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TMI Blog2009 (2) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant which is a proprietorship concern, is that, its licence as a Custom House Clearing Agent (hereinafter referred to as the 'CHA') has been suspended by Respondent no.2. 2.1 By an order dated 12.11.2008, we had admitted the Appeal and framed the following substantial questions of law:- "1. Whether any violation under the Customs Act, 1962 or imposition of penalty can be a ground to suspend Clearing House Agent License under regulation 20 of the Customs House Agents Licensing Regulation, 2004 without there being any violation of the provisions of the said Regulations? 2. Whether the suspension order can be sustained solely on the basis of the confessional statement recorded under Section 108 of the Customs Act, 1962? 3. Whether the delay of 4-1/2 years on the part of the Department for not taking immediate action against the alleged violation would not cause the suspension order to be revoked? 4. Whether the Clearing House Agent can be penalized for the mis-declaration, if any, even though it is not his duty/obligation under the Customs House Agents Licensing Regulation, 2004, while the importer is left free to work?" 3. In order to adjudicate upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court, it has been averred that the said statement was made under coercion. 3.5 Continuing with the narration, immediately after the DRI raid, that is, within two days thereafter, on 17.09.2003 the appellant on behalf of the three importers i.e, M/s E.I. Dupont India Ltd, M/s Sight Sound India and M/s Sound Terrific, deposited the differential duty, the details of which are as follows:- Name Differential Duty paid M/s E. I. Dupont India Ltd Rs 3,03,416/- M/s Sight Sound Rs 3,18,181/- M/s Sound Teriffic Rs 2,37,985/- 3.6 As a consequence of the aforesaid events, on 17.08.2004 a show cause notice was issued by the DRI to not only the three importers, but also, to the appellant. By way of the said notice, the afore-mentioned noticees were, inter alia, called upon to show cause as to why: (i) differential duty ought not to be recovered from them which was proposed to be levied on the ground of evasion by resorting to mis-declaration and suppression of facts; (ii) duty already deposited ought not to be appropriated towards the demand of differential customs duty; (iii) goods imported/cleared be not confiscated under Section 111(d)(m) of the Act; (iv) penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be exported. Now coming to the exemption claimed by the Noticee 1 under Notification No. 17/2001 and 21/2002, I find that they are not doing any export and are also not even registered with Apparel Export Promotion Council (AEPC), as such they are not bona fide exporter, and submitted forged AEPC certificate and claimed exemption from Customs duties under above Noticee on the basis of forged documents and misdeclaration on Bill of Entries as they were aware that the exemptions under Notification No. 17/01 and 21/02 are not admissible to them on hangtags imported by them as they are not doing any export. In reply to show cause notice, the Noticee I have claimed that they are entitle to get exemption under Notification No. 153/94 dated 13.07.94. The exemption under this Notification No. 153/94 is admissible only when. (i) the said goods have been imported for fixing on articles for export or for the packaging of such article, (ii) the importer by execution of a bond in such form and for such same as may be prescribed by the Assistant Commissioner of Customs or Deputy Commissioner of Customs binds himself to pay on demand in respect of the said goods as are not proved to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be imposed on both company and its Proprietor and have relied upon this issue on ." " .Now, I discuss the issue of involvement of CHA M/s J. D. Enterprises in evasion of Customs Duty by Noticees 1 to 4. In reply to the notice issue to CHA, he had denied the allegation leveled against him in the notice. He had denied the contents of his statement and have stated that he was made to tender a statement as per the whims and wishes of officers. Such claim by the CHA appears after thought as for clearing hangtags from Customs he submitted forged certificates which he had not denied even in reply to the show cause notice. As regard Plasma Monitors, as discussed above, it is quite clear that there was misclassification of same to evade Customs duty. In view of above there appear to be no ground to believe that his statement recorded under Section 108 of Customs Act 1962 was not given voluntarily without any pressure. In his reply the CHA have stated that in case of M/s Sound Terrific and M/s Sight and Sound India the goods were examined and catalogues were seen but I find that the party has not produced any catalogues during reply to SCN or at the time of personal hearing. Even the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner after hearing the Appellant was required to pass an order within a period of one week from the date of the hearing. 3.11 In view of the Tribunal's direction on 17.04.2007, Respondent no. 2 after noting the fact that the appellant had asked for postponement of the date of hearing from 09.04.2007 to 10.04.2007, passed a reasoned order whereby, he confirmed the order suspending the licence of the appellant taking into account the findings recorded against the appellant in the adjudication order dated 20.10.2006. 