Bombay High Court
The Principal Commssioner Of ... vs Unison Clearing Pvt. Ltd on 19 April, 2018
Bench: S.C. Dharmadhikari
SSK 1 Custom Appeal 88-16
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CUSTOMS APPEAL NO.17 OF 2016
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Unison Clearing Pvt.Ltd .. Respondent
WITH
CUSTOMS APPEAL NO.68 OF 2016
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Rudolph Thomas Lobo & Co.(P) Ltd .. Respondent
WITH
CUSTOMS APPEAL NO.88 OF 2016
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
M.D.Shipping Agency .. Respondent
WITH
CUSTOMS APPEAL NO.4 OF 2017
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Maa Krupa Forwarders Pvt.Ltd .. Respondent
WITH
CUSTOMS APPEAL (L) NO.49 OF 2017
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Mahendra Shipping Agency .. Respondent
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SSK 2 Custom Appeal 88-16
WITH
CUSTOMS APPEAL (L) NO.53 OF 2017
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
K.M.Commercial Services P.Ltd .. Respondent
WITH
CUSTOMS APPEAL (L) NO.54 OF 2017
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Kismat Clearing Agency .. Respondent
WITH
CUSTOMS APPEAL NO.6 OF 2017
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Mehul and Co. .. Respondent
WITH
CUSTOMS APPEAL NO.6 OF 2018
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Veena Shipping Agency Pvt.Ltd .. Respondent
WITH
CUSTOMS APPEAL NO.26 OF 2016
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Ukinex Commercial Services Customs
Broker (CHA firm) .. Respondent
WITH
CUSTOMS APPEAL NO.9 OF 2016
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SSK 3 Custom Appeal 88-16
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
SSS Sai Shipping Services P.Ltd .. Respondent
WITH
NOTICE OF MOTION (APPEALS) LODGING NO.2404 OF 2017
IN
CUSTOMS APPEAL LODGING NO.49 OF 2017
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Mehendra Shipping Agency .. Respondent
WITH
NOTICE OF MOTION (APPEALS) LODGING NO.2491 OF 2017
IN
CUSTOMS APPEAL LODGING NO.53 OF 2017
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
K.M. Commercial Services P.Ltd .. Respondent
WITH
NOTICE OF MOTION (APPEALS) LODGING NO.2495 of 2017
IN
CUSTOMS APPEAL LODGING NO.54 OF 2017
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Kismat Clearing Agency .. Respondent
WITH
NOTICE OF MOTION (APPEALS) NO.245 of 2016
IN
CUSTOMS APPEAL NO.17 OF 2016
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
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SSK 4 Custom Appeal 88-16
Versus
Unison Clearing Pvt Ltd .. Respondent
WITH
NOTICE OF MOTION (APPEALS) NO.1 of 2017
IN
CUSTOMS APPEAL NO.17 OF 2016
The Principal Commissioner
of Customs (General) Mumbai .. Petitioner
Versus
Unison Clearing Pvt Ltd .. Respondent
...
Mr.Pradeep Jetly for the appellants and applicants in Notice of
Motion.
Mr.Prakash Shah with Mr.Jas Sanghavi, Mr.Viraj Y. Bhate and
Ms.Neha Ahuja i/b Prompt Legal for respondent in CUAPP
17/2016.
Mr.Prakash Shah with Mr.Jas Sanghavi and Viraj Y. Bhate i/b
PDS Legal for respondent in CUAPP 9/2016 and CUAPPL
88/2016.
Mr.Prakash Shah for Amicus Curie in CUAPP 88/16.
Mr.Sujay Kantawala with Brijesh Pathak and Kartik Vig for
respondents in CUAPP 6/2017 and CUAPP 4/2017.
Mr.Deepak N. Salvi with Ms.Tanvi Sathe and Mr.Sahil D. Salvi
for respondent in CUAPPL 54/2017.
CORAM : S. C. DHARMADHIKARI &
SMT. BHARATI H. DANGRE, JJ.
RESERVED ON : 9th FEBRUARY 2018.
PRONOUNCED ON : 19th APRIL, 2018
JUDGMENT: - (Per Smt.Bharati H. Dangre, J)
1 This group of appeals came to be admitted on the
following substantial question of law.
SSK 5 Custom Appeal 88-16
(1) Whether the CESTAT is right in law
in setting aside the order or suspension of
the Custom Broker Licence on the ground of
delay between the suspension and the notice
of deviation or omission, ignoring that DRI
letter dated 24th July 2014 and the Custom
Broker Licence was suspended on 8th August
2014 ?
(2) Whether the Appellate Tribunal
completely ignored the two decisions of this
Court relied upon in paragraph 3, do not lay
down as an absolute proposition of law that
the delay in taking immediate action of
suspension vitiates the action of the
Commissioner of suspending the licence?
Since all the appeals involve the similar question
of law and particularly whether the inquiry report has to be
submitted from the period of 90 days from the date of issue of
notice under Sub-regulation (1) of Regulation 20 of 2013, all
the appeals were directed to be listed and heard on the same
date. It was agreed by both the parties that all the appeals
whether admitted, pending for admission or otherwise, can
then be conveniently disposed of. Hence, all the aforesaid
appeals were heard together and the parties advanced their
submissions on the said point of law by referring to the
distinct facts involved in each appeal.
The Principal Commissioner of Customs
SSK 6 Custom Appeal 88-16
(General), who has filed the appeals, is represented by the
learned Counsel Mr. Jetley who would argue that the
provision contained in Regulation 19 and 20 of the CBLR-
2013 is to be construed as directory, whereas, the learned
counsel representing the Customs Broker Licencee -
respondents in the appeals, would urge the Court to construe
the said provision as mandatory and prays for upholding the
order passed by CESTAT, in the light of the various
judgements delivered by different High Courts construing the
said provisions to be mandatory.
2 For effective adjudication of the appeals, it would
be necessary to refer to the statutory schemes as contained in
the Customs Act, 1962 as well as in the Customs House
Licensing Regulation ("CHLR", for short) as notified from
time to time.
The Customs Act, 1962 recognizes the 'Customs
Brokers' and contains a provision for grant of licence in their
favour in accordance with the Regulation. Section 146
imposes restrictions on any person to carry on business as
Customs Broker relating to the entry or departure of
SSK 7 Custom Appeal 88-16
conveyances or the import or export of goods at any customs
station unless such a person holds a licence granted in this
behalf in accordance with the Regulation. The Central Board
of Excise and Custom ("CBEC", for short) under the Central
Boards Revenue Act, 1963, is empowered to make
Regulations for the purpose of carrying out the provisions of
Section 146 and authorises it to make Regulation which may
provide for the authority by whom licence may be granted,
period of validity of such licence, qualification of a person
who may apply for such licence, and also to prescribe
circumstances in which the licence may be suspended or
revoked.
In exercise of power conferred by Sub-section (2)
of Section 146 of the Customs Act, 1962, Regulations have
been framed from time to time and the regulations which are
in existence and governing the group of appeals is the
Customs House Licensing Regulation of 2013 ("CHLR-2013",
for short).
3 The Customs House Agent Licence Regulation,
2004 ("CHALR-2004", for short) were brought into force by
SSK 8 Custom Appeal 88-16
notification issued on 23rd March, 2004 by the Central Board
of Excise and Customs. The Regulation defines Custom
House Agent as an agent for transaction of any business
relating to the entry or departure of conveyances or import or
export of goods at any customs stations. Regulation 20
contained a provision for suspension or revocation of licence
by the Commissioner of Customs on the grounds mentioned
therein. Sub-clause (2) of the said Regulation authorizes the
Commissioner of Customs to suspend the licence of a CHA
pending or contemplating an inquiry, where immediate action
was necessary in appropriate cases. Regulation 22 prescribed
the procedure for suspension or revocation of licence under
Regulation 20. Regulation 22 reads thus:
22. Procedure for suspending or revoking
licence under Regulation 20.
(1) The Commissioner of Customs shall issue a
notice in writing to the Customs House Agent
within ninety days from the date of receipt of offence
report, stating the grounds on which it is proposed
to suspend or revoke the licence and requiring the
said Customs House Agent to submit within thirty
days to the Deputy Commissioner of Customs or
Assistant Commissioner of Customs nominated by
him, a written statement of defense and also to
specify in the said statement whether the Customs
House Agent desires to be heard in person by the
said Deputy Commissioner of Customs or Assistant
SSK 9 Custom Appeal 88-16
Commissioner of Customs.
