Calcutta High Court
Welcome Air Express Private ... vs Commissioner Of Customs (Airport ... on 4 May, 2022
CUSTA NO. 04 OF 2015
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
SPECIAL JURISDICTION (CUSTOMS)
ORIGINAL SIDE
RESERVED ON: 12.04.2022
DELIVERED ON: 04.05.2022
CORAM:
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE HIRANMAY BHATTACHARYYA
CUSTA NO. 04 OF 2015
WELCOME AIR EXPRESS PRIVATE LIMITED
VERSUS
COMMISSIONER OF CUSTOMS (AIRPORT & ADMINISTRATION)
Appearance:-
Mr. Ananda Sen, Adv.
Mr. M.K. Poddar, Adv.
Mr. S.K. Poddar, Adv.
.....For the Appellant.
Mr. K.K. Maity, Adv.
.....For the Respondent.
Page 1 of 46
CUSTA NO. 04 OF 2015
JUDGMENT
(Judgment of the Court was delivered by T.S.SIVAGNANAM, J.)
1. This appeal filed under Section 130 of the Customs Act, 1962 (the Act) is
directed against the order dated 25.05.2015 passed by the Customs Excise and
Services Tax, Appellate Tribunal, East Regional Bench, Kolkata (Tribunal) in
Customs Appeal No. 75205/2014 arising out of an order-in-original dated
19.12.2013 passed by the Commissioner of Customs (Administration &
Airport), Calcutta. The appellant has raised the following substantial questions
of law for consideration:-
(I) Whether on the facts and in the circumstances of the case
the Tribunal was correct in coming to its findings that the
petitioner had violated the provisions of Regulation 13 (b),
13 (d) and 19 (8) of Customs House Agents Licensing
Regulation, 2004 resulting in revocation of the license of
the petitioner, by solely relying upon statement given by
the Managing Director of the petitioner without taking into
consideration the other part of the evidence available on
record, and whether the said finding is legal, proper and
justified or whether the said finding is vitiated being
perverse in law?
(II) Whether on the facts and in the circumstances of the case
the Tribunal grossly erred in law incoming to its conclusion
that finding given in a collateral proceeding will not be
taken into consideration for adjudicating a case when the
background and genus of the offence committed is same in
both the cases?
CUSTA NO. 04 OF 2015
2. The facts as stated by the appellant are that the appellant is a private
limited company registered under the provisions of the Companies Act, 1956
and engaged in the business as the Customs House Agent (CHA). The appellant
was granted a license to function as a CHA by order dated 27.01.2007 passed
by the Commissioner of Customs (Administration) Kolkata in terms of Section
146 of the Act read with Regulation 9 (1) of the Customs House Agent Licensing
Regulation, 2004 (CHALR), the period of license was for 10 years from
29.07.2006.
2.1 During November 2008, a forwarding agent M/s. Draft Cargo India Private
Limited, Kolkata is said to have approached the appellant to export certain
goods for one of its silent exporter, M/s. Himalayan Tours and Travels. The
appellant would state that they earnestly believed that Himalayan Tours had a
genuine export consignment as it was suggested by letter of authorization given
by them dated 07.11.2008 certifying that Himalayan Tours and Travels
appoints the appellant as their authorized CHA and the scope of their
responsibility is confined to clearance of customs and dock based on pre-given
documents. They also undertook that the container in which the goods were
stuffed are 600 bags of iron sponge and there are no specified/contraband
goods and/or any goods contrary to the Act has been stuffed in the said
container. The appellant is stated to have prepared the shipping bill on the
basis of the invoice and packing list prepared and forwarded by Himalayan
Tours through Draft Cargo India, the freight forwarder. The shipping bill was
assessed by the Customs authorities and the appellant paid the customs duty
CUSTA NO. 04 OF 2015
of Rs. 57,637/- on behalf of the exporter. On 11.11.2008 the transporter of the
said exporter brought the consignment stuffed in 20 feet container under lock
and key and handed over the same to the Jetty Sircar of the appellant outside
the gate of the Netaji Subhas Chandra Dock, Kolkata for the purpose of taking
the same inside the port to comply with the shipping formalities with the
customs authorities. The appellant would further state that the container was
opened by the customs authorities for the purpose of examination and
appraisement of the Cargo and thereafter it was sealed by the customs
authorities and "Let Export Order" dated 11.11.2018 was issued.
2.2 On 30.11.2008 the Managing Director of the appellant was called over
phone by the officers of the Directorate of Revenue Intelligence, Calcutta, Zonal
House, (DRI) to be present in the dock complex for the purpose of re-
examination of the Cargo. The container was opened and the Cargo was re-
examined and stated to contain red sander-woods in logs. Thereafter the
Managing Director received summons under Section 108 of the Act and the
statement was recorded from the Managing Director which according to the
appellant was obtained under threat, undue influence and coercion. It is
thereafter by order dated 11.05.2009 the CHA license granted to the appellant
was suspended in exercise of the powers conferred under Regulation 20(2) of
the CHALR. It was alleged that the appellant has contravened the provisions of
the CHALR and the conditions of license warranting immediate action so as to
prevent further exercise of his CHA license. The order further stated that
proceedings for revoking the license under Regulation 22 of CHALR will be
CUSTA NO. 04 OF 2015
initiated separately. The appellant filed WP NO. 454 of 2009 challenging the
order of suspension and by order dated 22.05.2009 an interim order was
granted till 26.06.2009 subject to the condition that the appellant shall not
allow the CHA license to be used by any other person other than the appellant
and the employees of the appellant. Simultaneously, the department issued
notice dated 05.05.2009 under proviso to Section 110 (2) of the Act calling
upon the appellant to show cause as to why the time limit for issuance of
show-cause notice under Section 110 (2) should not be extended for a further
period of 6 months that is up to 12.11.2009 under the proviso to Sub-section
(2) of Section 110 of the Act. Opportunity of personal hearing was granted and
fixed on 08.05.2009, by the Commissioner of Customs (Port), Kolkata. The
appellant who was the 6th noticee appeared and submitted reply to the show
cause notice. The contentions raised by the appellant did not find favour with
the Commissioner who by order dated 08.05.2009 extended the period for
issuance of the show cause notice up to 12.11.2009. It is thereafter the show
cause notice dated 14.08.2009 was issued to the appellant under Section 22 (1)
of the CHALR calling upon them to show cause as to why the CHA license held
by them should not be revoked and their security deposit ordered to be fortified
under Regulation 20 (1) of the CHALR. In the said show cause notice, the
authority was of the prima facie view that the conduct of the appellant is
unbecoming as CHA on the following grounds:-
(a) As per Regulation 13 (a) of CHALR2004, the CHA should
obtain an authorization from the
company/firm/individuals by whom he is for the time
CUSTA NO. 04 OF 2015
being employed as Customs House Agent and produce
such authorization whenever required by the Deputy or
Assistant Commissioner of Customs but the CHA failed to
do so.
(b) As per Regulation 13 (b) of CHALR2004, the CHA should
transact business in the Customs Station wither
personally or through an employee duly approved by the
Deputy/Assistant Commissioner of Customs but the CHA
failed to do so.
(c) As per Regulation 13 (d) of CHALR2004 the CHA should
advise his client to comply with the provisions of the Act
and in case of non-compliance, shall bring the matter to
the notice of the Deputy/Assistant Commissioner of
Customs, but the CHA failed to do so.
(d) As per Regulation 19(8) of CHALR2004, the CHA should
exercise such supervision as may be necessary to ensure
the proper conduct of their employees in the transaction
of business as agents, but the CHA failed to do so.
