, there was no point in passing the impugned order and at least there was no emergency for not complying with the principles of natural justice. 9. In this matter, by way of an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C norms. It has also been indicated that the petitioner admitted his negligence in accepting the importer's documents as such without applying due diligence to verify their correctness; and he did not properly advise the importer for correct declaration of value, unit and quality brand of the consignments. 13. It is, however, submitted by the petitioner that he is not an expert about valuation or quality of gemstones; and that he was not aware as to who the suppliers of the proprietary firms were. According to the petitioner, the import documents for all the consignments were attested by the proprietors and on basis of the documents received from the parties, he furnished the details to the Customs, who, after physical verification and satisfaction, cleared all the consignments on as is basis and did not point out any infirmity. The petitioner has further averred that he fully co-operated with DRI during investigation by producing all KYC related documents and available information. 14. It is pointed out that DRI, however, issued a show cause notice on 8-5-2012 alleging, inter alia, qua the petitioner that he did not comply with the KYC norms and without checking the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been alleged that the CHA facilitated the unauthorized transport of export cargo with replacement of declared cargo with prohibited goods; and was guilty of abetment of smuggling when it had failed to examine the relevant documents in accordance with the KYC norms and failed to properly advice the party concerned for correct declaration of exported consignments. 20. It is submitted that the petitioner had always exercised due diligence to ascertain the correctness of information and had verified the antecedents, correctness of the IEC Code, and identity of his client by using reliable, independent, authentic documents data and information. It is further submitted that the charge against the petitioner-company and one of its Directors is that they did not verify the antecedents of the overseas buyer or agents of their clients but such an additional onus of complying with KYC norms for the clients of his client is not envisaged as an obligation of CHA under the Regulations of 2004 or the Act of 1962. It is also submitted that an extraneous reason and circumstance has been taken into consideration about an Order No. 4/2013 having been passed against the petitioner under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel appearing for the petitioner in CWP No. 7435/2013 has referred to Section 146 (2) of the Act of 1962 to submit that it is only by virtue of these provisions that the Board may make Regulations; and Clauses (a) to (f) thereof nowhere authorise the Board to make any Regulation for any proposition of so-called 'prohibition'. According to the learned counsel, under Clause (e) of Section 146 (2), provisions for suspension or revocation of a license may be made but there is no authority in the Board to provide for prohibition and hence, Regulation 21 providing for prohibition remains ultra vires and deserves to be struck down. 24. Per contra, the learned counsel appearing for the respondents have submitted that Regulation 21 is not beyond the powers of the Board; and is, in the scheme of the Regulations of 2004, a provision made for the purpose of proper and effective implementation of these Regulations and the Act of 1962. The learned counsel further submitted that the action was required to be taken in these cases because the persons dealing with consignment were found indulging in smuggling and for their fundamental faults and flaws, the respective CHAs cannot avoid thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, subject to the provisions of regulation 22, revoke the licence of a Customs House Agent and order for forfeiture of part or whole of security, or only order forfeiture of part or whole of security, on any of the following grounds, namely :- (a) failure of the Customs House Agent to comply with any of the conditions of the bond executed by him under regulation 10; (b) failure of the Customs House Agent to comply with any of the provisions of these regulations, within the jurisdiction of the said Commissioner of Customs or anywhere else; (c) any misconduct on his part, whether within the jurisdiction of the said Commissioner of Customs or any where else which in the opinion of the Commissioner renders him unfit to transact any business in the Customs Station. (2) Notwithstanding anything contained in sub-regulation (1), the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the licence of a Customs House Agent where an enquiry against such agent is pending or contemplated. 21. Prohibition. - Notwithstanding anything contained in regulation 22, the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Customs shall furnish to the Customs House Agent a copy of the report of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, and shall require the Customs House Agent to submit, within the specified period not being less than sixty days, any representation that he may wish to make against the findings of the Deputy Commissioner of Customs or Assistant Commissioner of Customs. (7) The Commissioner of Customs shall, after considering the report of the inquiry and the representation thereon, if any, made by the Customs House Agent, pass such orders as he deems fit. (8) Any Customs House Agent aggrieved by any decision or order passed under regulation 20 or sub-regulation (7) of regulation 22 may prefer an appeal under section 129A of the Act to the Customs, Central Excise and Service Tax Appellate Tribunal established under sub-section (1) of section 129 of the Act." Legality and validity of Regulation 21: 28. It appears expedient to take up at the first the question as to whether Regulation 21 is ultra vires the powers of the Board under Section 146(2) of the Act of 1962. 29. With reference to clause (a) to (f) of sub-section (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, but only in appropriate case where immediate action is considered necessary. Regulation 22 provides for the procedure for suspending or revoking a license under Regulation 20, which include issuance of notices, affording opportunity of defence to the CHA sought to be proceeded against, and taking evidence with opportunity to the CHA to cross-examine the witnesses and even for appeal. 32. However, apart from Regulation 20 and 22, the Regulation in question, i.e., Regulation 21 has been framed separately, giving the powers to the Commissioner to prohibit any CHA of working in any section or sections of the Customs Station on being satisfied that such CHA has not fulfilled his obligations laid down under Regulation 13 in relation to the work in that section or sections. 