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TMI Blog2022 (5) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... id retraction or a whisper about the veracity of the statement. For the first time, after the show-cause notice dated 14.08.2009 was issued, while submitting the reply a faint attempt has been made by the appellant to retract the so called statement. Therefore, we hold that the authority rightly rejected the so called retraction and proceeded to adjudicate the matter taking note of the statement recorded under Section 108 of the Act. The learned Tribunal on its part also examined this aspect and rightly affirmed the view of the Commissioner. Waiver of penalty proceedings initiated under Section 114 of the Act - HELD THAT:- The Commissioner did not totally exonerate the appellant from the charge against them but what weighed in the mind of the Commissioner to drop the penalty proceedings was because the appellant themselves stated that mere involvement as a CHA cannot be a ground to take penal action under the Customs Act but at best they can be proceeded under the relevant Regulation. That apart, the Commissioner also found that there is no evidence linking the Customs officers. Therefore, the Commissioner though fit to drop the penalty proceedings. The order nowhere exonerate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ron or any other product. The letter given by the exporter dated 07.11.2008 is a document which has been created so as to enable the appellant to wriggle out of the conspiracy which was hatched. Therefore, the adjudicating authority as well as the tribunal rightly did not give any credence to the letter dated 07.11.2008. The revocation of the CHA license granted to the appellant and forfeiture of the security deposit upheld - substantial questions of law are answered against the appellant - appeal dismissed. - CUSTA NO. 04 OF 2015 - - - Dated:- 4-5-2022 - HON BLE MR. JUSTICE T.S. SIVAGNANAM AND HON BLE MR. JUSTICE HIRANMAY BHATTACHARYYA Appearance:- Mr. Ananda Sen, Adv. Mr. M.K. Poddar, Adv. Mr. S.K. Poddar, Adv. .For the Appellant. Mr. K.K. Maity, Adv. ..For the Respondent. JUDGMENT (Judgment of the Court was delivered by T.S.SIVAGNANAM, J.) 1. This appeal filed under Section 130 of the Customs Act, 1962 (the Act) is directed against the order dated 25.05.2015 passed by the Customs Excise and Services Tax, Appellate Tribunal, East Regional Bench, Kolkata (Tribunal) in Customs Appeal No. 75205/2014 arising out of an order-in-original dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods and/or any goods contrary to the Act has been stuffed in the said container. The appellant is stated to have prepared the shipping bill on the basis of the invoice and packing list prepared and forwarded by Himalayan Tours through Draft Cargo India, the freight forwarder. The shipping bill was assessed by the Customs authorities and the appellant paid the customs duty of Rs. 57,637/- on behalf of the exporter. On 11.11.2008 the transporter of the said exporter brought the consignment stuffed in 20 feet container under lock and key and handed over the same to the Jetty Sircar of the appellant outside the gate of the Netaji Subhas Chandra Dock, Kolkata for the purpose of taking the same inside the port to comply with the shipping formalities with the customs authorities. The appellant would further state that the container was opened by the customs authorities for the purpose of examination and appraisement of the Cargo and thereafter it was sealed by the customs authorities and Let Export Order dated 11.11.2018 was issued. 2.2 On 30.11.2008 the Managing Director of the appellant was called over phone by the officers of the Directorate of Revenue Intelligence, Calcutta, Zona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant is unbecoming as CHA on the following grounds:- (a) As per Regulation 13 (a) of CHALR2004, the CHA should obtain an authorization from the company/firm/individuals by whom he is for the time being employed as Customs House Agent and produce such authorization whenever required by the Deputy or Assistant Commissioner of Customs but the CHA failed to do so. (b) As per Regulation 13 (b) of CHALR2004, the CHA should transact business in the Customs Station wither personally or through an employee duly approved by the Deputy/Assistant Commissioner of Customs but the CHA failed to do so. (c) As per Regulation 13 (d) of CHALR2004 the CHA should advise his client to comply with the provisions of the Act and in case of non-compliance, shall bring the matter to the notice of the Deputy/Assistant Commissioner of Customs, but the CHA failed to do so. (d) As per Regulation 19(8) of CHALR2004, the CHA should exercise such supervision as may be necessary to ensure the proper conduct of their employees in the transaction of business as agents, but the CHA failed to do so. 2.3 The appellant submitted their reply dated 17.09.2009 denying and disputing the allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction was taken within a reasonable time. The writ petition filed by the appellant in WP No. 454 of 2009 was taken up for hearing and by order dated 23.12.2009, the same was disposed of by directing the Commissioner of Customs to complete the proceedings and pass an adjudicating order within 6 months from the date of communication