2.3 The appellant submitted their reply dated 17.09.2009 denying and
disputing the allegations made against them in the show cause notice. In the
said reply the appellant retracted the statement recorded by the authorities
from the Managing Director of the appellant, on the ground that it was a
statement prepared as per the dictation of the authority and the Managing
Director was under duress and coercion and no reliance could be placed on the
statement. The sum and substance of the reply given by the appellant was that
there is no allegation that the appellant was involved in mis-declaration and/or
export of red sanders and there is no provision under the Act or under CHALR
CUSTA NO. 04 OF 2015
that there should be a written agreement between the forwarding agent and the
clearing agent to undertake the export. Further it was stated that it is
absolutely false to state that the Jetty Sircar, Mithun Ghosh was not an
employee of the appellant and the copy of a Jetty Sircar license issued by the
Kolkata Port Trust was relied upon to state that Mithun Ghosh was an
employee of the appellant. Further it was stated that the appellant was duly
authorized to carry on the export formalities and copy of the authorization
letter was appended to the reply. Further with regard to the allegations that the
appellant failed to verify the genuineness of the export Cargo, it was stated that
the Cargo was in a sealed container and question of verifying the same by the
appellant, a clearing agent, does not arise and they have no authority to break
open the lock of the container but they are required to be proved based upon
the declaration of the exporter as per invoice, packing list and the authorized
letter which stated that the cargo has 600 bags of iron sponge and there is no
specified/contraband goods. Further the appellant placed reliance on the "Let
Export Order" issued by the customs authorities who had examined the cargo
by opening the container after which it was re-sealed. Further the appellant
contended that it is practically impossible for a clearing agent to verify the
genuineness of each and every client and it is a usual business practice that
clients will be introduced by the forwarding agent and the clearing agent would
undertake the job reposing faith on the forwarding agent. The other allegations
which were made against the appellant were also denied. It is further
submitted that though the reply was submitted by the appellant and received
CUSTA NO. 04 OF 2015
by the department, no further action was taken within a reasonable time. The
writ petition filed by the appellant in WP No. 454 of 2009 was taken up for
hearing and by order dated 23.12.2009, the same was disposed of by directing
the Commissioner of Customs to complete the proceedings and pass an
adjudicating order within 6 months from the date of communication of the
order in the writ petition. The appellant would state that it is only thereafter
the department conducted an inquiry under Regulation 22 (2) of CHALR and
submitted inquiry report dated 30.01.2010, a copy of which was forwarded to
the appellant along with the letter dated 04.03.2010. The appellant submitted
a representation dated 30.04.2010 on the contents of the inquiry report
denying and disputing the findings of the inquiring authority and stating that
the inquiry was completed in a hurried manner and the inquiry officer has
failed to adhere to Regulation 22 (6) of the CHALR which stipulates a time limit
for furnishing the copy of the inquiry report. The appellant also reiterated their
earlier submission denying and disputing the allegations made against them.
2.4 An opportunity of personal hearing was granted to the appellant in which
the appellant was represented by his Counsel. The appellant placed reliance on
several decisions of the Hon'ble Supreme Court to substantiate their case. The
Commissioner of Customs by order-in-original dated 5th August, 2011 revoked
the CHA license granted to the appellant and forfeited the security deposit.
Earlier, the Commissioner of Customs (Preventive), Kolkata adjudicated a
show-cause notice dated 11 th November, 2009 issued by the DRI to nine
noticees and the appellant and its Managing Director were the 6 th and 7th
CUSTA NO. 04 OF 2015
noticees in the said show-cause notice. An order-in-original dated 5th January,
2012 was passed confiscating the red sanders under Sections 113(d) and 119
of the Act. Insofar as the penalty which was proposed against the appellant and
its Managing Director, the Commissioner dropped the penalty proceedings.
Penalty was imposed on the exporter and its Managing Director to the tune of
Rs. 5,00,000/- each and penalty of Rs. 10,00,000/- was imposed on one
Ashok Thakur who was the third noticee.
2.5 The appellant filed an appeal before the Tribunal, challenging the order
dated 5th August, 2011 revoking that CHA license and forfeiting the security
deposit. Before the learned Tribunal, the appellant relied upon the order-in-
original dated 5th January, 2012 passed by the Commissioner of Customs
(Preventive) dropping the penalty proceeding against the appellant and its
Managing Director. It was contended that based on identical allegations which
were the basis for revoking the license, were considered by the Commissioner
and penalty proceedings were dropped against the appellant and its Managing
Director and this order should be considered while testing the correctness of
the order revoking the CHA license. The learned Tribunal noting that the
findings in the order passed by the Commissioner of Customs (Preventive), was
not available before the Commissioner of Customs (Administration and Airport)
while revoking the license, remanded the matter back to the Commissioner
(Administration and Airport) to decide the case afresh. Pursuant thereto, fresh
adjudication was commenced which culminated in an order dated 19th
December, 2013. Thereunder, the Commissioner of Customs (Administration &
CUSTA NO. 04 OF 2015
Airport) revoked the CHA license granted to the appellant and forfeited the
security deposit. This order was challenged by the appellant before the learned
Tribunal. The learned Tribunal by order dated 25 th May, 2015 dismissed the
appeal which is impugned before us.
3. Mr. Ananda Sen, learned Advocate appearing for the appellant contended
that the learned Tribunal did not properly consider the detailed reply filed by
the appellant for the show-cause notice and the inquiry report though the
learned Tribunal has referred to the contents of the show-cause notice and the
inquiry report. Further, the learned Tribunal did not record any findings as to
the effect of the order dated 5th January, 2012 by which the penalty
proceedings under Section 114 was dropped against the appellant and its
Managing Director and the basic facts and the evidence being the same, the
findings recorded in the order dated 5th January, 2012 should have an effect
while deciding the correctness of the revocation of the CHA license. Further,
the learned Tribunal brushed aside the Jetty Sircar license issued to Mithun
Ghosh which proved that Ghosh was the employee of the appellant. Further,
the learned Tribunal ought to have appreciated the limited work assigned to
the appellant who bonafidely worked on the basis of letter of authorization
issued by the exporter. Further, the learned Tribunal ought to have taken note
of the fact that the Customs Department had examined the cargo and having
been satisfied had issued "Let Export Order" and solely based upon the
statement recorded under Section 108 of the Act from the Managing Director of
the appellant which was duly retracted, the order revoking the license ought to
CUSTA NO. 04 OF 2015
have been set aside. Further, the Jetty Sircar license issued to Mithun Ghosh is
by the Kolkata Port Trust and not by a private concern or an individual and
due weightage ought to have been given to the said document. Further, the
learned Tribunal ought to have given due consideration to the retraction made
by the Managing Director to the statement which was recorded from him under
Section 108 of the Act and due weightage ought to have been given to the
evidential value of such a statement which was subsequently retracted.
Further, it was contended that the learned Tribunal did not analyze the case in
the context of doctrine of proportionality which should have been given due
consideration. The learned Advocate referred to Regulation 30 of the CHALR
and submitted that no case has been made out to revoke the license issued to
the appellant. Further, it is contended that the appellant had bonafidely
carried out that assignment as CHA license in accordance with the license
issued and in accordance with the CHALR and it does not warrant regulation of
the CHA license.
4. In support of his contention, the learned Advocate referred to the decision
of the High Court of Delhi in Vijender Singh Versus Commissioner of
Customs (Import & General) (Del) (HC) 1 for the proposition that when two
proceedings are initiated pertaining to the very same transaction, and in one
such proceeding the appellant and its Managing Director were exonerated,
based on the same allegations, the CHA license could not have been revoked.