33. Apparent it is that the powers in case of fault, default, failure, misconduct and non-fulfilment of obligations have been provided in different manner with reference to different eventualities. In the matters covered under Regulation 20, the procedure per Regulation 22 is followed, which is akin to a departmental inquiry. Such inquiry is contemplated in the cases where license is proposed to be revo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e powers to make regulations generally for the purpose of regulating the license of CHA; and in particular to provide for the circumstances in which preventive so also punitive measures could be taken qua a licensee. The arguments against the legality and validity of Regulation 21 are required to be and are hereby rejected. Requirements of adherence to the principles of natural justice : 38. Even when we hold that Regulation 21 is within the powers of the Board and is not ultra vires, the questions still remain as to how and in what manner the same is to be employed; and as to how the principles of natural justice are to operate? 39. The import, scope, purport and operation of the principles of natural justice in administrative processes have been explained by the Hon'ble Supreme Court in several of the decisions referred by the learned counsel for the petitioners. For the present, suffice would be to notice the following passage from the decision of the Hon'ble Supreme Court in Swdeshi Cotton Mill v. UOI (1981) 1 SCC 664 as follows :- "Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 764 and Shanker Ghosh v. Union of India & Anr.: (2007) 1 SCC 331. 41. The learned counsel for the respondents on the other hand have referred to the decisions in Liberty Oil Mills & Ors. v. Union of India & Ors.: (1984) 3 SCC 465 and Union of India & Anr v. Tulsiram Patel: (1985) 3 SCC 398 to submit that in a given case, principles of natural justice could even be excluded. 42. There is no and there cannot be any quarrel with the principles laid down in the decisions referred by the learned counsel for the parties. The ordinary rule is that of necessity of affording pre-decisional hearing but like any other, this rule has not been laid down in absolute terms and there are well-defined exceptions to this rule too [as held in paragraph 101 in Tulshiram Patel's case (supra)]. In essence, whether a right to pre-decisional hearing could be excluded would depend on the nature of action to be taken, its object and purpose. 43. As noticed and observed hereinabove, Regulation 21 is essentially that of a preventive measure. However, even this preventive measure entails civil and evil consequences on the concerned CHA, who would be prohibited from working in one or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of principles of natural justice on the face of it is arbitrary and thus not sustainable in law. 7. The Writ Petition accordingly is allowed. The impugned order is set aside. However, liberty is granted to the respondent to pass fresh order in accordance with law, after giving opportunity of hearing to the petitioner. 8. Consequently, connected Miscellaneous Petition is closed. No costs." 45. In the case of International Cargo Services v. Union of India 120 (2005) DLT 195 = 2006 (193) E.L.T. 546 (Del.) the Hon'ble Delhi High Court while essentially considering a case where an order passed under Regulation 20(2) of the Regulations of 2004 was in question observed as under :- "7. The principles of natural justice have twin ingredients. Firstly, the person likely to be adversely effected by the action of the authorities should be given notice to show cause or granted reasonable opportunity of being heard in consonance with the maxim audi alteram partem. Secondly, the order so passed by the authorities should give reasons for arriving at any conclusion showing proper application of mind. Violation of either of these principles normally would render an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have to be read into regulation 20(2) but with the proviso that post-decisional hearing in emergent situation and subject to the satisfaction of the competent authority would be granted at the very first possible opportunity. Wherever a license is suspended without hearing, the authorities would be under obligation to grant post-decisional hearing to the agent immediately thereafter and ensure that the authorities after hearing the concerned party and upon due application of mind consider the matter whether the order of suspension should continue during the period of enquiry or otherwise. Such an approach would be just, fair and would further the object sought to be achieved by these provisions. The expression 'immediate' has to be harmoniously read and construed with other provisions including the provisions of regulations 20 and 22. The period specified in regulation 22 would have the effect of rendering the expression 'immediate' ineffective and meaningless Therefore, applying the principle of harmonious construction, the provisions will have to be given their true and correct meaning and they should be permitted to operate in the field in which they are intended to opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is equally well-settled that in a case where urgent action is required, particularly in public interest, it may not always be appropriate or efficacious to furnish a pre-decisional hearing. Where immediate action is required, the authority can be directed to give an opportunity to the person who is affected by the order an opportunity of a hearing after passing a pro tem order for a limited period. In the case of a suspension Regulation 20(2) contemplates immediate action being taken, where it is required, after which an opportunity has to be given to the agent whose licence is suspended within fifteen days from the date of the suspension. In our view, Regulation 21 has to be so interpreted so as to balance the requirement of fairness to the Customs House Agent on the one hand, which would warrant compliance with the principles of natural justice together with the need, on the other hand to protect the public interest essentially where immediate action is warranted. Hence, where immediate action is warranted, to prevent a customs house agent from carrying out activities which are prejudicial, a prohibitory order can be passed under Regulation 21 for a limited period. During that pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e necessity of protecting the public interest in appropriate cases where immediate action is warranted and where delay would be prejudicial to the public interest." (emphasis supplied). 48. In the given case, the Hon'ble Court noticed the fact that a representation had already been submitted for lifting of prohibition. Hence, the Commissioner of Customs (General) was directed to pass orders on the representation after furnishing to the petitioner an opportunity of being heard. 49. Benefited by the above pronouncement of law by the Hon'ble Supreme Court and other Hon'ble High Courts, we may proceed to consider as to whether the orders in question are vitiated and/or the course to be adopted hereafter. 50. With respect, we are unable to endorse the view in the order passed by the learned Single Judge of the Hon'ble Madras High Court that the prohibitory order under Regulation 21 be considered to be a final order and is to be set aside only on the ground that before passing the same, an opportunity of hearing was not given t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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