of the order in the writ petition. The appellant would state that it is only thereafter the department conducted an inquiry under Regulation 22 (2) of CHALR and submitted inquiry report dated 30.01.2010, a copy of which was forwarded to the appellant along with the letter dated 04.03.2010. The appellant submitted a representation dated 30.04.2010 on the contents of the inquiry report denying and disputing the findings of the inquiring authority and stating that the inquiry was completed in a hurried manner and the inquiry officer has failed to adhere to Regulation 22 (6) of the CHALR which stipulates a time limit for furnishing the copy of the inquiry report. The appellant also reiterated their earlier submission denying and disputing the allegations made against them. 2.4 An opportunity of personal hearing was granted to the appellant in which the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Tribunal by order dated 25th May, 2015 dismissed the appeal which is impugned before us. 3. Mr. Ananda Sen, learned Advocate appearing for the appellant contended that the learned Tribunal did not properly consider the detailed reply filed by the appellant for the show-cause notice and the inquiry report though the learned Tribunal has referred to the contents of the show-cause notice and the inquiry report. Further, the learned Tribunal did not record any findings as to the effect of the order dated 5th January, 2012 by which the penalty proceedings under Section 114 was dropped against the appellant and its Managing Director and the basic facts and the evidence being the same, the findings recorded in the order dated 5th January, 2012 should have an effect while deciding the correctness of the revocation of the CHA license. Further, the learned Tribunal brushed aside the Jetty Sircar license issued to Mithun Ghosh which proved that Ghosh was the employee of the appellant. Further, the learned Tribunal ought to have appreciated the limited work assigned to the appellant who bonafidely worked on the basis of letter of authorization issued by the exporter. Further, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersus Shiva Khurana, Customs Appeal No. 45 of 2017 dated 14th January, 2019 and it is submitted that the duty of a CHA is as a mere agent and not as a revenue officer who has power to investigate and go into the veracity of the statement made orally or in a document. 5. With regard to proportionality of penalty, heavy reliance was placed on the decision of the High Court of Delhi in M/s. Ashiana Cargo Services Versus Commissioner of Customs (I G) (Del) (2014) SCC Online Del 1161. With the above submissions the learned Advocate for the appellant prayed for setting aside the order passed by the learned Tribunal and consequently set aside the order passed by the Commissioner revoking the appellant s license and to restore the same so as to enable the appellant to carry on their duties as a CHA. 6. Mr. K.K. Maity learned Standing Counsel appearing for the Department submitted that what is required to be considered is the effect of the order passed under the Customs Act dropping the penalty proceedings against the appellant and such order was passed under the provisions of the Customs Act and the order revoking the CHA license has been passed under the CHALR which specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cember, 2013 rightly pointed out that the order-in-original dated 5th January, 2012 passed under the provision of the Customs Act has no bearing on the action initiated under the CHALR which is initiated separately without prejudice to the action already taken under the provisions of the Customs Act. Further, the Managing Director of the appellant had clearly stated in the statement recorded under Section 108 that Jetty Sircar Mithun Ghosh who actually did the clearance work at the dock was not the employee of the CHA but the employee of the freight forwarder Draft Cargoways. Thus, this statement is binding on the Managing Director and the subsequent retraction while submitting a reply dated 17th September, 2009 to the show-cause notice was rightly disbelieved by the adjudicating authority. Further, the facts, clearly show that the appellant had violated Regulation 13(b) of the CHALR as none of their employees have been approved by the Customs Authorities, which is required to be done under the regulations. Thus, the Commissioner rightly held that the appellant was not aware about the exporter, did not take any steps to know the exporter, failed to advice them to follow and comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohibits any person to carry on the business as a customs broker at any customs station unless and until he holds a license granted in this behalf in accordance with the regulations. In support of his contentions the learned Counsel placed reliance on the decision of the High Court of Judicature at Madras in Commissioner of Customs (Export), Chennai Verus I. Sahaya Edin Prabhu 2015 (320) ELT 264 (Mad.) and submitted though the facts of the case were different it was also a case relating to attempt to smuggle red sanders and in that case on facts there was nothing to indicate that the CHA has not discharged his duty in the clear appearance various services further in the case on hand it has clearly established that the appellant has failed