For the same proposition, reliance was placed on the decision of the High Court
(2018) SCC Online- Del 13051
CUSTA NO. 04 OF 2015
of Judicature at Bombay in Commissioner of Central Excise, Nagpur Versus
Ramratan Shrivallabh Chandak (Dead) 2 and also the decision in Union of
India Versus M/s. East & West Shipping Agency (Bom) (HC), Customs
Appeal No. 78 of 2018 dated 23.02,2010. To explain the duties of the CHA
license, reliance was placed on the decision of the High Court of Delhi in
Commissioner of Customs versus Shiva Khurana, Customs Appeal No. 45
of 2017 dated 14th January, 2019 and it is submitted that the duty of a CHA
is as a mere agent and not as a revenue officer who has power to investigate
and go into the veracity of the statement made orally or in a document.
5. With regard to proportionality of penalty, heavy reliance was placed on
the decision of the High Court of Delhi in M/s. Ashiana Cargo Services
Versus Commissioner of Customs (I & G) (Del) 3. With the above submissions
the learned Advocate for the appellant prayed for setting aside the order passed
by the learned Tribunal and consequently set aside the order passed by the
Commissioner revoking the appellant's license and to restore the same so as to
enable the appellant to carry on their duties as a CHA.
6. Mr. K.K. Maity learned Standing Counsel appearing for the Department
submitted that what is required to be considered is the effect of the order
passed under the Customs Act dropping the penalty proceedings against the
appellant and such order was passed under the provisions of the Customs Act
and the order revoking the CHA license has been passed under the CHALR
which specifies the duties and responsibilities of a CHA and, therefore, the
(2014) 310 ELT 438 (Bom.)
(2014) SCC Online Del 1161
CUSTA NO. 04 OF 2015
order dropping penalty proceedings can have no effect on the action taken
under CHALR. In this regard, the learned Standing Counsel has drawn our
attention to the findings recorded by the Commissioner of Customs (Preventive)
in his order dated 5th January, 2012 wherein it has been observed that though
action under the Customs Act may not be required to be taken, the appellant
can be proceeded under the relevant regulations (CHALR). Therefore, it is
submitted that the learned Tribunal after considering the effect of the order,
dropping the penalty proceedings and taking note of the fact that the appellant
failed to discharge their responsibilities properly in dealing with the goods
handling without verifying the antecedents of the exporter and allowed the
forwarding agent, Draft Cargoways to use that CHA license for financial
considerations and the Jetty Sircar, Mithun Ghosh who actually did the
clearance work at the dock, was not the employee of the CHA and they even
authorized three employees to Draft Cargoways for obtaining Jetty Sircar
license and all clearly exhibits that the appellant did not discharge their duties,
enjoyed upon them as a CHA. The learned standing Counsel further submitted
the appellant having allowed the freight forwarder, Draft Cargoways to use
their CHA license for the purpose of Customs clearance for monetary
considerations, that too, without any written agreement warrants revocation of
their license. The Jetty Sircar, Mithun Ghosh who handled the clearance work
at the dock was not the employee of the CHA but an employee of the M/s. Draft
Cargoways which is in clear violation of the license conditions read with
CHALR. The appellant does not dispute the fact that the authorization letter
CUSTA NO. 04 OF 2015
was not received directly by them from the exporter but from the freight
forwarder, Draft Cargoways. The appellant failed to verify the genuineness of
the exporter or the cargo which was sought to be exported. The assignment of
clearing received by the appellant was not sourced from the exporter directly
but from Draft Cargoways without verifying the genuineness of the exporter.
The appellant, in violation of Regulation 19 of CHALR authorized three
employees of Draft Cargoways and used them to process the documents on
behalf of the CHA. Further, the Commissioner in its order dated 19 th
December, 2013 rightly pointed out that the order-in-original dated 5 th
January, 2012 passed under the provision of the Customs Act has no bearing
on the action initiated under the CHALR which is initiated separately without
prejudice to the action already taken under the provisions of the Customs Act.
Further, the Managing Director of the appellant had clearly stated in the
statement recorded under Section 108 that Jetty Sircar Mithun Ghosh who
actually did the clearance work at the dock was not the employee of the CHA
but the employee of the freight forwarder Draft Cargoways. Thus, this
statement is binding on the Managing Director and the subsequent retraction
while submitting a reply dated 17 th September, 2009 to the show-cause notice
was rightly disbelieved by the adjudicating authority. Further, the facts, clearly
show that the appellant had violated Regulation 13(b) of the CHALR as none of
their employees have been approved by the Customs Authorities, which is
required to be done under the regulations. Thus, the Commissioner rightly held
that the appellant was not aware about the exporter, did not take any steps to
CUSTA NO. 04 OF 2015
know the exporter, failed to advice them to follow and comply with the
provision of the Act and the CHALR which is a duty cast upon the appellant.
Further, it is contended that merely verifying the IEC number of any exporter
or importer does not mean that the actual identity of the exporter or importer is
verified and that the exporter or importer has been advised by the appellant in
terms of the provisions of Regulation 30(d) of the CHALR. Thus, the appellant
ignored the mandatory obligation under the statutory regulations and thereby,
encouraged the unscrupulous exporter to smuggle red sanders. Further, the
Tribunal examined the facts and found that there is nothing to indicate that
the inquiry officer had overlooked a provision of Regulation 22(3) of the CHALR,
nor the appellant was able to find out that the inquiry officer had overlooked
the said provision or that documents were not supplied to them. Further, it is
submitted that the statement recorded under Section 108 of the Act is
admissible in evidence and can form the sole basis for suspending the CHA
license subject to it being voluntary and truthful and retracted statements can
be relied upon only if, on examination of evidence it is concluded that
statement was true and voluntary. Bearing this legal principle in mind, the
Commissioner after analyzing the facts has recorded the finding that the
appellant could not produce any documentary evidence to prove that the
statement of the managing Director were duly retracted, nor produced any
evidence that the statement recorded under Section 108 of the Act was under
coercion and compulsion. Therefore, it is submitted that the learned Tribunal
after re-examining the facts and noting the statutory provisions as well as the
CUSTA NO. 04 OF 2015
relevant regulations found that the Act provides for two types of actions
namely, for imposition of penalty for aiding and abetting the importer/ exporter
in smuggling of goods and the other being action contemplated under CHALR.
Therefore, the learned Tribunal rightly held that merely on the ground that
penalty proceedings were dropped, is not a ground for quashing the order
revoking the CHA license as it has been confirmed that the appellant had
indulged in gross misconduct and contravened the provisions of the CHALR.
The learned Standing Counsel referred to Section 146 of the Act which deals
with the license for customs broker and the embargo placed under Sub-Section
(1) of Section 146 which prohibits any person to carry on the business as a
customs broker at any customs station unless and until he holds a license
granted in this behalf in accordance with the regulations. In support of his
contentions the learned Counsel placed reliance on the decision of the High
Court of Judicature at Madras in Commissioner of Customs (Export),
Chennai Verus I. Sahaya Edin Prabhu 4 and submitted though the facts of
the case were different it was also a case relating to attempt to smuggle red
sanders and in that case on facts there was nothing to indicate that the CHA
has not discharged his duty in the clear appearance various services further in
the case on hand it has clearly established that the appellant has failed to
discharge his statutory obligation. Reliance was placed on the decision of the
High Court of Judicature at Patna in Bhaskar Logistic Services Pvt. Ltd.
2015 (320) ELT 264 (Mad.)
CUSTA NO. 04 OF 2015
Versus Union of India 5 wherein, the Court declined to interfere with the
factual findings recorded by the authorities. Reliance was placed on the
decision of the High Court of Judicature at Madras in K. V. Prabhakaran
Versus Commissioner of Customs, Chennai 6 , wherein under similar
circumstances the order revoking the CHA license was upheld. Reliance was
placed on the decision of High Court of Madras in Shri Rama Thenna
Thayalan & Anr. Versus CESTAT, C.M.A. (MD) Nos. 916 and 917 of 2014
dated 30.11.2021 wherein, the Court refused to interfere with the order passed
by the authorities. Reliance was placed on the decision in Commissioner of
Customs Versus K.M. Ganatra & Co. 7 to explain the important position of a
CHA in the customs house. Reliance was placed on the decision of the High
Court of Andhra Pradesh in Commissioner of Customs & CX., Hyderabad-II
Versus H.B. Cargo Services 8 which affirmed the imposition of maximum
punishment of revocation of license granted to a CHA.