Provided that the procedure prescribed in
regulation 22 shall not apply in respect of the
provisions contained in sub-regulation (2) to
regulation 20.
(2) The Commissioner of Customs may, on
receipt of the written statement from the Customs
House Agent, or where no such statement has been
received within the time-limit specified in the notice
referred to in sub-regulation (1), direct the Deputy
Commissioner of Customs or Assistant
Commissioner of Customs to inquire into the
grounds which are not admitted by the Customs
House Agent.
(3) The Deputy Commissioner of Customs or
Assistant Commissioner of Customs shall, in the
course of inquiry, consider such documentary
evidence and take such oral evidence as may be
relevant or material to the inquiry in regard to the
grounds forming the basis of the proceedings, and
he may also put any question to any person
tendering evidence for or against the Customs
House Agent, for the purpose of ascertaining the
correct position.
(4) The Customs House Agent shall be entitled to
cross-examine the persons examined in support of
the grounds forming the basis of the proceedings,
and where the Deputy Commissioner of Customs or
Assistant Commissioner of Customs declines to
examine any person on the grounds that his
evidence is not relevant or material, he shall record
his reasons in writing for so doing.
(5) At the conclusion of the inquiry, the Deputy
Commissioner of Customs or Assistant
Commissioner of Customs shall prepare a report of
the inquiry recording his findings and submit his
report within ninety days from the date of issue of a
notice under sub-regulation (1).
(6) The Commissioner of Customs shall furnish
to the Customs House Agent a copy of the report of
the Deputy Commissioner of Customs or Assistant
SSK 10 Custom Appeal 88-16
Commissioner of Customs, and shall require the
Customs House Agent to submit, within the
specified period not being less than thirty 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
within ninety days from the date of submission of
the report by the Deputy Commissioner of Customs
or Assistant Commissioner of Customs, under sub-
regulation (5).
(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.
The CHALR-2004 came to be amended by
notification dated 8th April, 2010 and the time limit came to
be incorporated in sub-clause (2) of Regulation 20 and sub-
clause (3) came to be added to the same Regulation where it
contemplated a post-decisional hearing on suspension of a
licence, within a period 15 days from the said suspension and
thereafter passing of an order revoking the suspension or
continuing it. Sub-Regulation (2) and (3) which came to be
inserted read thus :
(2) Notwithstanding anything contained in
SSK 11 Custom Appeal 88-16
sub-regulation (1), the Commissioner of
Customs may, in appropriate cases where
immediate action is necessary, (within fifteen
days from the date of receipt of a report from
investigating authority, suspend the licence) of
a Customs House Agent where an inquiry
against such agent is pending or contemplated.
(3) Where a licence is suspended under sub-
regulation(2), notwithstanding the procedure
specified under regulation 22, the
Commissioner of Customs may, within fifteen
days from the date of such suspension, give an
opportunity of hearing to the Customs House
Agent whose licence is suspended and may pass
such order as he deems fit either revoking the
suspension or continuing it, as the case may be,
within fifteen days from the date of hearing
granted to the Customs House Agent".
4 The CBLR-2013 was brought into force by
notification dated 21st June, 2013 in exercise of powers
conferred by Sub-section (2) of Section 146 of Customs Act,
1962 by superseding the existing CHALR-2004. The present
case revolves around the existing CBLR-2013 where a specific
time limit has been prescribed under Regulation 19, which
contains a provision for suspension and revocation of licence.
Further, a time frame has also been prescribed in Regulation
20 which prescribes a procedure for revocation of licence or
imposition of penalty. The grievance raised in the set of
SSK 12 Custom Appeal 88-16
Appeals before us is either that the notice was not issued by
the Revenue to the customs broker within stipulated period of
90 days from the date of receipt of offence report or cases,
where the entire inquiry has not been completed within the
time limit specified in Regulation 20.
As per the CBLR-2013, a customs broker means a
person licensed under the Regulations of 2013 to act as an
agent for the transactions of any business relating to the entry
or departure of conveyances or the import or export of the
goods at any customs station to hold a licence. The
Regulation, 2013 sets out the procedure for procuring such
licence on an application being preferred to the Commissioner
of Customs having jurisdiction over the area where the
applicant intends to carry on his business. Regulation 5 of the
Regulation, 2013 then set out the conditions to be fulfilled by
the applicant, so as to be considered fit for grant of licence
and contemplates an application to be made either by an
individual applicant or by a firm or company and then sets
out the qualification required to be possessed by the partner
of a firm or Director of a company or an authorised employee,
SSK 13 Custom Appeal 88-16
who may handle the customs work. Regulation 6 prescribes
for conduct of written as well as oral examination by the
DGICCE. Regulation 7 provides for grant of Licence by the
Commissioner of Customs on payment of Rs.5,000/- to an
applicant who has passed oral examination within two
months of the declaration of the result. The said licence
granted under the Regulation, 2013, is held to be valid for a
period of ten years from the date of its issuance and is
entitled for renewal from time to time as per the procedure
prescribed. Regulation 11 sets out obligations to be
discharged by the customs broker which inter alia requires
exercise of due diligence on the part of the customs broker
and discharge of his duties as customs broker with utmost
speed and efficiency and without any delay amongst other
obligations.
5 In the present set of appeals we are concerned
with Regulation 18, Regulation 19 and Regulation 20, which
deals with revocation/suspension of licences and the
procedure for doing so or for imposition of penalty. It would
be useful to reproduce the said Regulations:
SSK 14 Custom Appeal 88-16
"18. Revocation of licence or imposition of
penalty-
The Commissioner of Customs may, subject to
the provisions of regulation 20, revoke the licence of
a Customs Broker and order for forfeiture of part or
whole of security, or impose penalty not exceeding
fifty thousand rupees on a Customs Broker on any
of the following grounds, namely :-
(a) Failure to comply with any of the conditions of
the bond executed by him under regulation 8;
(b) failure to comply with any of the provisions of
these regulations, within his jurisdiction or
anywhere else;
(c) committing any misconduct, whether within
his jurisdiction or anywhere else which in the
opinion of the Commissioner renders him unfit to
transact any business in the Customs Station;
(d) adjudicated as an insolvent;
(e) of unsound mind; and
(f) has been convicted by a competent court for
an offence involving moral turpitude.
Provided that the imposition of penalty or any
action taken under these regulations shall be
without prejudice to the action that may be taken
against the Customs Broker or his employee under
the provisions of the Customs Act, 1962 (52 of 1962)
or any other law for the time being in force.
Regulation 19 - Suspension of licence:
(1) Notwithstanding anything contained in
regulation 18, the Commissioner of customs may, in
appropriate cases where immediate action is
necessary, suspend the licence of a Customs Broker
where an inquiry against such broker is pending or
contemplated.
(2) Where a licence is suspended, give an
opportunity of hearing to the Customs Broker whose
SSK 15 Custom Appeal 88-16
licence is suspended and may pass such order as he
deems fit either revoking the suspension or
continuing it, as the case may be, within fifteen
days from the date of hearing granted to the
Customs Broker:
Provided that in case the Commissioner of Customs
passes an order for continuing the suspension, the
further procedure thereafter shall be as provided in
Regulation 20.
20. Procedure for revoking licence or
imposing penalty:
(1) The Commissioner of Customs shall issue a
notice in writing to the Customs Broker within a
period of ninety days from the date of receipt of an
offence report, stating the grounds on which it is
proposed to revoke the licence or impose penalty
requiring the said Customs Broker to submit within
thirty days to the Deputy Commissioner of Customs
or Assistant Commissioner of Customs nominated
by him, a written statement of defense and also to
specify in the said statement whether the Customs
Broker desires to be heard in person by the said
Deputy Commissioner of Customs or Assistant
Commissioner of Customs.
(2) The Commissioner of Customs may, on receipt
of the written statement from the Customs Broker,
or where no such statement has been received
within the time-limit specified in the notice referred
to in sub-regulation (1), direct the Deputy
Commissioner of Customs or Assistant
Commissioner of Customs, as the case may be, to
inquire into the grounds which are not admitted by
the Customs Broker.
(3) The Deputy Commissioner of Customs or
Assistant Commissioner of Customs, as the case
may be, shall, in the course of inquiry, consider such
documentary evidence and take such oral evidence
as may be relevant or material to the inquiry in
regard to the grounds forming the basis of the
proceedings, and he may also put any question to
any person tendering evidence for or against the
Customs Broker, for the purpose of ascertaining the
SSK 16 Custom Appeal 88-16
correct position.