3.12 As a consequence, a show cause notice dated 18.07.2007 was also issued to the appellant calling upon the appellant to demonstrate as to why the CHA licence be not revoked. The appellant being aggrieved by both; the order dated 17.04.2007, whereby Respondent no. 2 had confirmed the order of suspension dated 29.01.2007, as well as, by the show cause notice dated 18.07.2007 calling upon him to furnish an explanation, in respect of, proposed revocation of his CHA licence; filed a statutory Appeal with the Tribunal, in so far as order dated 17.04.2007 was concerned. While, in respect of, show cause notice dated 18.07.2007, the appellant preferred to file a wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the respondents as contained in the reply to the show cause notice but would also take into consideration the effect of the order dated 31.12.2007 passed by the Commissioner (Appeals) as also any other order which the appellate authority may pass in Appeal Nos. 79/2008 and 80/2008. 3.16 To complete the narration of facts on 27.02.2008, the Tribunal in Customs Appeal Nos. 79/2008 and 80/2008 disposed of the interlocutory application for stay by observing that in view of the fact that the dispute was in respect of classification of goods imported by M/s Sound Terrific and given the fact that the differential rate of duty had already been paid by the importer, the condition of pre-deposit of penalty was required to be waived. With these observations, the interlocutory applications were allowed. 3.17 We are informed that on 14.03.2008 the appellant alongwith M/s Sound Terrific had moved an application for early hearing of their respective Appeals being Appeal Nos. 79/2008 and 80/2008, which was rejected by the Tribunal. 3.18 By the impugned judgment dated 04.06.2008, the Tribunal dismissed the Appeal of the appellant against the Commissioner's Order dated 17.04.2007, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once duty was paid before the issuance of show cause notice. In this case, the duty was paid on 17.09.2003 whereas the show cause notice was issued on 17.08.2004. In support of this submission, reliance was placed on the judgment of the Tribunal in the case of Rashtriya Ispat Nigam Ltd vs CCE; 2003 (161) ELT 285 and 2004 (163) ELT A53 (SC). 4.2 As against this, the learned counsel for the respondents submitted that the impugned judgment of the Tribunal deserved to be sustained as: (i) the respondent no. 2 had correctly exercised the power under Regulation 20(2) of the CHALR, 2004. It was submitted that in view of the adjudication order dated 20.12.2006 the Customs Department could not have but passed the order of suspension of the appellant's licence. It was, thus, submitted that there was not an inordinate delay, as alleged, by the learned counsel for the petitioner; (ii) in the statement made by the noticees including the appellant under Section 108 of the Act, it has been admitted that while clearing the goods the imports pertaining to M/s Sight Sound and M/s Sound Terrific had been incorrectly described i.e., there was a mis-declaration; only with a view to ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following reasons:- 5.1 The admitted facts in the present case are that in respect of imports in issue pertaining to the three importers, namely, E.I. Dupont India Limited, M/s Sight Sound and M/s Sound Terrific, the imports were during the period 2002-03. The description with respect to imports made by E.I. Dupont India Limited, in the 14 bills of entry was that, what had been imported were tags/labels, entitled to clearance under notification Nos. 17/2002 and 21/2002. Evidently, as per the stand of E.I. Dupont India Ltd taken before the adjudicating authority; the tags/labels were issued free of cost by the manufacturers of lycra and were imported into the country for the purposes of publicity in order to gain market for lycra in the country; and that the importers had cleared the said tags/labels at a concessional rate of duty by claiming the benefit of Notification no. 21/2002 dated 01.03.2002 (which prior to 01.03.2002 was pari materia to Notification no. 17/2001 dated 01.03.2001). We may note, a fact which was not disputed, that the condition prescribed for claiming exemption as per the said Notification no. 21/2002 was that the tags/labels ought to have been importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to the conclusion that it could not be held that the tags were meant only for garments to be exported. He also returned a finding of fact that E. I. Dupont India Ltd was not carrying out any export and they were not registered with AEPC. In these circumstances, he concluded that E. I. Dupont India Ltd was not a bona fide exporter and hence, it was not entitled to exemption under Notification no. 17/2001 and 21/2002 as they were not carrying out any export. He also dealt with the submission of E. I. Dupont India Limited that they were entitled to an exemption under notification 153 of 1994 dated 13.07.1994 and rejected the same on the ground that firstly, E. I. Dupont India Limited had not claimed exemption in the bill of entry under Notification no.153/1994 and secondly, the said exemption was available only if the importer was in a position to satisfy the Assistant Commissioner that the articles had been exported within six months from the date of importation or within such extended period as may be permitted by the Assistant Commissioner. In view of the above, since the condition stipulated under Notification no. 153/1994 was not fulfilled, the Additional Commissioner (Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nafide exporter." 