7. On the doctrine of proportionality the learned standing Counsel referred
to the decision of the High Court of Gujarat at Ahmadabad in Ota Kandla Pvt.
Ltd. Versus Union of India 9 wherein the Court affirmed that punishment of
revocation of license was neither harsh nor disproportionate. Reliance was
placed on the decision of the High Court of Judicature at Madras in Shri
2016 (340) ELT 17 (Patna)
2019 (365) ELT 877 (Mad.)
AIR (online) 2016 (SC) 536
2011 (268) ELT 448 (A.P.)
2011 (269) ELT 457 (Guj.)
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Kamakshi Agency Versus Commissioner of Customs (Mad.) 10, wherein the
Court affirmed the order of revocation of license that blank documents were
signed by the proprietor of the CHA without knowing the importers/ exporters
and nature of goods imported/ exported. Reliance was placed on the decision of
the High Court of Delhi in Premier Shipping Agency Versus Commissioner
of Customs 11 , wherein the vires and scope of Regulation 21 of Customs
Broker Licensing Regulation (2013) (CBLR) was upheld. With the above
submissions the learned Senior Standing Counsel contended that this Court
will not interfere with the concurrent findings of the fact recorded by the
adjudicating authority and affirmed by the learned Tribunal and in the absence
of any procedural violation committed by the department, this Court exercising
power under Section 130 of the Act will not interfere with the factual findings
and accordingly, prayed for dismissal of the appeal.
8. Mr. Ananda Sen, learned Advocate appearing for the appellant by way of
reply, while briefly reiterating the contentions advanced by him submitted the
decision in H.B. Cargo Services was considered and dealt with by the High
Court at Delhi in the case of Shiva Khurana (supra) and the decision in Shri
Kamakshi Agency was also considered in Ashiana Cargo Services and after
taking note of all the decisions the High Court of Delhi dealing with the
punishment of revocation of the CHA license held the same to be
disproportionate.
2001 (129) ELT 29 (Mad.)
2015 (315) ELT 27 (Del.)
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9. We have heard the learned Advocates appearing for the parties and
carefully perused the materials placed on record. In the preamble portion of
this judgment we have referred to the two substantial questions of law
suggested by the revenue and since, the appellant has raised the issue
regarding proportionality of the punishment before the Tribunal as well as
before this Court, apart from considering the two substantial questions of law
which have been suggested we shall also deal with the aspect regarding
proportionality of the punishment imposed on the appellant while dealing with
the matter.
10. The appellant was granted a license under Regulation 9(1) of the CHALR,
2004 to carry on the activity as a Customs House Agent. The license was for a
period of 10 years from 29.07.2006. The CHALR was notified in exercise of
powers conferred by Sub-Section (2) of Section 146 of the Act and in
supersession of the Customs House Agents' License Regulation, 1984.
11. Regulation 2(c) defines "Customs House Agent" to mean a person
licensed under the Regulations (CHALR) to act as an agent in the transaction of
any business relating to the entry or departure of conveyances or the import or
export of goods at any Customs station. Regulation 3 places an embargo
stating that no person shall carry on business as a CHA relating to the entry or
departure of a conveyance or the import or export of goods of any Customs
station unless such person holds a license granted under the Regulations
(CHALR). The proviso exempts three categories where no license is required, of
which we are not concerned in this appeal. The application for being appointed
CUSTA NO. 04 OF 2015
as a CHA can be made only upon the same being invited by the Commissioner
of Customs in terms of Regulation 4. Regulation 5 deals with the applications
for license, Regulation 6 deals with the conditions to be fulfilled by the
applicant, Regulation 7 deals with scrutiny of applications for license and
Regulation 8 deals with the examination which the applicant has to undertake
for being considered for grant of license. Regulation 9 deals with grant of
license. Sub-Regulation (1) of Regulation 9 states that the Commissioner of
Customs shall on payment of a fee grant a license to an applicant who has
passed the examination referred to in Regulation 8. Sub-Regulations (2) to (6A)
of Regulation 9 deal with the various powers of the Customs authorities
including the power to reject an application for grant of license. Regulation 10
deals with execution of bond and furnishing of security which is required to be
complied with by the applicant before grant of license under Regulation 9.
Regulation 11 deals with the validity of the license and Regulation 12 prohibits
transfer of the license in favour of any other person. Regulation 13 deals with
obligations of the CHA. In the case on hand, we are to examine as to whether
the appellant has discharged his obligations in accordance with Regulation 13
read with the license conditions. The relevant clauses of Regulation 13 as
quoted below:
Regulation 13:-
a) Obtain an authorization from each of the companies, firms
or individuals by whom he is for the time being employed
as Customs House Agent and produce such authorization
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whenever required by the Deputy Commissioner of Customs
or Assistant Commissioner of Customs;
b) Transact business in the Customs Station either personally
or through an employee duly approved by the Deputy
Commissioner of Customs or Assistant commissioner of
Customs;
c) .............
d) Advise his client to comply with the provisions of the Act
and in case of non-compliance, shall bring the matter to the
notice of the Deputy Commissioner of Customs or Assistant
Commissioner of Customs'
e) Exercise due diligence to ascertain the correctness of any
information which he imparts to a client with reference to
any work related to clearance of Cargo or baggage;
f) Not withhold information contained in any order,
instruction or public notice relating to clearance of cargo or
baggage issued by the Commissioner of Customs, from a
client who is entitled to such information;
g) ................
h) ................
i) ................
j) ................
k) Maintain records and accounts in such form and manner as
may be directed from time to time by a Deputy
Commissioner of Customs or Assistant Commissioner of
Customs and submit them for inspection to the said
Deputy Commissioner of Customs or Assistant
Commissioner of Customs or an Officer authorized by him
whenever required;
l) ..................
m) ..................
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n) Ensure that he discharges his duties as Custom House
Agent with utmost speed and efficiency and without
avoidable delay;
o) Verify antecedent, correctness of Importer Exporter Code
(IEC) No., identity of his client and functioning of his client at
the declared address by using reliable, independent,
authentic documents, data or information.
12. Regulation 19 deals with the employment of persons. The CHA may
having regard to the volume of work as transacted by him employing any
number of persons to assist and the minimum educational qualification
required to be possessed by such person shall be 10+2 or equivalent.
Appointment of such a person shall be made only after obtaining the approval
of the Deputy Commissioner of Customs or Assistant Commissioner of
Customs or by a Committee by Officers of Customs. Sub-Regulation 8 of
Regulation 19 states that the CHA shall exercise such supervision as may be
necessary to ensure the proper conduct of any such employees in the
transaction of business as agents and be held responsible for acts or omissions
of his employees in regard to that employment. Regulation 20 deals with
suspension or revocation of license, Regulation 22, deals with the procedure for
suspending or revoking the license granted under Regulation 20. Thus, a
combined reading of these relevant regulations of the CHALR shows the
importance of the role of a CHA while handing Cargo for export or for import.