(4) The Customs Broker shall be entitled to
cross-examine the persons examined in support of
the grounds forming the basis of the proceedings,
and where the Deputy Commissioner of Customs or
Assistant Commissioner of Customs declines to
examine any person on the grounds that his
evidence is not relevant or material, he shall record
his reasons in writing for so doing.
(5) At the conclusion of the inquiry, the Deputy
Commissioner of Customs or Assistant
Commissioner of Customs, as the case may be, shall
prepare a report of the inquiry and after recording
his findings thereon submit the report within a
period of ninety days from the date of issue of a
notice under sub-regulation (1).
(6) The Commissioner of Customs shall furnish
to the Customs Broker a copy of the report of the
Deputy Commissioner of Customs or Assistant
Commissioner of Customs, as the case may be, and
shall require the Customs Broker to submit, within
the specified period not being less than thirty days,
any representation that he may wish to make
against the said report.
(7) The Commissioner of Customs shall, after
considering the report of the inquiry and the
representation thereon, if any, made by the Customs
Broker, pass such orders as he deems fit either
revoking the suspension of the license or revoking
the licence of the Customs Broker or imposing
penalty not exceeding the amount mentioned in
regulation 22 within ninety days from the date of
submission of the report by the Deputy
Commissioner of Customs or Assistant
Commissioner of Customs, under sub-regulation (5):
Provided that no order for revoking the
license shall be passed unless an opportunity is
given to the Customs Broker to be heard in person
by the Commissioner of Customs.
6 A perusal of the aforesaid regulations would
SSK 17 Custom Appeal 88-16
reveal that a procedure is prescribed for revocation of a
licence of a customs broker and for imposition of penalty on
the grounds set out in Regulation 18. Regulation 19 provides
for suspension of a licence in contemplation of an inquiry
against a broker or pending an inquiry, which authorizes the
Commissioner of Customs to suspend the licence of the
customs broker forthwith, where immediate action is
necessary. Sub-section 2 of Regulation 19 contemplates a post
decisional hearing where the licence is suspended in sub-
clause (1) and after affording an opportunity of hearing to
the customs broker, whose licence is suspended, the
Commissioner of Customs is authorised to pass such order as
he deems fit either revoking the suspension or continuing it,
as the case may be. However, when the Commissioner passes
an order for continuing the suspension, it is imperative for
him to follow the procedure under Section 20.
The procedure for revocation of licence is
provided in Regulation 20 and the issue involved before us in
the present set of appeals is whether the time frame
prescribed in the said Regulation is mandatory or directory. If
SSK 18 Custom Appeal 88-16
the time frame is mandatory then the necessary consequences
of not completing the inquiry within the time stipulated
would result into restoration of a licence and declaring the
action to revoke the licence as being invalid. If it is construed
as directory, then even on expiry of period of 90 days, the
procedure for revocation of licence which is initiated would
continue and mere failure to adhere to the time line
prescribed in the Regulation would not confer a positive
benefit in favour of the customs broker.
7 In the background of the statutory provisions, we
would deal with the submissions advanced on behalf of the
parties. We have extensively heard Mr. Jetley appearing for
the Principal Commissioner of Customs, who would finds
fault with the impugned orders passed by the said CESTAT.
Mr. Jetley would submit that the CESTAT has erred in holding
the period prescribed in the CBLR-2013 to be imperative and
in holding that there is no provision for extension of the time
line prescribed for completion of proceedings. He would
argue that the findings of the CESTAT that the learned
Commissioner did not adhere to the time line prescribed for
SSK 19 Custom Appeal 88-16
completion of inquiry proceedings and therefore he has no
legal right to keep the customs broker licence under
suspension for unlimited period, is erroneous. He would
submit that reliance placed on the judgments of the Tribunal,
wherein it had consistently taken a view that if inquiry
proceedings are not completed within overall period of nine
months, a time line prescribed in CBLR-2013, the suspension
of the customs broker licence cannot be continued do not lay
down correct position of law. He would submit that the
Tribunal has erred in taking the said view in the backdrop of
the judgment of the same Tribunal of CESTAT, West Zonal
Bench, Mumbai, in the case of Unison Clearing Pvt Ltd vs.
Commissioner of Customs (General Mumbai) to which one of
the Member Judicial (Ramesh Nair) was a party. He would
place heavy reliance on the said judgment delivered by the
Tribunal in Appeal No.C/85867/2015-MUM on 5th June,
2015, where the Tribunal by its exhaustive judgment has held
that the time line prescribed in the CBLR-2013 is construed to
be directory and the matter is closed on this basis. He would
submit that the purpose of Regulation would get defeated and
SSK 20 Custom Appeal 88-16
so would the intention of legislature in framing the
Regulation. He would submit that the Tribunal in the said
judgment had held that since there are no consequences
provided in the regulation for non-adherence of the time
period for conducting the inquiry, the non-compliance of the
time line cannot become fatal to the outcome of inquiry. Mr.
Jetly would invite our attention to the observations made by
the Tribunal in paragraph 4.2 of the judgment and to the
conclusion drawn by it that the time line laid down in the
Regulations are directory in nature. According to the learned
Counsel, the duty of a customs house agent is to render
assistance in the export and import business at the port and
the purpose of the the Regulation, 2013 is to streamline the
working of the customs brokers. The learned Counsel Mr.
Jetly would submit that if the provision is construed as
mandatory, it would result into serious consequences but he
would fairly submit that even if it is construed to be directory,
it does not mean that it is open for the custom authorities to
continue the suspension for an indefinite period.
The learned Counsel would submit that an inquiry
SSK 21 Custom Appeal 88-16
and the proceedings nonetheless are required to be completed
within a reasonable period and no absolute principle can be
laid down as to what is "Reasonable period". According to
him, what is Reasonable period would have to be determined
in each and every case depending on the peculiar facts and
circumstances of the case and he would state before us
several instances where the delay in completion of inquiry is
on account of some acts of the customs broker in an attempt
to prolong the inquiry beyond the prescribed period and in
such case, the delay may not be attributable to the Revenue.
In such circumstances, Mr. Jetly would argue that it is not
permissible for the customs broker to seek restoration of his
licence by taking advantage of his own wrong merely on the
ground that Regulation 20 mandates that the inquiry should
be concluded within 90 days. He would fairly submit that the
checks and balances are to be 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
SSK 22 Custom Appeal 88-16
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 license need not be restored.
Per contra, the learned counsel for the Respondent
Mr.Prakash Shah, would vehemently argue that the whole
purpose of Regulation 20 is to complete the proceedings
initiated against the customs house agent/custom broker in
an expeditious manner. According to the learned Counsel Mr.
Shah, the suspension cannot be permitted to be continued
indefinitely. He would submit that there is specific object in
streamlining the procedure and prescribing the time line for
conduct and completion of inquiry and for continued
suspension of a licence. According to him, if the inquiry is
prolonged for no reason and a licence of the customs broker
is suspended and on culmination of the inquiry if the charges
are not proved, in that contingency it would result into
immense loss of earning and loss of livelihood to such
customs broker. He would submit that the said Regulations
and the time limit have been framed by a responsible
SSK 23 Custom Appeal 88-16
authority as high as the CBEC itself. He would invite attention
of this Court to the circular No.9/10-CUS, dated 8th April,
2010 and would submit that the Government of India,
Ministry of Finance (Department of Revenue), Central Board
of Excise and Custom, New Delhi, had issued the said circular
and it contains a preface reflecting that it has been brought to
the notice of the Board by certain field formations that they
are facing difficulties in issuance of CHA Licence for eligible
person and in implementation of Customs House Agents
Licensing Regulation, 2004. All the aforesaid issues came to
be examined by the board in consultation with the custom
field formation in the board meeting and there was also a
meeting held with the Chief Commissioner of Customs having
jurisdiction over major customs houses and thereafter the
decision was taken to provide a time stipulation for
completion of proceedings of inquiry, on suspension of a
licence. In this background, Mr. Shah would submit that the
provisions in regard to the time limit contained in the CBLR-
2013 need to be construed as mandatory.
