Calcutta High Court
Commissioner Of Customs (Airport ... vs M/S. S. Pandey & Company on 26 September, 2022
CUSTA NO. 62 OF 2018
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
SPECIAL JURISDICTION (CUSTOMS)
ORIGINAL SIDE
RESERVED ON: 13.09.2022
DELIVERED ON: 26.09.2022
CORAM:
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE SUPRATIM BHATTACHARYA
CUSTA NO. 62 OF 2018
COMMISSIONER OF CUSTOMS (AIRPORT & ADMINISTRATION), KOLKATA
VERSUS
M/S. S. PANDEY & COMPANY
Appearance:-
Mr. K.K. Maiti, Learned Senior Standing Counsel.
.....For the Appellant.
Mr. Arijit Chakraborty, Adv.
.....For the Respondent.
Page 1 of 17
CUSTA NO. 62 OF 2018
JUDGMENT
(Judgment of the Court was delivered by T.S.SIVAGNANAM, J.)
1. This appeal filed by the Revenue under Section 130 of the Customs Act,
1962 (the Act), is directed against the order dated March 29, 2017 passed by
the Customs Excise and Service Tax Appellate Tribunal, Eastern Zonal Bench,
Kolkata (Tribunal) in order No. F/075901/2017 in Appeal No. C/194/2012-
DB, arising out of order-in-original dated April 13, 2012, passed by the
Commissioner of Customs (Airport & Admin.), Kolkata under Regulation 22(7)
of the Customs House Agents Licensing Regulations, 2004 (CHALR).
The appeal was admitted on November 26, 2018 on the following questions of
law:
(i) Whether the impugned order of the Tribunal can be
called perverse for the reason that on the ground the
respondent was exonerated from penalty in the proceeding
under Section 124 of the Customs Act, 1962, the Tribunal
set aside the order revoking their license?
(ii) Whether the Tribunal ought to have done so when
the charge against the agent was serious i.e. not advising
the customs properly under the regulations with regard to
the mis-declaration of the description of the goods by the
exporter?
2. The respondent was granted Customs House Agents License during 1997
under the erstwhile Customs House Agents Licensing Regulations, 1984 to
transact customs clearance work within the jurisdiction of Kolkata Customs
Commissionerate. The respondent came to adverse notice of the Department
pursuant to an investigation done by the Directorate of Revenue Intelligence,
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Kolkata Zonal Unit (DRI), who had received information that Red Sanders wood
which is a prohibited item, is attempted to be illegally exported under the guise
of ductile iron casting from an exporter of Burdwan through Haldia Port. This
investigation culminated in issuance of show-cause notice under Section 124 of
the Act dated 25.02.2010. The respondent was the 5th noticee in the said
notice. The respondent was called upon to show cause as to why penalty
should not be imposed on them under Section 114(i) of the Act on the alleged
ground that the respondent for material gain assisted in the attempt of illicit
export of Red Sanders and thus, had failed to discharge their responsibilities
properly/ legally in dealing with the subject goods. Further, they had handled
the consignments without getting any authorization letter from the declared
exporters and they had failed to advise their clients to comply with the
provisions of the Act and did not bring the matter to the notice of the Customs
Authorities and all these tantamounts to not exhibiting their proper role as
CHA. The competent authority under CHALR was requested to take suitable
action in terms of the Regulations for not complying with the obligations laid
down in Regulation 13 of the CHALR. Further, it appears that the respondent
has rendered themselves liable for penal action under Section 114(i) of the Act
for the aforesaid omission and commission. The appellant submitted their
explanation on March 16, 2010 stating that they received the job order from
M/s. Suman International and they were aware that M/s. Suman International
had secured the job order from M/s. Liner Shipping Agency (P.) Ltd. and M/s.
Suman International is also a CHA and since their license has been temporarily
CUSTA NO. 62 OF 2018
suspended, they approached the respondent for carrying out the said job order.
Further, the respondent referred to the statement recorded from the proprietor
under Section 108 of the Act wherein they had stated that they entrusted the
job order to their employee Mr. Samrat Basu who got the documents from M/s.