The conditions stipulated in the regulation clearly show that there is no vested
right in the CHA to claim that he is entitled to be granted license or that he
can carry on his business activities as done by a normal businessman. In
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other words, the activities of a CHA are clearly circumscribed under the
Regulations and equally the obligations which a CHA has to discharge have
also been clearly delineated in the Regulations. Thus, the conditions contained
in the Regulations as well as in the license issued to a CHA are irrevocably
binding on the CHA or in other words there cannot be any relaxation of the
rigour of the effect of the Regulation on the activities of a CHA. As pointed out
above the CHA is not free to employ any person of his choice but only with the
approval of the Customs Authorities, that apart the person to be employed is
required to possess a minimum educational qualification prescribed under
Regulation 19(1). Thus, if a CHA permits a person to represent or handle any
cargo for export or import without such person being specifically authorized by
the Customs to be an employee of the CHA, it would amount to a clear violation
of the Regulation warranting action against the CHA. That apart, the CHA even
prior to the issuance of license has irrevocably bound himself by executing a
bond and furnishing security. This is to emphasize the role of a CHA while
carrying on their activities.
13. Regulation 13 stipulates the obligations of a CHA. Clause (a) of
Regulation 13 mandates that a CHA shall obtain an authorization from each of
the companies, firms or individuals by whom he is for the time being employed
as a CHA and produce such authorization whenever required by the Customs
Authorities. The CHA cannot transact business in the Customs station either
personally of through an employee duly approved by the department. The CHA
is required to advise his client to comply with the provisions of the Act and in
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case of non-compliance shall bring the matter to the notice of the Customs
Authorities. The words "his client" occurring in Regulation 13(d) would mean
the company or the firm or the individual by whom the CHA has been
employed. Thus, a CHA is required to obtain an authorization from the person
who has employed him as a CHA and produce such authorization as and when
required by the Customs Authorities. Therefore, the appellant cannot be heard
to say that he received the authorization from a freight forwarder, Cargoways
and he bonafidely believed the said freight forwarder. This candid admission of
the appellant would clearly show that the appellant has disregarded and
violated Regulation 13(a). Furthermore, there was no document produced by
the appellant to show that the person/ persons who handled the cargo were
the employee/ employees of the appellant duly approved by the Customs
Authorities. The appellant had placed strong reliance on the Jetty Sircar
License issued by the Kolkata Port Trust, a temporary license, authorizing
Mithun Kumar Ghosh to deliver cargo and take delivery of cargo from Kolkata
Port Trust on behalf of the appellant. The case of the respondent department is
based upon a statement recorded from the Managing Director of the appellant
under Section 108 of the Act. Statement recorded under Section 108 of the Act
is admissible in evidence and can be a sole basis for taking appropriate action
based on such statement. The appellant would contend that the statement
recorded from the Managing Director was not voluntary but taken under threat
and coercion and therefore, the statement cannot be relied upon. The
statement was recorded from the Managing Director of the appellant on two
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dates, namely, 18.11.2008 and 27.4.2009. Neither the Managing Director nor
the appellant took any steps to retract statement so recorded at the earliest
point of time. It is only after the show-cause notice dated 14.08.2009 was
issued while submitting their reply dated 17.09.2009 in paragraphs (viii) and
(ix) therein, the appellant would contend that the authority pressurized the
Managing Director to write a statement as per their dictation and sign the same
which he had done under duress and coercion and as such, no reliance should
be placed on the same. On a reading of the said contention, we have no
hesitation to hold that the said contention is absolutely vague. It is no doubt
true that when a statement is recorded and the authority proposes to rely upon
the original statement, he is required to deal with the retraction and record
satisfaction that the retraction was an afterthought, not admissible and does
not impinge on the evidential value of the first statement. As mentioned, the so
called retraction is absolutely vague. There is no material or any other
reference made to support the stand that the Managing Director was forced to
give a statement. As noted above, statements were recorded on two dates,
18.11.2008 and 27.04.2009. If the stand taken by the appellant were to be
true, any prudent person would retract the statement at the earliest point of
time. The appellant/ Managing Director did nothing after 18.11.2009 but chose
to cooperate in the investigation by responding to another summons and also
recording another statement on 27.04.2009. Even, thereafter there is no valid
retraction or a whisper about the veracity of the statement. For the first time,
after the show-cause notice dated 14.08.2009 was issued, while submitting the
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reply a faint attempt has been made by the appellant to retract the so called
statement. Therefore, we hold that the authority rightly rejected the so called
retraction and proceeded to adjudicate the matter taking note of the statement
recorded under Section 108 of the Act. The learned Tribunal on its part also
examined this aspect and rightly affirmed the view of the Commissioner.
14. The next aspect to be considered is with regard to the effect of the order
passed by the Commissioner dated 05.01.2012 dropping the penalty
proceedings initiated under Section 114 of the Act. In the said proceedings
there were totally 9 noticees and the appellant was the 6 th noticee and its
Managing Director the 7th noticee. On a perusal of the order-in-original date
05.01.2012 we find that the Commissioner has elaborately discussed the
factual matrix and found that a racket of unscrupulous persons involved
themselves in a conspiracy to organize smuggling of red sanders out of the
country in violation of the Exim Policy, 2004-2009. Further, it was observed
that the main offenders had engaged some personal agents to handle the
official formalities relating to the export of the consignment on their behalf.
Three persons have been named to be the main culprits who have master-
minded the conspiracy in the attempt of smuggling the red sanders and they
mis-declared the description of the export goods to cover the attempt of
smuggling. Further, it was noted that a similar consignment declared as
sponge iron, had been exported by the same group of persons in the month of
October, 2008 and it can be reasonably be presumed that the same might have
contained red sanders which have been smuggled out of India under the guise
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of export of sponge iron and therefore, those three perpetrators were held liable
for penal action under Section 114(i) of the Act. The three culprits who are said
to be the master-mind behind the conspiracy were also arrayed as noticees in
the proceedings as noticee Nos. 2, 3 and 8. Out of these three, noticee Nos. 3
and 8 namely, Ashok Thakur and Shakil Khan could not be apprehended and
8th noticee Shahanaz Khan could not be located. The freight forwarder had
been found to have assisted the racket in the attempt of illicit export of red
sanders and failed to discharge the responsibility and they handled the job
without verifying the antecedents of the exporter which tantamounts to not
properly carrying out the duty as a forwarding agent and therefore, Draft
Cargoways were also held liable for penal action under Section 114(i) of the
Act. The marketing executive of Draft Cargoways was also held liable for penal
action has he had assisted the entire racket for material gain. With regard to
the appellant the Commissioner holds that they for material gain assisted the
racket of attempted smuggling and failed to discharge their responsibilities
properly/ legally in dealing with the export goods as a CHA. Further, it was
held that the appellant handled the job without verifying the antecedents of the
declared exporter, have allowed the freight forwarder, Draft Cargoways to use
their CHA license for financial considerations. Further Jetty Sircar Mithun
Ghosh who actually did the clearance work at the dock was not an employee of
the appellant and the appellant authorized three employees of Draft Cargoways
for obtaining Jetty Sircar license which tantamounts to not carrying out their
obligations as a CHA.
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15. Thus, it was held that the appellants have also rendered themselves
liable for penal action under Section 114 (i). The Commissioner also noted that
by order dated 12.05.2009, the CHA license granted to the appellant was
suspended. With regard to the Managing Director of the appellant, the
Commissioner noted that he had also assisted the racket in the attempt of
illicit export of red sanders for material gain and allowed Draft Cargoways to
use their CHA license against financial considerations. After noting all the
above facts which were referred to in the show cause notice the adjudication
proceedings was commenced. The seized red sanders were ordered to be
confiscated. With regard to the charge against the appellant and its Managing
Director, the Commissioner took note of the submissions of the appellant that
their involvement as hirer of container and CHA by itself cannot make them
liable for penal action under the Customs Act and at best they can be
proceeded against under the relevant regulations. This submissions made by
the appellant was accepted by the Commissioner. In other words, the
Commissioner was convinced that the involvement of the CHA in the entire
matter cannot be solely the reason to take penal action under the Customs Act,
but the appellant themselves admitted that at best action could be taken under
the relevant Regulation. This aspect was considered coupled with the aspect
regarding whether there was criminal involvement on the part of the Customs
officers and when there was no specific and direct evidence available in that
regard, the Commissioner held that the appellant cannot be made liable for
penal action under the Customs Act.