He would rely upon the series of judgments
SSK 24 Custom Appeal 88-16
delivered by the Hon'ble Delhi High Court and Madras High
Court, which have consistently taken a view that the time
limit prescribed in the Regulation is mandatory and
sacrosanct. The High Courts had taken a view that the time
limit in the CHALR-2004 for issuance of show cause notice to
the CHA licence holder and completion of the inquiry within
90 days of its issuance are mandatory and the said time limit
has been engrafted in Regulation 22 of CHALR-2004 by
notification dated 8th April, 2010. The judgments of these
Courts have consistently emphasised the mandatory nature of
the aforesaid time limit in several of its decisions and the
violation of the said time line has resulted into declaring the
action of the Commissioner of Customs revoking the CHA
licence to be unsustainable in law. The Hon'ble Madras High
Court has also laid great emphasis on the time limit
prescribed in the back drop of its object, being to curb the
smuggling of goods and by considering the object of the
provision, and specifically by referring to the transformation
of the CHA Regulation into CBLR-2013 Regulations. The
Court had held that earlier Regulation did not have time limit
SSK 25 Custom Appeal 88-16
to complete the proceedings but by Circular No.9/10 dated
8th April, 2010, the necessity to specify the time limit for
initiating action was addressed by the board after field
inspection and by notification dated 8th April, 2010
prescribing the time period for initiating action and
completion of the procedure was introduced and given effect
to by notification dated 20th January, 2014. The Hon'ble
Madras High Court has further held that under CBLR-2013
the necessity was felt to prescribe a time schedule on the
recommendation of the CBEC, a statutory authority and
therefore, a time frame came to be consciously introduced in
the Regulation and the use of the term "shall" in the
Regulation makes it imperative to construe the said time
schedule as "mandatory". In this regard, Mr. Shah relies on
the following decisions:
(1) Masterstroke Freight Forwarders P. Ltd. vs.
C.C.(I), Chennai-I, reported in 2016 (332) E.L.T.
300 (Mad.)
(2) Patriot Frieght Logistics System vs.
Commissioner of Cus., Chennai, reported in 2017
(350) E.L.T. 59 (Mad).
(3) A. M. Ahamed & Co. vs. Commissioner of
Customs (Imports), Chennai, reported in 2014
SSK 26 Custom Appeal 88-16
(309) E.L.T. 433 (Mad).
(4) M/s. Maakrupa Forwarders Pvt Ltd vs.
Commissioner of Customs (G), Mumbai, reported
in 2016-TIOL-2899-CESTAT-MUM.
(5) Sharp Logistics Pvt Ltd vs. Commissioner of
Cus. (General), Mumbai, reported in 2012 (286)
E.L.T. 704 (Tri.-Mumbai).
(6) Overseas Air Cargo Services vs. Commr. Of
Cus. (General), New Delhi, reported in 2016 (340)
E.L.T. 119 (Del.)
(7) M/s. Zen Cargo Movers Pvt Ltd. vs.
Commissioner of Customs, New Delhi, reported in
2016-TIOL-524-CESTAT-DEL.
(8) Saro International Freight System vs. Commr.
Of Cus., Chennai-VIII, reported in 2016 (334)
E.L.T. 289 (Mad.)
(9) S.K. Logistics vs. Commr. Of Cus. (General),
New Delhi, reported in 2016 (331) E.L.T. 486 (Tri.-
Del.).
(10) Commissioner of Customs (General) vs.
S.K.Logistics, reported in 2016 (337) E.L.T. (Del.).
(11) Sunil Dutt vs. Commissioner of Cus.
(General) NCH, reported in 2016 (337) E.L.T. 162
(Del.).
(12) Indair Carrier Pvt. Ltd. vs. Commissioner of
Customs (General), reported in 2016 (3370 E.L.T.
41 (Del.).
(13) Trinity Sea & Air Pvt Ltd vs. Commr of Cus
(Import General), New Delhi, reported in 2017
(350) E.L.T. 293 (Tri.-Del.).
(14) Sowparnika Shipping Services vs. Commr.
Of Customs, Chennai-VIII, reported in 2017 (352)
E.L.T. 286 (Mad.)
SSK 27 Custom Appeal 88-16
8 The question that arises for determination in
the present set of appeals is whether the time line as
prescribed in Regulation 20 is directory in nature or is
mandatory. Perusal of the scheme of Regulation and
specifically Regulation 18, 19 and 20 empowers the
Commissioner of Customs to revoke the licence of custom
broker and order for forfeiture of part or whole of its security
or to impose penalty not exceeding Rs.50,000/- on a custom
broker on any of the following grounds i.e. (a) failure to
comply with any of the conditions of bond executed by him
under Regulation 8. (b) failure to comply with any of the
provisions of these Regulations, within its jurisdiction or
anywhere. (c) committing any misconduct, whether within its
jurisdiction or anywhere else which in the opinion of the
Commissioner renders him unfit to transact the business in
Customs station. (d) adjudicated insolvent, (e) is of unsound
mind and (f) has been convicted by a competent court for an
offence involving moral turpitude.
The customs house agent have an important role
to play in the entire scenario. He is the person, who acts as an
SSK 28 Custom Appeal 88-16
agent and transact the business and has a direct access to the
port since he assists the assessee covered by the Customs Act
to facilitate the entry or departure of conveyance or the
import or export of goods at any customs stations. Since the
customs house agent has a direct access to the port, the
revenue intended that there should be a regime of discipline
governing such customs house agent and only a person who is
qualified and in know how of the business relating to the
customs would be entitled to be conferred with a licence to
act as a customs house agent. To maintain the regime of
discipline, the customs house agent is granted a license on
passing of an examination and before granting the licence it is
imperative for him to enter into an option in Form - D and, if
necessary, a surety option in Form - E to continue observation
of these regulations and require him to furnish a bank
guarantee, postal security and the national saving certificate
in the name of the Commissioner of Customs for an amount
of Rs.50,000/- for carrying on a business of customs house
agent. The customs house licensing regulation also fastens the
customs house agent with certain obligation since he acts on
behalf of the Company, firms or individuals and in turn acts as
SSK 29 Custom Appeal 88-16
their agent and Regulation 13 in detail sets out the obligation
of the customs house agent, which mandates him to follow a
regime of discipline while he acts so and while he discharges
his duty in the said capacity.
In order to continue the regime of discipline, the
Commissioner of Customs is empowered to revoke a licence
of the customs house agent and order forfeiture of his security
if the customs house agent fails to comply with any of the
conditions of the bond executed by him and he fails to comply
with the provisions of the Regulation or indulge into an act
which would amount to "misconduct". The licence of customs
house agent, therefore, continues subject to his abiding by the
obligations imposed upon him and he acting in a fair manner
as expected in terms of the regulations. The Regulation 19
authorises the Commissioner of Customs to suspend the
licence if it is so required to be suspended immediately even
without an inquiry against the customs broker being pending
or even when it is not initiated, but only contemplated.
Regulation 19 sub-clause (2) contemplates a post decisional
hearing when a licence has been suspended and the
SSK 30 Custom Appeal 88-16
Commissioner of Customs was required to take an action
immediately without following the procedure of issuing of
show cause notice and sub-clause (2) of Regulation 19
contemplates an opportunity of hearing to be afforded within
15 days from the date of suspension. On consideration of the
submission of the customs broker, and on being afforded an
opportunity of hearing, the Commissioner of Customs has two
options, he may either revoke the suspension or he may
continue the same. If the Commissioner of customs decides to
continue the suspension then he would follow the procedure
prescribed in Regulation 20.
Regulation 20 prescribes a procedure for revoking
a licence or imposing penalty. Sub-clause (1) of Regulation 20
requires a Commissioner of Customs to issue notice in writing
to a customs broker within a period of 90 days from the
receipt of an offence report stating the grounds on which it is
proposed to revoke the licence or impose the penalty to the
customs broker, and permit him to submit his say within 30
days to the Deputy Commissioner of Customs or Assistant
Commissioner of Customs. If the customs broker expresses an
SSK 31 Custom Appeal 88-16
intention to be heard in person by the Deputy Commissioner
of Customs or Assistant Commissioner of Customs, he is
permitted to do so and sub-Regulations (2) and (3) then sets
out the procedure to be followed on receipt of the written
statement or when no such written statement is received and
the material that would be taken into consideration for the
purposes of ascertaining the correct position. The Regulation
also affords an opportunity of cross-examination of the
persons examined in support of the grounds forming the basis
of the proceedings. Sub-clause (5) of Regulation 20 mandates
the Deputy Commissioner of Customs or Assistant
Commissioner of Customs to prepare a report of inquiry and
forward the same within 90 days from the date of issuance of
notice to the Commissioner of Customs. The customs broker is
then entitled to get a copy of the said report and he is also
permitted to submit a representation if he intends to do so. As
per clause (7) of Regulation 20 the Commissioner of Customs
on consideration of report of inquiry received by him and the
representation from a customs broker, if any, would pass the
final order which he deems fit either revoking the suspension
of licence or revoking the licence of customs broker or
SSK 32 Custom Appeal 88-16
imposing a penalty as mentioned in Regulation 22 within 90
days from the submission of report by the Deputy
Commissioner of Customs or Assistant Commissioner of
Customs under clause (5) of Regulation 20. However, when
he decides to revoke the licence, it is imperative for him to
grant an opportunity of hearing to the customs broker in
person.