Suman International and on the basis of such documents, he prepared the
shipping bills and other documents necessary for export of the goods. Further,
it was stated that Mr. Samrat Basu was not aware of the contents of the
containers. It was further stated that CHA did not know about the contents of
the containers in as much as the containers were not packed in their presence
and the containers have been brought by the export personnel and they
handed over the containers after those entered the docks. Thus, the
respondent denied the allegation that they knew or were in association with the
exporter to export a prohibited cargo, as such the allegation is false and there
is no evidence to the said fact. Further, the respondent contended that the
Department has not produced any evidence that the respondent had knowledge
that the containers contained Red Sanders wood. Further, it was contended
that in order to invoke penalty proceedings against the respondent, the onus is
on the Department to prove that the CHA had knowledge about the contents of
the containers or they have associated with the exporter to export prohibited
goods out of the country. Thus, all the allegations are mere surmises and
conjectures on the part of the investigation agency and no penalty can be
imposed on assumptions, presumptions and suspicion. Reliance was placed on
the decision of the Hon'ble Supreme Court in Hindustan Steel Ltd. Versus
CUSTA NO. 62 OF 2018
State of Orissa1. Further, it was stated that in the show-cause notice a
request has been made to the competent authority under the CHALR to take
action against the respondent and this direction is arbitrary exhibiting bias
against the respondent. Further, it was submitted that first and foremost what
is required to be seen is whether there was any intentional contravention of the
provisions of the CHALR and even before adjudicating the case, such
recommendation to the competent authority under the CHALR to take action
against the respondent is not proper and justified. Accordingly, the respondent
prayed for dropping further proceedings pursuant to the show-cause notice
dated 25.02.2010.
3. Thereafter, show-cause notice dated July 26, 2010 was issued to the
respondent under Regulation 22(1) of the CHALR calling upon the respondent
to show cause as to why the Customs House Agent License held by them
should not be revoked and their security deposit ordered to be forfeited under
the provisions of Regulation 20(1) of CHALR, 2004. In the meantime, the
license granted to the respondent was suspended under Regulation 20(2) of the
CHALR by order dated 18.03.2010. The respondent had challenged the said
order by filing an appeal before the learned Tribunal which was pending at
relevant time and also stated to be pending as on date. The respondent had
submitted in their reply dated 27.03.2012 to the enquiry report and a written
synopsis dated 28.03.2012 setting out their defense. The adjudicating
authority who had issued the show-cause notice under Section 124 of the
1978 (2) ELT 159 (SC)
CUSTA NO. 62 OF 2018
Customs Act passed order dated January 4, 2012 dropping the proposal to
impose penalty on the respondent on the ground that the Department has
failed to establish knowledge of involvement of the respondent for gain in the
alleged conspiracy to abet smuggling. Thereafter, the competent authority
under the CHALR adjudicated the show-cause notice dated July 26, 2010 and
passed ordered dated 16.04.2012 revoking the license granted to the
respondent and also order forfeiture of the full amount of security deposit.
Aggrieved by such order, the respondent filed appeal before the learned
Tribunal which was allowed by the impugned order. Aggrieved by such order,
the revenue is on appeal before us.
4. We have heard Mr. K.K. Maiti, learned Senior Standing Counsel for the
appellant revenue and Mr. Arijit Chakraborty, learned Advocate for the
respondent.