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16. Mr. Ananda Sen, Learned Advocate appearing for the appellant would
strenuously contend that the proceedings initiated against the Customs Act
and the CHALR are based on identical set of facts and one wing of the same
department though proposed penal action under Section 114 (i) of the Act
dropped the same and with the same set of facts, another wing of the
department cannot impose the maximum punishment of revocation of license.
To buttress the said submissions, reliance was placed on the decision in
Vijender Singh where also proceedings against the appellant therein was
initiated under the Regulations and for the very same transaction of appellant
therein show cause notice was issued as to why penalty should not be imposed
under Section 117 of the Customs Act. In the said decision, the Court noted
that the first order passed imposing penalty under the Customs Act was set
aside by the tribunal on the ground that the there is no specific contravention
of the Act had been established against the appellant therein and therefore it
was held that with the same facts another show cause notice under the
relevant Regulations could not have been issued and action could not have
been initiated under the Regulations.
17. In the preceding paragraphs, we have noted factual position. The
Commissioner did not totally exonerate the appellant from the charge against
them but what weighed in the mind of the Commissioner to drop the penalty
proceedings was because the appellant themselves stated that mere
involvement as a CHA cannot be a ground to take penal action under the
Customs Act but at best they can be proceeded under the relevant Regulation.
CUSTA NO. 04 OF 2015
That apart, the Commissioner also found that there is no evidence linking the
Customs officers. Therefore, the Commissioner though fit to drop the penalty
proceedings. The order nowhere exonerates the appellant from the allegations
which were the basis for issuance of the show cause notice. In the opinion of
the Commissioner penal action under the Customs Act was not warranted.
More so because, the appellant themselves reconciled to the fact that they can
be proceeded under the relevant Regulations (CHALR). Therefore, placing
reliance the proceedings of the Commissioner dropping the penalty proceedings
can in no manner impact the order revoking the license granted to the
appellant. Therefore on the facts, the decision in Vijender Singh is
distinguishable. The decision in Ramaratan would be wholly inapplicable to the
facts of the present case as in the said matter, the Division Bench of the High
Court of Bombay took note of the findings rendered by the Criminal Court
which was taken note of by the Tribunal and such order was affirmed. Equally
the decision in East & West Shipping Agency is also distinguishable as the
Court granted relief since the order passed by the Settlement Commission was
not challenged and that being a judicial proceeding in terms of Section 127 M
of the Customs Act, findings rendered therein were held to be binding on the
department.
18. Mr. Ananda Sen placed reliance on the decision in Shiva Khurana and it
was argued that the duty of the CHA is as a mere agent and not that of a
revenue official who is empowered to investigate and enquire into the veracity
of the statement made orally or in a document and there is nothing in the
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Regulations nor in the Customs Act which can cast the higher responsibility on
a CHA. This decision cannot be applied to the case on hand as the appellant
themselves have admitted that they have received the authorization from the
freight forwarder and not the exporter. In the earlier part of this judgment, we
have interpreted Regulation 13 (a) and (d) by holding that the appellants/CHA
was under a statutory obligation to obtain an authorization from the exporter
who has employed them as a CHA. Further the appellant was duty bound to
advise his client who is the exporter and not the freight forwarder to comply
with the provisions of the Act and in case of non-compliance the CHA has to
bring the matter to the notice of the Customs department. Therefore, on the
facts which are not in dispute, the case of the appellant cannot improve by
placing reliance on the decision in Shiva Khurana. At this juncture, it would be
beneficial to take note of the decision of the Hon'ble Supreme Court in
Commissioner of Customs Versus K.M. Ganatra & Co. 12 where in the
Hon'ble Supreme Court quoted with approval the order passed by the Mumbai
Tribunal which explains the important position of the CHA in the following
terms:
"The CHA occupies a very important position in the Custom
House. The Customs procedures are complicated. The importers
have to deal with a multiplicity of agencies viz. carriers,
custodians, like BPT as well as the Customs. The importer
would find it impossible to clear his goods through these
agencies without wasting valuable energy and time. The CHA
AIR (Online) 2016 (SC) 536
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is supposed to safeguard the interests of both the importers
and the Customs. A lot of trust is kept in CHA by the
importers/exporters as well as by the Government agencies. To
ensure appropriate discharge of such trust, the relevant
regulations are framed. Regulation 14 of the CHA Licensing
Regulations lists out obligations of the CHA. Any contravention
of such obligations even without intent would be sufficient to
invite upon the CHA the punishment listed in the Regulations."
19. Thus, any contravention of the obligations cast on the CHA even without
intent would be sufficient to invite upon the CHA the punishments listed in the
Regulations.
20. In Shri Kamakshi Agency the role of the CHA had been set out in the
following terms:-
The very purpose of granting a license to a person to act as
Custom House Agent is for transacting any business relating to
the entry or departure of conveyance or the import or export of
goods at any customs station. For that purpose, under
Regulation 9 necessary examination is conducted to test the
capability of the person in the matter of preparation of various
documents, determination of value procedures for assessment
and payment of duty, the extent to which he is conversant with
the provisions of certain enactments etc. Therefore, the grant of
licence to act as a Custom House Agent has got a definite
purpose and intent. On a reading of the Regulations relating to
the grant of licence to act as Custom House Agent, it is seen that
while Custom House Agent should be in a position to act as
agent for the transaction of any business relating to the entry or
departure of conveyance or the import or export of goods at any
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customs station, he should also ensure that he does not act as
an Agent for carrying on certain illegal activities of any of the
persons who avail his services as Custom House Agent. In such
circumstances, the person playing the role of Custom House
Agent has got greater responsibility. The very prescription that
one should be conversant with the various procedures including
the offences under the Customs Act to act as a Custom House
Agent would show that while acting as Custom House Agent, he
should not be a cause for violation of those provisions. A CHA
cannot be permitted to misuse his position as a CHA by taking
advantage of his access to the Department. The grant of licence
to a person to act as Custom House Agent is to some extent to
assist the Department with the various procedures such as
scrutinizing the various documents to be presented in the course
of transaction of business for entry and exit conveyance or the
import or export of the goods. In such circumstances, great
confidence is reposed in a Custom House Agent. Any misuse of
such position by the Custom House Agent will have far reading
consequences in the transaction of business by the Custom
House officials.
21. The above decision was referred to in H.B. Cargo Services and affirmed
the maximum punishment as provided for under the regulation to be imposed
on the earlier CHA. In Shri Rama Thenna Thalayan, the case was also one of
the smugglings of red sanders and the Court took note of the fact that the very
admission of the CHA itself is sufficient to hold that they acted recklessly,
negligently in using their CHA license and affirmed the penalty which was
imposed upon.
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22. In K.V. Prabhakaran the following where two substantial questions of
law framed for consideration among the 7th questions which are as follows:
1) "Whether the Tribunal was justified in sustaining the Order-in-
Original, imposing penalty when admittedly the said Order-in-
Original only, found violation of the provisions of Customs
Broker Licensing Regulations, 2013?
2) Whether the Tribunal misdirected itself in its enquiry in the
appeal in holding that the appellant would be liable for penalty
in terms of Section 114 of the Customs Act, 1962, when
admittedly, no positive material has been placed to show overt
acts of abetment with prior knowledge, especially when the
Appellant had no reason to believe that the goods tendered for
export was indeed the cargo which was stuffed in the
container?"