9 The scheme of Regulation 20, reveals a procedure
to be followed by revenue for revocation of licence and the
said procedure mandates following the principle of natural
justice and is based the principles of fairness and equity. The
said regulation affords an opportunity to the customs broker
to defend an action proposed against him, but at the same
time, it sets out a time limit to be followed at every stage of
the inquiry. A show cause notice asking to show cause as to
why licence should not be revoked, is to be issued within a
period of 90 days from the date of receipt of offence report.
The customs broker is given 30 days time to submit his
written statement of defence and also to specify whether he
proposes be heard in person. The Deputy Commissioner of
SSK 33 Custom Appeal 88-16
Customs or Assistant Commissioner of Customs, who is
nominated by the Commissioner of Customs would enquire
into the grounds with which the customs broker is charged
and after taking into consideration the documentary and oral
evidence would prepare a report within a period of 90 days
from the date of issuance of show cause notice. Once such
report is submitted to the Commissioner of Customs, he
would again afford an opportunity to the customs broker to
prefer a representation on the same within a period of 30
days and then on receipt of such report the Commissioner of
Customs would take a final action within a period of 90 days
from the date of receipt of report of the Deputy Commissioner
of Customs or Assistant Commissioner of Customs. The whole
process prescribes a time limit with an intention that the
proceedings initiated against the customs house agent do not
continue till infinity and are concluded within a prescribed
time frame since continuation of the inquiry for a prolonged
period would result into deprivation of means of livelihood of
the customs house agent and would keep him out of the
business since the licence is under suspension. With this
prime objective, the time limit have been specified in
SSK 34 Custom Appeal 88-16
Regulation 20 and the moot question involved before us is
whether the adherence to the time scheduled is so
imperative that any violation or infringement or deviation
there from would result into a declaration of the action as
invalid.
10 The question, therefore, is whether the provision
contained in Regulation 20 is mandatory or directory. The use
of the word "shall" in normal parameters be construed as
mandatory and the word "shall" would be required to be read
as "must" unless and until it was essentially read as "may" to
achieve the legislative intention and to be construed in
accordance with its use in the provision. However, it cannot
be laid down as an universal rule that whenever the word
"shall" is used in a statute, it would only mean to be of
mandatory nature, whereas the word "may", would be
indicative of being directory. However, use of such word is not
the sole test or criteria, but the said word shall be construed
by taking into consideration the nature, design and the
consequences, which would flow from construing it one or
the other way. The Hon'ble Apex Court in the case of Delhi
SSK 35 Custom Appeal 88-16
Air take Services Pvt Ltd and another Vs. State of West Bengal
and another reported in 2011(a) SCC page 354 has observed
thus:
"where a statute imposes a public duty and
proceeds to lay down the manner and time
frame within which the duty shall be
performed. The injustice or inconvenience
resulting from a rigid adherence to the
statutory prescriptions may not be relevant
factor in holding such prescriptions to be only
directory. For eg., when dealing with provisions
relating to criminal law, legislative purpose is to
be borne in mind for its proper interpretation.
It is said that the purpose of criminal law is to
permit everyone to go about the daily lives
without fear of harm to person or property and
it is in the interest of everyone that serious
crime be effectively investigated and
prosecuted. There must be fairness to all sides.
In a criminal case, the Court is required to
consider the triangulation of interests taking
into consideration the position of the accused,
the victim and his or her family or the public.
The basic purpose of interpretation of
statutes is further to aid in determining either
the general object of the legislation or the
meaning of the language in any particular
provision. It is obvious that the intention which
appears to be most in accordance with
convenience, reason, justice and legal principles
should, in all cases of doubtful interpretation,
be presumed to be the true one. The intention
to produce an unreasonable result is not to be
imputed to a statute. On the other hand, it is
not impermissible, but rather is acceptable, to
adopt a more reasonable construction and avoid
SSK 36 Custom Appeal 88-16
anomalous or unreasonable construction. A
sense of the possible injustice of an
interpretation ought not to induce Judges to do
violence to the well settled rules of construction,
but it may probably lead to the selection of one,
rather than other, of the two reasonable
interpretations. In earlier times, statutes
imposing criminal or other penalties were
required to be construed narrowly in favour of
the person proceeded against and were more
rigorously applied. The courts were to see
whether there appeared any reasonable doubt
or ambiguity in construing the relevant
provisions right from the case of R.V. Jones, ex
p Daunton, the basic principles state that even
statutes dealing with jurisdiction and
procedural law are, if they relate to inflation of
penalties, tobe strictly construed; compliance
with the procedures will be stringently exacted
from those proceedings against liable to be
penalised and if there is any ambiguity or
doubt, it will be resolved in favour of the
accused / such person. These principles have
been applied with approval by different Court
even in India. Enactments relating to
procedure in courts are usually construed as
imperative. A kind of duty is imposed on court
or a public officer when no general
inconvenience or injustice is caused from
different construction. A provision of statute
may impose an absolute or qualified duty upon
public officer which itself may be a relevant
consideration while understanding the
provision itself."
The question therefore, is whether use of word
"shall" as indicated in Regulation 20 which requires the
Commissioner of Customs to issue a notice in writing to the
SSK 37 Custom Appeal 88-16
custom broker within a period of 90 days from the date of
receipt of offence report, is to be construed as mandatory or
directory. The distinction between a directory and mandatory
enactment is explained in Halsbury's Law of England,
Simond's Edition, Volume 36 in the following words:
"where a statute requires an act to be done
within a particular time or in a particular
manner, the question arises whether the
validity of the Act is affected by a failure to
comply with that time-limit prescribed. If it
appears that the Parliament intended
disobedience to render the act invalid, the
provision in question is described as
"mandatory", "absolute", imperative" or
"obligatory", if on the other hand compliance
was not intended to govern the validity of what
is done, the provision is said to be "directory".
Crawford in statutory constitution, 1940 Edition has
brought the distinction between mandatory and directory
provision in the following words "A statute, or one or more of
its provisions may be either mandatory or directory. While
usually in order to ascertain whether a statute is mandatory
or directory, one must apply the rules relating to the
construction of statutes; yet it may be stated, as a general
rule, that those whose provisions relate to the essence of the
thing to be performed or to matters of substance, are
SSK 38 Custom Appeal 88-16
mandatory, and those which do not relate to the essence and
whose compliance is merely a matter of convenience rather
than of substance are, directory. So, a mandatory statute may
be defined as one whose provisions or requirements, if not
complied with, will render the proceedings to which it relates
illegal and void, while a directory statute is one where non-
compliance will not invalidate the proceedings to which it
relates.
In Maxwell on interpretation of statutes the
principle is thus stated "The general rule is that an absolute
enactment must be obeyed or fulfilled exactly, but it is
sufficient if a directory enactment be obeyed or fulfilled
substantially. The above statement of law in Maxwell conveys
the impression that even in the case of a directory provision,
omission in substantial compliance may invalidate the act or
proceedings.
In Govindlal Chhaganlal v. Agriculture Produce
Market Committee reported in AIR 1976 SC 263, the Supreme
Court has approvingly quoted the following passage from
Crawford on statutory construction as under:
SSK 39 Custom Appeal 88-16
"The question as to whether the statute is
mandatory or directory depends upon the intent
of the legislature and not upon the language in
which it is clothed. The meaning and the
intention of the legislature must govern and this
is to be ascertained not only from the
phraseology of the provision, but by considering
its nature, design and the consequences of
which would follow from construing it one way
or other".