5. The allegation against the respondent is that they have violated
Regulations 13(a) and 13(d) of the Customs House Agents Licensing
Regulation, 2004. Regulation 13 deals with obligations of Customs House
Agent. Sub-Regulation (a) of Regulation 13 states that a Customs House Agent
shall 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 whenever required by the Deputy Commissioner of
Customs or Assistant Commissioner of Customs. Sub-Regulation (d) states
that a Customs House Agent shall advise his client to comply with the
provisions of the Act and in case of non-compliance shall bring the matter to
CUSTA NO. 62 OF 2018
the notice of the Deputy Commissioner of Customs or Assistant Commissioner
of Customs. The admitted fact is that the export order was not received by the
respondent from the exporter but they had secured the order through another
CHA and it is that agency which had entrusted the documents for the purpose
of preparation of shipping bills and other export documents after the goods
were loaded in the containers, sealed and brought to the docks. The consistent
case of the respondent is that they had no knowledge of the cargo which was
stuffed in the containers and the containers had the seal affixed by the Central
Excise Department intact and having received the documents from M/s. Linker
India, export documents were prepared by the respondent. In the light of the
said factual position, the respondent while responding to the show-cause
notice dated 25.02.2010 issued by the DRI, specifically contended that unless
there is evidence to show that the respondent/ CHA had knowledge of the
prohibited goods being stuffed into the containers, they cannot be held liable
for payment of penalty as penalty cannot be imposed on assumptions and
presumptions without evidence. This stand taken by the respondent in the
response to the show-cause notice dated February 25, 2010 was accepted by
the adjudicating authority in its order dated 04.01.2012, wherein the authority
specifically recorded that the Department has failed to establish knowledge of
any involvement of the resposdent for gain in the alleged conspiracy to abet
smuggling of Red Sanders. The learned Tribunal taking note of the said order
dated January 04, 2012 and also taking note of the conduct of the respondent
in having cooperated with the investing agency and taking into account the
CUSTA NO. 62 OF 2018
overall facts and circumstances of the case which were referred, opined that
revocation of license and forfeiture of the security deposit is excessive. The
revenue is before us contending that the respondent having violated
Regulations 13(a) and (d) of the Regulation, the competent authority under the
CHALR was well justified in revoking the license and ordering forfeiture of the
security deposit. In support of their contention, Mr. Maiti placed reliance on
the decisions in the case of Welcome Air Express Pvt. Ltd. Versus
Commissioner of Customs (Airport & Administration) 2 dated 04.05.2022
and Commissioner of Customs (Airport & Administration) Versus M/s.
Marico Logistics Pvt. Ltd.3 dated July 21, 2022.
6. Mr. Chakraborty contended that the Tribunal taking note of the order
dated January 4, 2012 exonerating the respondent from the penalty
proceedings proposed under Section 124 of the Act as well as the conduct of
the respondent in having cooperated with DRI in the investigation and
considering the totality of the facts and circumstances of the case opined that
the revocation of the license was excessive. Thus, in the absence of any
perversity in the order passed by the Tribunal, this Court will not interfere with
the said order, more particularly when no substantial question of law arises for
consideration in this appeal. Mr. Chakraborty placed reliance on the decision of
the High Court of Bombay in Commissioner of Customs (General) Versus
Sainath Clearing Agency 4 ; the decision of the Hon'ble Supreme Court in
CUSTA No. 4 of 2015
CUSTA No. 16 of 2020
2015 (326) ELT 548 (Bom.)
CUSTA NO. 62 OF 2018
Commissioner of Customs (General) Versus K.M. Ganatra and Company 5 ;
Transport Logistics Versus CESTAT, Chennai 6, Commissioner of Customs
(General) Versus Alankar Shipping & Clearing P. Ltd.7 and Exim Cargo
Services Versus Commissioner of Customs (General) 8.
7. In Welcome Air Express Pvt. Ltd. the appeal filed by the Customs
House Agent was dismissed affirming the order passed by the learned Tribunal
upholding the revocation of license. In M/s. Marico Logistics Pvt. Ltd. the
order passed by the learned Tribunal setting aside the revocation of license was
reversed and the order passed by the competent authority revoking the license
was restored. These decisions have been pressed into service by Mr. Maiti to
support his argument that the doctrine of proportionality was considered in
those cases and the Court had upheld the stand taken by the Department and
confirmed the order of revocation. It is no doubt true that in both the decisions,
the Court considered the doctrine of proportionality, however such
consideration was made after taking note the facts and circumstances of those
cases. In Welcome Air Express Pvt. Ltd. the Court held that no lenient
approach can be adopted in favour of the Customs House Agent as in the
proceedings initiated under Section 124 of the Act, the Commissioner of
Customs did not exonerate the CHA. In Marico Logistics Pvt. Ltd. there was
an admission made by the Customs House Agent before the Commissioner
which clearly shows the connection of the CHA with the attempt to export the
2016 (332) ELT 15 (SC)
2016 (338) ELT 380 (Mad.)
2019 (367) ELT 553 (Bom.)
2019 (368) ELT 1024 (Del.)