to discharge his statutory obligation. Reliance was placed on the decision of the High Court of Judicature at Patna in Bhaskar Logistic Services Pvt. Ltd. Versus Union of India 2016 (340) ELT 17 (Patna) wherein, the Court declined to interfere with the factual findings recorded by the authorities. Reliance was placed on the decision of the High Court of Judicature at Madras in K. V. Prabhakaran Versus Commissioner of Customs, Chennai 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cargo Services was considered and dealt with by the High Court at Delhi in the case of Shiva Khurana (supra) and the decision in Shri Kamakshi Agency was also considered in Ashiana Cargo Services and after taking note of all the decisions the High Court of Delhi dealing with the punishment of revocation of the CHA license held the same to be disproportionate. 9. We have heard the learned Advocates appearing for the parties and carefully perused the materials placed on record. In the preamble portion of this judgment we have referred to the two substantial questions of law suggested by the revenue and since, the appellant has raised the issue regarding proportionality of the punishment before the Tribunal as well as before this Court, apart from considering the two substantial questions of law which have been suggested we shall also deal with the aspect regarding proportionality of the punishment imposed on the appellant while dealing with the matter. 10. The appellant was granted a license under Regulation 9(1) of the CHALR, 2004 to carry on the activity as a Customs House Agent. The license was for a period of 10 years from 29.07.2006. The CHALR was notified in exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce such authorization whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs; b) Transact business in the Customs Station either personally or through an employee duly approved by the Deputy Commissioner of Customs or Assistant commissioner of Customs; c) . d) Advise his client to comply with the provisions of the Act and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs e) Exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of Cargo or baggage; f) Not withhold information contained in any order, instruction or public notice relating to clearance of cargo or baggage issued by the Commissioner of Customs, from a client who is entitled to such information; g) . h) . i) . j) . k) Maintain records and accounts in such form and manner as may be directed from time to time by a Deputy Commissioner of Customs or Assistant Commissioner of Customs and submit them for inspection to the said Deput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, that apart the person to be employed is required to possess a minimum educational qualification prescribed under Regulation 19(1). Thus, if a CHA permits a person to represent or handle any cargo for export or import without such person being specifically authorized by the Customs to be an employee of the CHA, it would amount to a clear violation of the Regulation warranting action against the CHA. That apart, the CHA even prior to the issuance of license has irrevocably bound himself by executing a bond and furnishing security. This is to emphasize the role of a CHA while carrying on their activities. 13. Regulation 13 stipulates the obligations of a CHA. Clause (a) of Regulation 13 mandates that a CHA shall obtain an authorization from each of the companies, firms or individuals by whom he is for the time being employed as a CHA and produce such authorization whenever required by the Customs Authorities. The CHA cannot transact business in the Customs station either personally of through an employee duly approved by the department. The CHA is required to advise his client to comply with the provisions of the Act and in case of non-compliance shall bring the matter to the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the authority proposes to rely upon the original statement, he is required to deal with the retraction and record satisfaction that the retraction was an afterthought, not admissible and does not impinge on the evidential value of the first statement. As mentioned, the so called retraction is absolutely vague. There is no material or any other reference made to support the stand that the Managing Director was forced to give a statement. As noted above, statements were recorded on two dates, 18.11.2008 and 27.04.2009. If the stand taken by the appellant were to be true, any prudent person would retract the statement at the earliest point of time. The appellant/ Managing Director did nothing after 18.11.2009 but chose to cooperate in the investigation by responding to another summons and also recording another statement on 27.04.2009. Even, thereafter there is no valid retraction or a whisper about the veracity of the statement. For the first time, after the show-cause notice dated 14.08.2009 was issued, while submitting the reply a faint attempt has been made by the appellant to retract the so called statement. Therefore, we hold that the authority rightly rejected the so called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 114(i) of the Act. The marketing executive of Draft Cargoways was also held liable for penal action has he had assisted the entire racket for material gain. With regard to the appellant the