The Hon'ble Apex Court further observed :
"thus the governing factor is the manner and
intent of the legislature which should be
gathered not merely from the words used by
legislature but from a variety and other
circumstances and consideration. But the
circumstances that the legislature has used a
language of compulsive force is always of great
relevance in the absence of anything contrary in
the context indicating that a permissive
interpretation is permissible, the statute ought
to be construed as peremptory. One of the
fundamental rules of interpretation is that if
the words of the statue are themselves precise
and unambiguous, no more is necessary than to
expound those words in their natural and
ordinary sense, the words themselves in such
case best declare the intention of the
legislature".
In Raza Buland Sugar Co. Ltd vs Municlpal Board,
Rampur, reported in AIR 1965 Supreme Court 895, while
construing whether a provision is mandatory or directory, the
Hon'ble Apex Court observed that the determination in the
ultimate analysis depends on the law and facts gathered on
SSK 40 Custom Appeal 88-16
the infringement of the contention but by considering this
nature, this being a consequence which will follow from
construing them in one way or the other.
11 While construing the provision contained in
Section 20 of the regulation whether it is mandatory or
directory and whether the word "shall" used in the said
regulation be construed as mandatory, it would be necessary
to ascertain the real intention of the legislature by carefully
evaluating the whole concept of the statute. The question
whether the statute is mandatory or directory, would depend
on the intention of the legislature and not necessarily merely
by looking at the language in which it is clothed. 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. The
circumstance, namely, the statute provides a contingency of
the non-compliance of the provisions, the fact that the non-
compliance of the provision is or is not visited with some
penalty, the consequences flowing therefrom and above all
SSK 41 Custom Appeal 88-16
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. If the provisions are construed
as mandatory, the act done in breach thereof necessarily will
be invalid, but if the provision is held to be directory then
even though there is no strict compliance with the provision,
the act will be valid, though it may give rise to some
consequences, if provided by the statute. It is no doubt true
that the purpose of Regulation 20, which governs the
Customs House agents is to inculcate discipline and a pattern
in discharge of their duties and working. The regulation
ensures to safe-guard the right conferred on the customs
house agent by conferring the minimum protection by
prescribing a period of licence and once such licence is
granted unless and until there is a default on part of the
customs house agent, its renewal is assured. However, the
default on part of the Customs House Agent needs to be
inquired into before depriving the Customs House Agent of
his licence. At the same time the interest of revenue is also
sought to be protected by the regulation which authorises the
Commissioner of Customs to revoke the licence and forfeit the
SSK 42 Custom Appeal 88-16
part of or whole of the security or even to impose a penalty in
the circumstances identified by the regulation. In order to
maintain the regime of discipline, the Commissioner is also
authorised to initiate an action in form of suspension of
licence with immediate effect contemplating or pending an
inquiry. The imminence of the action, postponement of the
opportunity of hearing that Regulation 19 provides for post
decisional hearing when an action is taken to suspend the
licence. Thus, the regulation aims at securing interest of the
customs house agent and also the revenue. Thus, the urgency
and expediency of the action permits the Authority to step in
immediately or with promptitude. A balancing of interests is
achieved by ensuring prompt action and avoiding undue
delay in taking it to its logical conclusion.
The question therefore is whether non-adherence
to the time frame as mentioned in regulation 20 would be so
strictly construed so as to result in declaring initiation of
action itself invalid, if that is not adhered to. There might be
circumstances and situations which are not within the control
either of the customs house agent or the Revenue. It is
SSK 43 Custom Appeal 88-16
possible that a customs house agent is unable to attend the
proceedings on account of his ill-health or any other
unforeseen contingency, resultantly, the proceedings are
required to be postponed by extending the date for submitting
his written statement or submitting evidence, resultantly
postponing the final time limit prescribed. In such a situation,
can the provision be construed to be mandatory to the
detriment of the customs house agent, since it was beyond his
control to respond to the allegations made against him.
Another contingency may occur, when the hearing in the
proceedings is completed, but on account of administrative
exigency, the Commissioner of Customs is transferred, can it
be still said that the time line was so mandatory that when
the order was not passed on 16th day, the entire action
becomes invalid. It is also possible that the customs house
agent avoids to adhere to the time limit and does not file his
reply under Regulation 19 (2) and then takes advantage of
the fact that the suspension was not revoked on the 16 th day,
irrespective of the fact that the alleged action is detrimental
to the interest of the revenue or the allegations levelled
SSK 44 Custom Appeal 88-16
against him are of serious nature. In such circumstances, can
it be permissible that the customs house agent is entitled to
take benefit of his own wrong, on the ground that the process
is not completed within the stipulated period. In such
circumstances, if the provision is construed in such a rigid
form and no flexibility is allowed, though it results into
declaration of the entire action of the revenue as illegal,
would it ensure justice or defeats it?
In these circumstances, the principle that comes
into foreplay is the one set out in "Principles of Statutory
Interpretation, Ninth Edition 2004 Justice G.P Singh" is
"where a statute imposes a public duty and lays
down a manner in which and time within which
the duty shall be performed; whether the strict
adherence to the time limit results into an
injustice or inconvenience and this may be a
relevant factor in defining whether the
provision is to be construed as mandatory or
directory".
In a situation where a public officer is cast with a
duty and the power flowing from a statute and he is expected
to perform a duty within a specific time limit, it will have to
be examined that non-performance of the duty within the
stipulated time limit, would it render the entire action already
SSK 45 Custom Appeal 88-16
initiated illegal, merely because the public officer was not
able to adhere to the time limit. A particular statute may
provide for a consequence of not deciding an application
within the period stipulated therein and may contain a
provision that if it is not decided within a particular time
schedule, it shall be deemed to be granted. If performance of
a public duty is required to be discharged within a specific
time which also confers a right on a person, the provision as
to time limit will still have to be held as directory unless it is
shown that a person on whom the right is conferred, is
prejudiced because of non-performance of the duty within a
specific time. Thus in case of T. V. Usman vs Food Inspector,
Tellicherry, reported in 1994 (1) SC 260, the time limit
prescribed by Rule 7(3) of the Adulteration Rules, which
requires that the public analyist "shall within the period of 45
days" deliver to the Legal Health Authority a report of the
result of his analysis has been held to be directory unless the
delay has prejudiced the right of the accused to have sample
of the food analysis by Central Food Laboratory, e.g., when
the sample becomes unfit for analysis because of the delay. If
a statutory provision as to time limit is a condition for
SSK 46 Custom Appeal 88-16
exercise of a statutory power as distinct from duty, the
prescription as to time will be construed as mandatory but
whether it is a case of statutory duty or statutory power, the
statute may expressly or impliedly make the authority functus
officio on expiry of the prescribed period. In the words of
Privy Council in case of Monterial Street Railway vs.
Normandin AIR 1917 P.C 142, the principle was stated thus:
"When the provision of a statute relates to
performance of a public duty and the case is
such that to hold null and void acts, in neglect
of this duty, would work serious general
inconvenience, or injustice to persons who have
no control over those who are entrusted with
the duty, and at the same time would not
promote the main object of the legislature, it
has been the practice to hold such provisions to
be directory only".
In that case the question involved was that
whether omission to revise the jury list in terms of the statute
had the effect of invalidating the verdict of the jury and it was
held that the verdict of the jury cannot be avoided on account
of irregularities in due revision of the jury list.