23. In the said case the CHA whose license was revoked had taken a defence,
as was argued before us in this appeal, that the containers were sealed by the
Customs Officers and the question of verification or holding the CHA liable for
the attempt of smuggling cannot be made. The Court after taking note of the
various decisions which was cited at the bar held that lending the CHA license
to a third party for mis-usage without knowing the actual importer and the
goods to be imported is a serious issue and the CHA having misused the
license acted recklessly and carelessly by lending support to unscrupulous
persons for facilitating smuggling activities, cannot be viewed lightly.
Accordingly, the substantial questions of law framed were answered against the
CHA. The said decision could very well be applied to the facts of the case on
hand.
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24. In Bhaskar Logistics Services Private Limited, the Court refused to
interfere with the factual findings recorded by the authorities as under Article
226 of the Constitution of India, the Court will only evaluate the correctness of
the decisions making process and not the decision itself. In fact, the scope of
the present appeal has been clearly circumscribed under the provisions of the
Customs Act and the Court is required to decide the substantial questions of
law and therefore the contentions advanced on behalf of the appellant have to
be tested on the anvil as provided under Section 130 of the Act. Ongoing
through the order passed by the Commissioner revoking the licence issued to
the CHA, and the order passed by the Tribunal we find that there is no error in
the decision-making process nor is there any perversity in the manner in which
the authority or the tribunal have adjudicated the facts in issue. Hence, it is
not a fit case where the Court will interfere with such findings. It was argued
by the Learned Advocate appearing for the appellant that though the tribunal
on the earlier round of litigation had remanded the matter to the Commissioner
to take into consideration the order dropping penalty proceedings under the
Customs Act and are re-do the matter, such order has been brushed aside. On
perusal of the order passed by the Commissioner dated 19.12.2013, we find
the submissions to be incorrect, as the Commissioner has analysed the scope
of both the proceedings and rightly held that the action initiated under the
CHALR was without prejudice to the action taken under the provisions of the
Customs Act. To put it differently though the Regulation has been framed
under Section 146 of the Customs Act the Regulations assumes importance as
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the appellant is a licencee under the Regulations. In fact, it can be interpreted
to mean a special law which governs the duties, responsibilities and obligations
of a CHA. Therefore, the dropping of the penalty proceedings in the case on
hand cannot have any impact on the revocation of the licence granted under
the CHALR. As already noted, while dropping the penalty proceedings the
appellant has not been exonerated but as the appellant themselves stated that
at best they can be proceeded against under the Regulation (CHALR) the
Commissioner was of the view that penal action need not be initiated under the
Customs Act. Therefore, the Commissioner on remand has rightly understood
the scope of remand and the purport and import of the order-in-original dated
05.01.2012. There is a categorical finding on fact which could not be assailed
by the appellant, to the effect that the appellant did not know who the exporter
was and the appellant did not directly receive the export order or the
consignment from the exporter. This having been admitted, it would clearly
show that they have failed to discharge their statutory obligations under
Regulation 13 (b) and 19 (8) of the CHALR.
25. Thus, we find that the order passed by the tribunal does not suffer from
any illegality or perversity for us to interfere and consequently the substantial
questions of law have to be answered against the appellant.
26. The learned Advocate appearing for the appellant submitted that the
punishment of revocation of licence is a major punishment and considering the
facts and circumstances of the case is wholly disproportionate. To buttress the
said submissions, reliance was placed on the decision in Ashiana Cargo
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Services. In the said, G Cards were issued to two employees of M/s. V K
International and it was found that those employees were misusing the G
Cards and indulging in illegal narcotics exports. Action was initiated against V
K International under the provisions of the CHALR for contravention of
Regulation 13 (b) (e) and 19 (8). This ultimately culminated in an order
revoking the CHA license under Regulation 20 (1) which was challenged before
the Learned Tribunal. Before the Tribunal, there was a difference of opinion
wherein one of the Learned Members held that the punishment of revocation
was too harsh. The other Learned Member held that the punishment of
revocation was justified under the facts and circumstances. The matter was
referred to a third member who held that the punishment of revocation of
licence was justified. The matter travelled to the High Court wherein it was
contended that there is no finding of culpability or mens rea on the
appellant/CHA and there is no direct or indirect involvement and the
department did not establish the direct involvement of the CHA with the
nefarious activities of the employees of V K International. The Court examined
as to the proportionality of penalty awarded and after noting the decisions of
the Hon'ble Supreme Court in Coimbatore District Central Cooperative
Bank Versus Coimbatore District Central Bank Employees Association 13.
It was held that the consequences of revocation being serious, the
proportionality doctrine must inform the Commissioner's analysis and this is
also the exercise the Court must undertake though with the major of deference
(2007) 4 SCC 669
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towards the Commissioners conclusion. After noting the facts of the case and
also that the appellant therein did not have knowledge that the illegal exports
were effected by using of G Cards given to V K International's employees, there
were no active or passive facilitations by the appellant therein. The Court also
noted that providing G Cards to non-employees is in violation of the CHALR
Regulations. But the revenue did not argue that this by itself was sufficiently
grave so as to justify the extreme measure of revocation. Taking note of these
factors as well as the stand of the revenue in the said case, the court held that
presence of an aggravating factor is important to justify the penalty of
revocation. After discussing and taking note of the several decisions including
the decision relied on by the revenue in the case of H.B. Cargo Services and
others the Court held that there is a factual finding that CHA was not aware of
the misuse of the G Cards and therefore, the Court held that in the absence of
any mens rea, the punishment of revocation of this CHA license was not
proportional and accordingly the order was set aside.
27. In Union of India and Another Versus G. Ganayutham 14 , the
Hon'ble Supreme Court considered the position of proportionality in
administrative law in England and India and held as follows:
The current position of proportionality in administrative law in
England and India can be summarized as follows:-
(1) To judge the validity of any administrative order or statutory
discretion, normally the Wednesbury test is to be applied to find out
(1997) 7 SCC 463
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if the decision was illegal or suffered from procedural improprieties
or was one which no sensible decision-maker could on the material
before him and within the framework of the law, have arrived at.
The Court would consider whether relevant matters had not been
taken into account or whether irrelevant matters had been taken
into account or whether the action was not bona fide. The Court
would also consider whether the decision was absurd or perverse.
The Court would not however go into the correctness of the choice
made by the administrator amongst the various alternatives open
to him. Nor could the Court substitute its decision to that of the
administrator. This is the Wednesbury test.
(2) The Court would not interfere with the administrator's decision
unless it was illegal or suffered from procedural impropriety or was
irrational in the sense that it was in outrageous defiance of logic or
moral standards. The possibility of other tests, including
proportionality being brought into English Administrative Law in
future is not ruled out. These are the CCSU principles.
(3) (a) As per Bugdaycay, Brind and Smith, as long as the Conventio n
is not incorporated into English Law, the English Courts merely
exercise a secondary judgment to find out if the decision maker
could have, on the material before him arrived at the primary
judgment in the matter he had done.
(b) If the Convention is incorporated in England making available
the principle of proportionality, then the English Courts will render
primary judgment on the validity of the administrative action and
find out if the restriction is disproportionate or excessive or is not
based upon a fair balancing of the fundamental freedom and the
need for the restriction thereupon.
(4)(a) The position in our country, in administrative law, where no
fundamental freedoms as aforesaid are involved, is that the
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Courts/Tribunals will only play a secondary role while the primary
judgment as to reasonableness will remain with the executive or
administrative authority. The secondary judgment of the Court is to
be based on Wednesbury and CCSU principles as stated by Lord
Greene and Lord Diplock respectively to find if the executive or
administrative authority has reasonably arrived at his decision as
the primary authority.