Commissioner holds that they for material gain assisted the racket of attempted smuggling and failed to discharge their responsibilities properly/ legally in dealing with the export goods as a CHA. Further, it was held that the appellant handled the job without verifying the antecedents of the declared exporter, have allowed the freight forwarder, Draft Cargoways to use their CHA license for financial considerations. Further Jetty Sircar Mithun Ghosh who actually did the clearance work at the dock was not an employee of the appellant and the appellant authorized three employees of Draft Cargoways for obtaining Jetty Sircar license which tantamounts to not carrying out their obligations as a CHA. 15. Thus, it was held that the appellants have also rendered themselves liable for penal action under Section 114 (i). The Commissioner also noted that by order dated 12.05.2009, the CHA license granted to the appellant was suspended. With regard to the Managing Director of the appellant, the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant therein and therefore it was held that with the same facts another show cause notice under the relevant Regulations could not have been issued and action could not have been initiated under the Regulations. 17. In the preceding paragraphs, we have noted factual position. The Commissioner did not totally exonerate the appellant from the charge against them but what weighed in the mind of the Commissioner to drop the penalty proceedings was because the appellant themselves stated that mere involvement as a CHA cannot be a ground to take penal action under the Customs Act but at best they can be proceeded under the relevant Regulation. That apart, the Commissioner also found that there is no evidence linking the Customs officers. Therefore, the Commissioner though fit to drop the penalty proceedings. The order nowhere exonerates the appellant from the allegations which were the basis for issuance of the show cause notice. In the opinion of the Commissioner penal action under the Customs Act was not warranted. More so because, the appellant themselves reconciled to the fact that they can be proceeded under the relevant Regulations (CHALR). Therefore, placing reliance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occupies a very important position in the Custom House. The Customs procedures are complicated. The importers have to deal with a multiplicity of agencies viz. carriers, custodians, like BPT as well as the Customs. The importer would find it impossible to clear his goods through these agencies without wasting valuable energy and time. The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/exporters as well as by the Government agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed. Regulation 14 of the CHA Licensing Regulations lists out obligations of the CHA. Any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulations. 19. Thus, any contravention of the obligations cast on the CHA even without intent would be sufficient to invite upon the CHA the punishments listed in the Regulations. 20. In Shri Kamakshi Agency the role of the CHA had been set out in the following terms:- The very purpose of granting a license to a person to act as Custom House Agent is for transacting any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recklessly, negligently in using their CHA license and affirmed the penalty which was imposed upon. 22. In K.V. Prabhakaran the following where two substantial questions of law framed for consideration among the 7th questions which are as follows: 1) Whether the Tribunal was justified in sustaining the Order-in- Original, imposing penalty when admittedly the said Order-in- Original only, found violation of the provisions of Customs Broker Licensing Regulations, 2013? 2) Whether the Tribunal misdirected itself in its enquiry in the appeal in holding that the appellant would be liable for penalty in terms of Section 114 of the Customs Act, 1962, when admittedly, no positive material has been placed to show overt acts of abetment with prior knowledge, especially when the Appellant had no reason to believe that the goods tendered for export was indeed the cargo which was stuffed in the container? 23. In the said case the CHA whose license was revoked had taken a defence, as was argued before us in this appeal, that the containers were sealed by the Customs Officers and the question of verification or holding the CHA liable for the attempt of smuggling cannot be made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, it can be interpreted to mean a special law which governs the duties, responsibilities and obligations of a CHA. Therefore, the dropping of the penalty proceedings in the case on hand cannot have any impact on the revocation of the licence granted under the CHALR. As already noted, while dropping the penalty proceedings the appellant has not been exonerated but as the appellant themselves stated that at best they can be proceeded against under the Regulation (CHALR) the Commissioner was of the view that penal action need not be initiated under the Customs Act. Therefore, the Commissioner on remand has rightly understood the scope of remand and the purport and import of the order-in-original dated 05.01.2012. There is a categorical finding on fact which could not be assailed by the appellant, to the effect that the appellant did not know who the exporter was and the appellant did not directly receive the export order or the consignment from the exporter. This having been admitted, it would clearly show that they have failed to discharge their statutory obligations under Regulation 13 (b) and 19 (8) of the CHALR. 