Applying the aforesaid principle to Regulations 19
and 20, it can be safely concluded that if the provision is
construed to be mandatory, then in such circumstances, mere
SSK 47 Custom Appeal 88-16
non-adherence to the time schedule would result into
conferring a benefit upon a otherwise undeserving Customs
House Agent to have his suspension revoked, or to have the
action of revocation of his licence being declared invalid,
though he would have been charged with grave and serious
allegations of indulging into any misconduct rendering him
unfit to transact the business at customs station. However, on
the other hand, it would also not be appropriate on part of
the Revenue Authorities to indefinitely postpone the
proceedings and deal it in a casual manner, by keeping the
licence suspended for a considerably long period of time,
resultantly, keeping the customs house agent out of business,
which may be the only source of livelihood for him. The
whole purpose of the CBLR-2013 being to frame a time line
so that undue delay in the proceedings can be avoided, and
the balance will have to be struck between the strict
adherence to the said time schedule to such an extent that
even a day's delay would prove to be fatal and render the
entire action invalid and on the other hand, to grant such a
discretion to the revenue to continue the said action of
suspension of licence for an indefinite period depriving the
SSK 48 Custom Appeal 88-16
customs brokers of their right to carry on business on the
basis of the licence, on a spacious ground that the charges
levelled against him are being enquired into. Neither of these
two extreme situations are ideal and balance will have to be
struck by construing that the time limit for completion of
inquiry for revoking the licence or imposing the penalty and
keeping the licence under suspension should be "Reasonable
period", depending on the facts and circumstances of each
case. There cannot be any absolute principle, which can be
laid down to determine as what would be reasonable period
but it would be dependent on the facts and circumstances of
each case since on one hand, the purpose of prescription of
the time limit by the Regulation is to cast a duty on the
Revenue Authorities to act within the time frame since it
adversely affects the interest of the licensee and on the other
hand the licensee should not be permitted to take an
advantage of some delay at the instance of the Revenue,
which is beyond its control since the revenue administration
needs to be granted certain concessions which may be on
account of administrative exigencies, and the department
working at different levels through different persons. The
SSK 49 Custom Appeal 88-16
principles of fairness and equity demands that when there is
deviation from the time schedule prescribed in the
Regulation, the Revenue enumerates the reasons and
attributes them to an officer dealing with it and also accounts
for every stage at which the delay occurs. Every endeavour
should be made to adhere to the time schedule but in
exceptional circumstances, which are beyond the control of
the revenue if the time schedule is not adhered to, an
accountability be fastened on the Revenue, to cite reasons
why the time schedule was not adhered to, and then leave the
decision to the adjudicating authority to examine whether the
explanation offered is reasonable or reflects casual attitude on
behalf of the Revenue. This is the only way how the
Regulation can be made effective and worthy of its existence
so as to safe-guard the interest of the customs house agent,
who is in a position of the delinquent and faces an inquiry
somehow similar to an inquiry in disciplinary proceedings on
one hand and the revenue in the capacity of the
administration on the other hand.
In Union of India Vs. R.S. Saini, 1999(2) SCC 151,
SSK 50 Custom Appeal 88-16
the Supreme Court held that the office memorandum fixing
the time limit for completion of disciplinary proceeding is
only a mid-line and non-compliance of such office
memorandum will not invalidate the punishment. The office
memorandum was held to be not construed as imposing rigid
time line for imposing of the order of punishment. Further in
Topline Shoes Limited Vs. Corporation Bank, in 2002(6) SCC
33, the Supreme Court did not accept the submission raised
before it that the said commission constituted under the
Consumer Protection Act, 1986 has no power to accept the
reply beyond the stipulated period of 45 days. The Apex
Court held that said provision cannot be construed as
mandatory in nature though no consequences are prescribed
and the wording used is "not exceeding 15 days". It did not
prescribe for any kind of period of limitation and hence the
provision was construed to be directory in nature. Such type
of provision, being procedural in nature, aimed at speedy
disposal of disputes, demanded adherence to the time
schedule, would fall short of creating any substantial right in
favour of a party for reason of its non-compliance. The
provision contained in a statute which is procedural in nature
SSK 51 Custom Appeal 88-16
that employed the word "shall" be held to be mandatory, if it
did not cause any prejudice. The emphasis, therefore, should
not be upon the language employed in the provision, but the
Court will have to examine whether the provision is intended
to specify certain procedure or whether it confers certain
rights in the individual and casts a corresponding duty on the
officer concerned. The Court will have to examine as to if
such a provision is construed to be mandatory or directory,
what is the effect or such a provision and whether its non-
compliance would invalidate or render the proceedings void
ab initio or it would result into imposition of lesser penalty or
in issuance of directions to protect the individual against the
action of the State. The language of the statute, the intention
of the legislature would determine the impact of non-
compliance in facts and circumstances of a given case, before
the Court construes a provision to be directory or mandatory.
12 The learned Counsel for the Respondents have
taken us through series of judgments delivered by the various
High Courts taking a view that the time limits in the CHALR
for issuance of show cause notice to the customs house
SSK 52 Custom Appeal 88-16
licencee and completion of inquiry within 90 days being
sacrosanct. The Delhi High Court in Indian Courier Pvt Ltd vs.
Commissioner of Customs (General) emphasized on the
mandatory nature of the CHALR as regards the time limit in
the following words:
"6. The time limits in the CHALR, 2004 for
issuance of the SCN to the CHA licence holder
and completion of the inquiry within 90 days of
issuance of such SCN are sacrosanct. The
aforesaid time limits were engrafted into
Regulation 22 of the CHALR, 2004 by a
Notification No.30/2010-Cus. (N.T.) dated 8th
April, 2010. Simultaneously, the CBEC issued
Circular NO.9/2010 dated 8th April, 2010
clarifying the procedures governing the
suspension and revocation of CHA licence. In
para 7.1 of the said Circular, it was noted as
under:
"7.1 The present procedure prescribed for
completion of regular suspension proceedings
takes a long time since it involves inquiry
proceedings, and there is no time limit
prescribed for completion of such proceedings.
Hence, it has been decided by the Board to
prescribe an overall time limit of nine months
from the date of receipt of offence report, by
prescribing time limits at various stages of
issue of show cause notice, submission of
inquiry report by the Deputy Commissioner of
Customs or Assistant Commissioner of Customs
recording his findings on the issue of
suspension of CHA license, and for passing of
an order by the Commissioner of Customs.
Suitable changes have been made in the present
SSK 53 Custom Appeal 88-16
time limit of forty five days for reply by CHA to
the notice of suspension, sixty days time for
representation against the report of AC/DC on
the grounds not accepted by CHA, by reducing
the time to thirty days in both the cases under
the Regulations."
12 The said judgment has been consistently followed
by the Delhi High Court, wherein the Court had taken a view
that revocation of a CHA licence is bad in law since the time
limit for completion of inquiry in terms of Regulation 22 (5)
has not been adhered to. The Madras High Court in case of
Masterstroke Freight Forwarders Pvt Ltd Vs. C.C (I) Chennai
2016 (332) ELT 300 (Madras) while dealing with the issue as
to whether period of 90 days prescribed in Regulation 20(1)
of CBLR, 2013 are directory or mandatory, after referring to a
series of judgments held thus:
"The purpose for which such time limit
has been prescribed is to curb the smuggling of
goods and in the result to cancel the licences of
the brokers if they are involved and to impose
penalty. The interpretation of a statute must
always be to give a logical meaning to the object
of the legislation and the aim must be to
implement the provisions rather than to defeat
it. As laid down by the Apex Court in the
judgments relied upon by the learned counsel
for the petitioners, when a statute prescribes a
thing to be done in a particular manner, it must
be performed in such a manner. Also, the use of
SSK 54 Custom Appeal 88-16
the consequence of the action is the revocation
of the licence and it would also pave way for
inaction by the officials breeding corruption.
It is also to be noted that every act of
breach by the Broker would entitle the
authorities to initiate proceedings from the date
of knowledge of the offence. It is only if the time
limit is strictly followed, swift action can be
initiated against the Customs Brokers and the
authorities can also be made accountable. The
Regulations only contemplate initiation of
proceeding by issuance of notice within 90 days.
While, making out a prima facie case, the
respondents ought to have, without any shadow
of doubt, treated the word "shall" in Regulation
11 as "mandatory" and not "directory".
Therefore, when a time limit is prescribed in
Regulations, which empowers action in
Regulation 18 and procedure in Regulation
20(1), the use of the term "shall" cannot be
termed as "directory". It is pertinent to
mention here that the CBLR, 2013 have
replaced the CHA Regulations. The CHA
regulations did not have any time limit to
complete the proceedings. Therefore, by a
Circular 9/2010, dated 8-4-2010, the necessity to
include a time limit for initiating action was
addressed by the Board after field inspection
and by a notification dated 8-4-2010,
amendments prescribing time period for
initiating action and completing proceedings
was made. The same was given effect by
notification dated 20-1-2014. Whereas, under
the CBLR, 2013 having found the necessity to
prescribe a period, the Central Board, the
statutory authority had included the same in
the Regulations itself, when they were brought
into force. Therefore, when a time limit is
prescribed in Regulations, which empowers
action under Regulation 18 by following the
SSK 55 Custom Appeal 88-16
procedure in Regulation 20(1), the use of the
term "shall" cannot be termed as "directory".
Under such circumstances, the rule can only be
termed as "Mandatory".