5.4 Similarly, a reference to the fact that E.I. Dupont India Ltd was not an exporter is also made out in Paragraph 4 of the show cause notice wherein a reference has been made to the statement of one Shri Sasi Kumar, Manager, Regional Sales and Commerce. On the reading of the show cause notice it is clear that the gravamen of the charge was that what was recorded in the 14 bills of entry that the importer was entitled to the benefit of Notification no. 21/2002 was incorrect as they were aware of the fact that the said benefit of exemption from custom duty was available only to those importers which were bona fide exporters. It is another thing that the representative of E.I. Dupont India Ltd had explained that the work of clearance of goods had been handed over to CHA i.e., the appellant and that they had no knowledge whatsoever of the AEPC Certificate having been forged and submitted by the CHA. We find that in the context of the findings in the adjudication order, as well as, the allegations made in the show cause notice, the observations of Commissioner (Appeals) in paragraph 5 of his order to the effect; that the department has not stated in the show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te www.plasmaconcepts.com and also saw various models of plasma monitors, based on which he came to the conclusion that what the said importers i.e. M/s Sight Sound and M/s Sound Terrific had imported were nothing but plasma television systems which were mis-declared to evade customs duty. In so far as the appellant was concerned, the Additional Commissioner (Customs) even while noticing the fact that the appellant had denied the charge of mis-declaration, concluded, based on the statement of the appellant, as also, the fact that no catalogues had been produced either in reply to the show cause notice or at the time of personal hearing, that the goods, in issue were 'reception apparatus' for television. 5.6 It was contented before us by the learned counsel for the appellant that there is no reference to the said fact i.e. the goods imported are a 'reception apparatus' for television in the show cause notice. This submission is factually incorrect as a perusal of the paragraph 5 and paragraph 7 (3) of the show cause notice dated 17.08.2008 would clearly show that an allegation has been made that 'reception apparatus' for television have been mis-declared as flat panel display ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for clearance of imported goods and those exported out of the country. As per Section 46 of the Act, upon import of any goods other than those which are intended for transit or shipment, an entry is required to be made by an importer by presenting to a proper officer a bill of entry for home consumption or warehousing in a prescribed Form. Under sub-section (4) of Section 46 the importer, while presenting a bill of entry, makes a declaration as regards the truth of the contents of such bill of entry and in support of such declaration he is required to produce before the proper officer the invoice, if any, relating to the imported goods. 5.10 In Section 146 of the Act, it is provided that no person shall carry on business as an agent relating to the entry or departure of a conveyance or import or export of goods at any custom station unless such a person holds a licence granted in this behalf in accordance with the regulations. Sub-section (2) of Section 146 empowers the Board to make regulations for the purpose of carrying out the provisions of this section and, in particular such regulation may provide for matters as stated in sub-clause (a) to (f) pertaining the subject ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty and prosecution shall apply to cases where wrong; declaration, information, statement or document are furnished under these Rules. 5.14 Section 11 of the Foreign Trade (Development and Regulation) Act, 1992 (in short 'Foreign Trade Act') provides for the consequences of export or import being made by any person in violation of the provisions of the Act. Sub-section (2) of Section 11 provides that, in the event of violation there shall be a penalty which may not exceed Rs 1,000/- or five times of value of the goods, whichever is more. 5.15 Sub-section (4) of Section 11 of the Foreign Trade Act provides for recovery of penalty by way of land revenue, and in the event the person concerned does not pay the penalty, the adjudicating authority is empowered to suspend the importer/exporter code number till penalty is paid. The rules made under the Foreign Trade Act, that is, the Foreign Trade (Regulation), Rules 1993 (in short 'Foreign Trade Rules') provide for various aspects, including in Rule 11, issues pertaining to declaration as to the value and quality of imported goods. Rule 11 of the Foreign Trade Rules imposes an obligation on the owner on importation of any good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uality had occurred on account of any willful act, negligence or default of the agent it is provided that the duty shall not be recovered from the agent unless the concerned authority as indicated under the provision comes to the conclusion that the duty cannot be recovered from the owner or the importer. 6.3 The provisions referred to hereinabove make it clear that an owner or importer can act through an agent. In the instant case, the appellant who is admittedly the CHA of the importers, both filed as well as filled up the contents of the bill of entry, a fact which is not denied, on behalf of the three importers referred to hereinabove. In view of these facts and the provisions referred to hereinabove, it cannot be said that the agent cannot be held to be liable for violation of the provisions of the Act. The purpose of providing for appointment of an accredited agent, that is, an agent who has been issued a licence under the Regulations framed under the Act, is not only to facilitate the clearance of goods, but in doing so, to hold either one of them or both accountable for the actions which they take, based on which the clearance of goods imported into the country is broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms, in respect of, the grounds which are not admitted by the CHA. The procedure for conducting the inquiry and the rights available to the CHA during the course of inquiry are detailed out in sub-regulation (3) (4) of Regulation 22. Under sub-regulation (5), the Deputy