25. Thus, we find that the order passed by the tribunal do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein. The Court also noted that providing G Cards to non-employees is in violation of the CHALR Regulations. But the revenue did not argue that this by itself was sufficiently grave so as to justify the extreme measure of revocation. Taking note of these factors as well as the stand of the revenue in the said case, the court held that presence of an aggravating factor is important to justify the penalty of revocation. After discussing and taking note of the several decisions including the decision relied on by the revenue in the case of H.B. Cargo Services and others the Court held that there is a factual finding that CHA was not aware of the misuse of the G Cards and therefore, the Court held that in the absence of any mens rea, the punishment of revocation of this CHA license was not proportional and accordingly the order was set aside. 27. In Union of India and Another Versus G. Ganayutham (1997) 7 SCC 463 , the Hon ble Supreme Court considered the position of proportionality in administrative law in England and India and held as follows: The current position of proportionality in administrative law in England and India can be summarized as follows:- (1) To jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at his decision as the primary authority. (4) (b) Whether in the case of administrative or executive action affecting fundamental freedoms, the Courts in our country will apply the principles of proportionality and assume a primary role, is left open, to be decided in an appropriate case where such action is alleged to offend fundamental freedoms. It will be then necessary to decide whether the Courts will have a primary role only if the freedoms under Article 19, 21 etc. are involve and not for Article 14. Punishment in disciplinary matters: Wednesbury CCSU tests: (1) Finally, we come to the present case. It is not contended before us that any fundamental freedom is affected. We need not therefore go into the question of proportionality . There is no contention that the punishment imposed is illegal or vitiated by procedural impropriety. As to irrationality there is no finding by the Tribunal that the decision is one which no sensible person who weighed the pros and cons could have arrived at nor is there a finding, based on material, that the punishment is in outrageous defiance of logic. Neither Wednesbury nor CCSU tests are satisfied. We have still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Director Coal India Limited and Another Versus Mukul Kumar Chowdhury and Others Mumbai AIR 2010 SC 75, the doctrine of proportionality was explained in the following terms: The doctrine of proportionality is, thus, well recognized concept of judicial in our jurisprudence. What is otherwise within the discretionary domain and sole power of the decision maker to quantity punishment once the charge of misconduct stands proved, such discretionary power is exposed to judicial intervention if exercised in a manner which is out of proportion to the fault. 30. The above decisions were taken note of in OTA Kandla Private Limited and it was held as follows: In view of the above principles laid down by the Hon ble Supreme Court in various judgments it clearly transpires that the judicial review of administrative action or of proportionality of punishment is permissible only if the decision of the decision maker is found to be illegal, unreasonable, irrational or suffering from any procedural impropriety, and that the High Court in exercise of jurisdiction under Article 226 or 227 should not interfere with the legal orders of Administrative Authorities, So far as the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th on a freight forwarder, as the obligation is on the CHA. Even a solitary instance of a violation, considering the complexity of the problem and the evidence which was available can be sufficient to impose the maximum penalty of revocation. In the order passed by the Commissioner while initiating penal action against the exporter there is a reference to an earlier export done by the very same exporter stated to have exported sponge iron and the department is of the reasonable belief that the earlier export would also have been export of red sanders. That apart, we find that the wordings in the letter of authorization dated 07.11.2008 alleged to have been given by the exporter is curiously worded. If the exporter Himalayan Tour and Travels was a genuine exporter, there would be no necessity to give any undertaking that the Cargo does not contain any contraband. The letter does not specify as to from where the cargo has been procured more importantly the exporter claims himself to be a tour operator as well as an importer-exporter. There was nothing placed on record by the exporter to indicate that he was a regular exporter of sponge iron or any other product. 32. Therefore, we ..... 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