13 The learned counsel appearing for the licensee, by
relying on the said judgments would argue that the said
Hon'ble High Courts have granted benefit to the customs
brokers on account of non-adherence to the time limit.
Reliance is also placed on the judgment of the said CESTAT
West Zonal Bench, Mumbai delivered in Appeal
No.C/87322/15 in case of M/s.Maakrupa Forwarders Pvt. Ltd
Vs. Commissioner of Customs, Mumbai dated 18th October
2016. Perusal of the said judgment, would reveal that
Revenue had taken 1221 days to complete the inquiry for
which a period of 270 days is prescribed in CBLR, 2013 and
in this backdrop, the Tribunal observed that due to inordinate
delay of exceptional nature in completing the proceedings,
fundamental right of work is being denied to the appellant
and it was also observed that the Customs Brokers who are
unscrupulous, get the advantage of the delay and people who
are not guilty would continue to suffer the suspension and
revocation on account of delay by revenues due to lack of
SSK 56 Custom Appeal 88-16
responsibility.
The said judgment of the CESTAT reflects a
extreme situation and the data which was placed before the
Tribunal revealed that inquiries had been pending for more
than five years and in this back drop, the Tribunal commented
about the inordinate delay. This is what precisely is to be
avoided. The order passed by the CESTAT cannot be said to be
erroneous by taking into consideration the enormous delay,
reflecting the attitude of the Revenue, which had failed to
discharge its duty, causing serious inconvenience to the
Customs House Agent, which in any event, cannot be
justified. However, the said principle cannot be accepted as
an absolute principle where the delay of 15 days has also
been held to be inordinate and the licence came to be
restored. We do not propose to deal with these two
extremities since we are of the considered view that the mid-
line has to be drawn where the time line may not be
construed as so rigid, inflexible and a reasonable deviation is
permissible where delay is accounted for and the Revenue
would be made accountable in discharge of its statutory duty.
SSK 57 Custom Appeal 88-16
The principle, which is to be applied to construe
whether the Regulation is directory or mandatory, is to be
tested by examining the consequences of the Regulation being
treated either way in the context of the aim and object of the
provision.
14 Adherence to the time schedule prescribed in the
Regulation 20 in a rigid way would lead to a situation where
non-compliance with the time frame and even deviation by a
single day would resultantly invalidate the entire action and
the licence which is under suspension or which is revoked, is
liable to be restored. The procedural formality as required to
be complied within the time frame prescribed in the
regulation, even if it is deviated for whatsoever reason
beyond the control of the revenue or the custom house agent
would result into consequences of declaring the entire action
invalid if the provision is construed as mandatory. On the
other hand, if the provision the construed as directory, the
custom house agent would be deprived of his licence for
considerable long time, if the time schedule is not adhered to
the Revenue at its sweet choice would prolong the procedure
SSK 58 Custom Appeal 88-16
and which is a likely situation, no attempts would be made to
complete the inquiry within the stipulated period.
This is what has weighed in the mind of the High
Courts while dealing with the said regulation and holding the
same to be mandatory.
The catena of judgments on which reliance has
been placed to declare the provision as mandatory have
referred to 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
safe-guard the interest of the custom broker and smooth
import and export of goods. By relying on a celebrated
principle, when a statute prescribes a thing to be done in a
particular manner, it must be performed in such a manner, the
use of the word "shall" in the Regulation has been construed
as mandatory.
With due respect to the finding so recorded in the
judgment of the Madras Court in case of Masterstroke Freight
Forwarders P. Ltd. vs. C.C.(I), Chennai-I, reported in 2016
SSK 59 Custom Appeal 88-16
(332) E.L.T. 300 (Madras) delivered by the learned Single
Judge, the parameters of construing a provision as mandatory
or directory, when it deals with a discharge of a public duty
and a resultant consequence has not been specifically taken
into consideration. The salutary principle, whether statute
imposes a public duty and lays down the manner and time
within which the duty shall be performed, the injustice or
inconvenience resulting from a rigid adherence to the
statutory prescription, is a relevant factor for holding such
provision only as directory has been completely overlooked.
As observed by Justice DENMAN in CALDOW versus
PIXELL (1877) 2 CPD 562, "in considering whether the
statute is imperative, the balance may be struck between
inconvenience or sometime rigidly adhered to, or sometime
departure from this direction". In that case, it was held that
where a public officer was directed by statute to perform a
duty within a specific time the case is established that the
provisions are only directory, as already discussed above.
There might be reason why such time limits cannot be
adhered to and these reasons may be at times attributable to
SSK 60 Custom Appeal 88-16
the revenue and some time to the customs house agent. Strict
adherence to the said time limit and not making it even
slightly flexible would warrant a situation where even one
day deviation from the time line would be equally fatal as a
delay of one year. This surely is not the intention in framing
the Regulation. Undisputedly, the intention is to curb the
delay in concluding the inquiries, however, it should not be
stretched to an extent where it would defeat the very purpose
of the Regulation, being to enforce a regime of discipline in
the custom arena and it would result in letting the miscreant
set loose by taking benefit of deviation of the time schedule.
The said CESTAT West Zonal Bench, Mumbai in Unison
Clearing Pvt Ltd vs. Commissioner of Customs (General,
Mumbai) (supra) has in detail dealt with the Regulation 22
and has examined whether it has to be construed as
mandatory or directory. Relying on catena of judgments
delivered by the Hon'ble Apex Court, and specifically in Delhi
Air take Services Pvt Ltd and another Vs. State of West Bengal
and another, CESTAT has concluded that while deciding
whether the time period is directory or mandatory, it would
be seen that the purpose of law prescribing it as mandatory
SSK 61 Custom Appeal 88-16
and consequently the absence of provisions of consequences
in case of non-compliance with the requirement would
indicate that the provisions are directory irrespective of use of
the word "shall". The CESTAT has concluded that if the time
limits are construed as mandatory and the matter is put to an
end, the purpose of Regulation would be defeated and so
would be the intention behind framing such a Regulation.
On the other hand, if there is no consequence stated in the
regulation for non-adherence is a time period for conducting
the inquiry, the time line cannot be proved to be fatal to the
outcome of the inquiry. Based on these observations the
Tribunal had held the Regulation is directory in nature.
However, in the present judgment which is impugned before
us, the CESTAT has taken a view contrary to its earlier view in
Unison Clearing Pvt Ltd (supra) and after referring to certain
precedents where a view was taken that the regulations are
mandatory delivered by the Tribunal itself, the Tribunal was
pleased to quash and set aside the impugned order being not
sustainable and allowed the Appeals. It is to be noted that
the Member Judicial (Ramesh Nair) who is a party to the
judgment delivered by the said CESTAT in Unison Clearing Pvt
SSK 62 Custom Appeal 88-16
Ltd Vs. Commissioner of Customs (General Mumbai).
15 In view of the aforesaid discussion, the time-limit
contained in Regulation 20 cannot be construed to be
mandatory and is held to be directory. As it is already
observed above that though the time line framed in the
Regulation need to be rigidly applied, fairness would demand
that when such time limit is crossed, the period subsequently
consumed for completing the inquiry should be justified by
giving reasons and the causes on account of which the time-
limit was not adhered to. This would ensure that the inquiry
proceedings which are initiated are completed expeditiously,
are not prolonged and some checks and balances must be
ensured. One step by which the unnecessary delays can be
curbed is recording of reasons for the delay or non-adherence
to this time-limit by the Officer conducting the inquiry and
making him accountable for not adhering to the time
schedule. These reasons can then be tested to derive a
conclusion whether the deviation from the time line
prescribed in the Regulation, is "reasonable". This is the only
way by which the provisions contained in Regulation 20 can
SSK 63 Custom Appeal 88-16
be effectively implemented in the interest of both parties,
namely, the Revenue and the Customs House Agent.
16 In the light of the aforesaid discussion, the
appeals filed by the Revenue succeed and the question of law
framed in the appeals is answered by holding that the CESTAT
was not justified in setting aside the order or suspension of
the Customs Brokers Licence on the ground of delay between
suspension and the notice of deviation or omission and it
cannot be laid down as an absolute proposition of law that
delay in taking immediate action of suspension or initiation of
inquiry within a period of 90 days would vitiate the action of
the Commissioner. The matters are remanded to the CESTAT
for fresh adjudication in light of the question of law answered
in the present appeals.
[SMT. BHARATI H. DANGRE, J] [S. C. DHARMADHIKARI,J]