(4) (b) Whether in the case of administrative or executive action
affecting fundamental freedoms, the Courts in our country will
apply the principles of 'proportionality' and assume a primary role,
is left open, to be decided in an appropriate case where such action
is alleged to offend fundamental freedoms. It will be then
necessary to decide whether the Courts will have a primary role
only if the freedoms under Article 19, 21 etc. are involve and not for
Article 14.
Punishment in disciplinary matters:
Wednesbury & CCSU tests:
(1) Finally, we come to the present case. It is not contended before us
that any fundamental freedom is affected. We need not therefore go
into the question of 'proportionality'. There is no contention that the
punishment imposed is illegal or vitiated by procedural impropriety.
As to 'irrationality' there is no finding by the Tribunal that the
decision is one which no sensible person who weighed the pros
and cons could have arrived at nor is there a finding, based on
material, that the punishment is in 'outrageous' defiance of logic.
Neither Wednesbury nor CCSU tests are satisfied. We have still to
explain 'Ranjit Thakur'.
(2) In Ranjit Thakur, this Court interfered with the punishment only
after coming to the conclusion that the punishment was in
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outrageous defiance of logic and was shocking. It was also
described as perverse and irrational. In other words, this Court felt
that, on facts, Wednesbury and CCSu tests are satisfied. In
another case, in B.C Chaturvedi Versus Union of India [1995] (6)
SCC 749] a three Judge Bench said the same thing as follows (SCC
P. 762 para 18)
"The High Court/Tribunal while exercising the power of judicial
review, cannot normally substitute its own conclusions on penalty
and impose some other penalty. If the punishment imposed by the
disciplinary authority or the appellate authority shocks the
conscience of the High Court/Tribunal it would appropriately would
the relief, either by directing the disciplinary authority/appellate
authority to reconsider the penalty imposed or to shorten the
litigation, it may itself, in exceptional and rare case, impose
appropriate punishment with cogent reasons in support thereof"
Similar view was taken in Indian Oil Corporation Versus Ashok
Kumar Arora [1997 (3) SCC 72] that the Court will not intervene
unless the punishment is wholly disproportionate.
28. In Coimbatore District Central Cooperative Bank while considering
the doctrine of proportionality it was held as follows:
"Proportionality is a principle where the Court is concerned
with the process, method or manner in which the decision-
maker has ordered his priorities, reached a conclusion or
arrived at a decision. The very essence of decision-making
consists in the attribution of relative importance to the factors
and considerations in the case. The doctrine of
proportionality thus steps in focus true nature of exercise the
elaboration of a rule of permissible priorities
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De Smith states that 'proportionality' involves 'balancing test'
and 'necessity test'. Whereas the former ("balancing test")
permits scrutiny of excessive onerous penalties or
infringement of rights or interests and a manifest imbalance
of relevant consideration, the latter ('necessity test') requires
infringement of human rights to the least restrictive
alternative ['Judicial Review of Administrative Action' (1995);
pp 601-605; para 13.085; see also Wade and Forsyth;
'Administrative Law'; (2005); p. 366]
29. In Chairman Cum Managing Director Coal India Limited and
Another Versus Mukul Kumar Chowdhury and Others 15, the doctrine of
proportionality was explained in the following terms:
The doctrine of proportionality is, thus, well recognized concept
of judicial in our jurisprudence. What is otherwise within the
discretionary domain and sole power of the decision maker to
quantity punishment once the charge of misconduct stands
proved, such discretionary power is exposed to judicial
intervention if exercised in a manner which is out of proportion
to the fault.
30. The above decisions were taken note of in OTA Kandla Private Limited
and it was held as follows:
In view of the above principles laid down by the Hon'ble
Supreme Court in various judgments it clearly transpires that
the judicial review of administrative action or of
proportionality of punishment is permissible only if the
Mumbai AIR 2010 SC 75
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decision of the decision maker is found to be illegal,
unreasonable, irrational or suffering from any procedural
impropriety, and that the High Court in exercise of
jurisdiction under Article 226 or 227 should not interfere with
the legal orders of Administrative Authorities, So far as the
facts of the present case are concerned, as stated
hereinabove, respondent No. 3- the CEGAT has upheld the
order of respondent No. 2 revoking the licence of the
petitioner as CHA on the ground of petitioner having
committed breach of statutory regulations and the
misconduct by misusing its licence. In the opinion, of this
Court, once the decision of the respondent Authorities that
the petitioner committed violation of statutory regulations and
the misconduct if found to be within the legal parameters, all
the legal consequences as a result of such violation and the
breach have to follow. The case of the petitioner being the
case of contravention of said regulations and misuse of
licence as CHA, the respondent Authorities have rightly
revoked the licence of the petitioner. The said decision having
been arrived at by the respondents, after taking into
consideration all relevant material and the said Regulation,
and after following the due process of law, it could not be
said that the said decision was illegal, unreasonable,
perverse or irrational. Under the circumstances, it could also
be not said that the punishment of revocation of licence was
a harsh punishment or the punishment dehors the doctrine of
proportionality. The petitioner having failed to point out any
perversity or unreasonableness on the part of respondent
authorities warranting judicial intervention, this Court does
not find any merits in the present petition.
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31. Bearing the above legal principles in mind namely as to how the doctrine
of proportionality has to be applied, if we examine the facts of the case on
hand, we find that the appellant has not been completely exonerated by the
Commissioner while dropping the penal action under the Customs Act. The
admitted fact is that the appellant did not receive the export order from the
exporter which is mandatory under the Regulations. Merely by placing reliance
on the "Let Export Order" said to have been given by the Customs authorities
at the first instance cannot exonerate the appellant nor can it in any manner
waive or dilute the obligations of the appellant as the CHA as specified under
the Regulations. As pointed out earlier intention is irrelevant. The case of the
appellant is that they reposed trust and confidence on the freight forwarder,
unfortunately the regulation does not provide for conducting the operation as a
CHA based on trust and faith on a freight forwarder, as the obligation is on the
CHA. Even a solitary instance of a violation, considering the complexity of the
problem and the evidence which was available can be sufficient to impose the
maximum penalty of revocation. In the order passed by the Commissioner
while initiating penal action against the exporter there is a reference to an
earlier export done by the very same exporter stated to have exported sponge
iron and the department is of the reasonable belief that the earlier export
would also have been export of red sanders. That apart, we find that the
wordings in the letter of authorization dated 07.11.2008 alleged to have been
given by the exporter is curiously worded. If the exporter Himalayan Tour and
Travels was a genuine exporter, there would be no necessity to give any
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undertaking that the Cargo does not contain any contraband. The letter does
not specify as to from where the cargo has been procured more importantly the
exporter claims himself to be a tour operator as well as an importer-exporter.
There was nothing placed on record by the exporter to indicate that he was a
regular exporter of sponge iron or any other product.
32. Therefore, we can safely hold that the letter given by the exporter dated
07.11.2008 is a document which has been created so as to enable the
appellant to wriggle out of the conspiracy which was hatched. Therefore, the
adjudicating authority as well as the tribunal rightly did not give any credence
to the letter dated 07.11.2008.
33. Therefore, indirectly the appellant has paved way for denigrating the
environment of the country by aiding an attempt to plunder its natural
resources more particularly a very rare species of tree which predominantly
grows in the Indian Sub-continent. Thus, we are not persuaded to exercise any
leniency in favour of the appellant and the decision in the case of Ashiana
Cargo is clearly distinguishable on facts and it does not persuade us to
exercise any compassion or leniency in the case of the appellant.
34. Thus, for all the above reasons we affirm the order passed by the
tribunal and consequently confirm the punishment of revocation of the CHA
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license granted to the appellant and forfeiture of the security deposit. The
substantial questions of law are answered against the appellant. No costs.
(T.S. SIVGNANAM, J)
I agree
(HIRANMAY BHATTACHARYAA, J)
(P.A.- PRAMITA/SACHIN)