Commissioner of the Customs or Assistant Commissioner of Customs upon conclusion of the inquiry is required to prepare a report recording his findings. The Commissioner of Customs under sub-regulation (6) is required to give a copy of the inquiry report to the CHA, seeking his representation within a period prescribed which is not less than 60 days. Upon receipt of the representation, the Commissioner of Customs is obliged to consider both the inquiry report and the representation and thereafter pass any order as he deems fit. If the CHA is aggrieved by the decision of the Commissioner of Customs, under sub-regulation (8), he has a right to appeal to the Tribunal under Section 129A of the Act. 6.7 In the present case, it is quite clear that the inquiry has not proceeded beyond the stage of issuance of show cause notice under Regulation 22. However, a combined reading of Regulation 13 (d) (e) read with su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of the Tribunal in the case of Varma Sons vs CC(G), Mumbai; 2008 (88) RLT 749, which in turn, relies upon two other judgments of the Tribunal itself, that is, in Thakkar Shipping Agency vs Collector of Customs; 1994 (69) ELT 90 and Smita International vs Commissioner of Customs (General); 2008 (225) ELT 439, for the proposition that the statement under Section 108 of the Customs Act, 1962 cannot be relied upon in the proceedings undertaken under CHALR, 2004 is not tenable in law for the reasons which follows. 6.10 In all three cases the Tribunal proceeds on the premise that, both under CHALR, 1984 and CHALR, 2004, while conducting an enquiry the concerned authority is required to offer the delinquent CHA a chance of cross-examining the person who is examined in support of grounds which form the basis of the proceedings. The Tribunal in the case of Smita International (supra) has referred to Regulation 22 sub-clause (3) (4) of CHALR, 2004 which has been held to be in pari materia with Regulation 23 of CHALR, 1984. Regulation 22 (3) and (4) of CHALR, 2004 to the extent necessary is extracted hereinafter:- "(3) The Deputy Commissioner of Customs or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becoming of a CHA licence. 6.12 In as much as, the CHA i.e., Vijay Thakkar was concerned be was charged with carrying on business other than that of a CHA agent, and that he had attempted to smuggle contraband goods in the guise of an unaccompanied baggage as was evident from the statements of the passengers i.e., K. Gangadhar and C. Abdulla and had as such rendered them liable for punishment under Regulation 21(c) of the Regulation. 6.13 This position was contested by the appellant-CHA. The appellant- CHA in their representation before the Inquiry Officer contended that they had inter alia not acted as agents for the two passengers. They also pleaded that uncorroborated statements of the two passengers could not be relied upon. It was also contended by the appellant-CHA i.e., Vijay Thakkar that he had retracted from his statement, and thus pleaded that no adverse conclusion could be drawn on the basis of uncorroborated statement of the two passengers. Lastly, it was contended that the two passengers, namely, K. Gangadhar and C. Abdulla had not been offered for cross-examination, though it was demanded, and it was not proved that the Appellant/CHA i.e., Vijay Thakkar had ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. The CHA/appellant i.e., Vijay Thakkar was not given an opportunity to cross-examine the two passengers who had made statements before the authority under Section 108 of the Customs Act, 1962. On the other hand the statement made by the CHA/appellant i.e., Vijay Thakkar under Section 108 had been retracted. It is in these circumstances, that the Tribunal observed that since the statements of the two passengers had not been subjected to cross-examination by the appellant/CHA i.e., Vijay Thakkar and given the fact that Vijay Thakkar himself had retracted his own statement under Section 108, the statements could not be relied upon. In our view, the Tribunal did not understand the law to be that statements made by a CHA under Section 108 cannot be used against him in proceedings under the CHALR, 1984. The same position would obtain viz-a-viz CHALR, 2004. This is quite clear upon reading paragraph 11 and 12 of the decision of the Tribunal. In our view the Tribunal in the subsequent decisions in the case of Varma Sons (supra) and Smita International (supra) had misconstrued the ratio of the decision in the case of Thakkar Shipping Agency (supra). In our view a statement recorded und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) dealt with penalty imposed under Section 11AC of Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules, 1944. 7. In view of discussions hereinabove, our answers to the questions of law framed are as follows:- 7.1 In so far as question no. 1 is concerned, we are of the view that the licence of a CHA can be suspended where there is a violation of the provisions of the Act or imposition of penalty, the power of suspension of licence is not confined to only those situations where there is a violation of the CHALR, 2004 Regulation. 7.2 In so far as question no. 2 is concerned, the CHA's licence can be suspended based on the confession made under Section 108 of the Act provided it is voluntary and the statement is truthful and is not the result of such inducement, threat or promise as mentioned in Section 24 of the Indian Evidence Act, 1872. 7.3 In so far as question no. 3 is concerned, in the given circumstances, we are of the view that there was no inordinate delay on the part of the respondents in suspending the licence of the CHA if one were to account for the fact that the order of the adjudication was passed on 20.10.2006 and also, the subsequent ..... 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