CUSTA NO. 62 OF 2018
prohibited item, Red Sanders and the Court held that the learned Tribunal has
picked holes in the evidence brought on record by the Licensing Authority
which not only probabilises but also establishes the violation committed by the
CHA giving no room for interference. Both the aforementioned decisions may
not be applicable to the case on hand as in the proceedings initiated under
Section 124 of the Act proposing to levy the penalty on the respondent was
dropped by adjudication order dated January 04, 2012 holding that the
Department had failed to establish knowledge of the respondent and
involvement for gain in the alleged conspiracy to abet smuggling. Thus, the
respondent stood completely exonerated from the proceedings initiated under
Section 124 of the Act.
8. It is true that the proceedings initiated under the CHALR are
independent proceedings but the fact remains that proceedings under the
CHALR was commenced by issuance of show-cause notice dated July 26, 2010
under Regulation 22(1) of the CHALR, 2004 pursuant to the direction issued by
the DRI while issuing show-cause notice dated February 25, 2010. Therefore,
while accepting the submission of Mr. Maiti that proceedings under the CHALR
are independent proceedings but if the factual matrix which led to the action
being initiated under CHALR has been found to be not established and nothing
adverse turns out against the CHA, such proceedings would undoubtedly have
a bearing on the proceedings proposing revocation of the license granted to the
respondent. Precisely this was done by the Tribunal and not only that the
learned Tribunal also notes the conduct of the respondent in cooperating with
CUSTA NO. 62 OF 2018
DRI in the investigation. That apart, the learned Tribunal has taken into
consideration the totality of the facts and circumstances and then held that the
order of revocation of license was excessive, in the given facts and
circumstances more particularly, when the respondent stood completely
exonerated in the proceedings initiated under Section 124 of the Act.
9. The power of the learned Tribunal to vary, confirm or modify the order
passed by the competent authority is beyond doubt. In K.M. Ganatra & Co.
the Hon'ble Supreme Court pointed out that the Tribunal has jurisdiction to
confirm, modify or annul the decision and while exercising its jurisdiction, has
to exercise it in accordance with law having regard to the factual matrix of the
case. The Tribunal having been conferred the power to modify the order
restricting the period of revocation will definitely come within the sweep of the
said power. In Sainath Clearing Agency it was held that the authority issuing
the license had certain amount of discretion in the matters of revocation of
licenses and while imposing penalty. It was pointed out that the orders should
not be lightly interfered with, however, that does not mean that once the orders
of the authorities like Commissioner are capable of being challenged in further,
then the Appellate Tribunal's powers are in any way restricted or
circumscribed. Further, it was held that in order to render substantial justice
and if the Tribunal feels that there is a certain period which has gone by during
which the agent has been out of business, then that is sufficient penalty but
such a view cannot be taken in all cases as a matter of rule. In Transport
Logistics it was held that the CHA was out of work for more than 3 years and
CUSTA NO. 62 OF 2018
that itself is sufficient punishment for the appellant therein. Following the
decision of this Court in Commissioner of Customs (Preventive) Versus Over
Land Agency 9, the period of suspension of license was restricted and the CHA
therein was directed to make fresh security deposit and on such deposit being
made, the license was directed to be restored. In Alankar Shipping &
Clearing Pvt. Ltd. the Court taking into consideration the decision in K.M.
Ganatra & Co. held that the Tribunal has power under the CHALR, 1984 to
take a lenient view to modify the revocation period. In Exim Cargo Services
the Court took into consideration the factual position and held that there is
nothing to show that appellant therein or any of its employees could be
attributed to any conscious or deliberate mis-statement on behalf of the
importer more particularly, when there was no corroborative evidence or
statement of anybody that the CHA had information, knowledge or has
connived in the alleged forgery of invoices, mis-declaration and under-
valuation. Further it was held that an element of mens rea, or any direct or
indirect involvement attributable to the CHA through active knowledge or
connivance is required to be proved in a proceeding for revocation of license of
a Customs House Agent.
10. The legal position which emerges from the above decisions is that,
considering the facts and circumstances of each case, the Tribunal has
jurisdiction to confirm, modify or annul the decision of the authority. Further,
the Tribunal exercises jurisdiction; such exercise should be in accordance with
2006 (204) ELT 554 (Cal.)
CUSTA NO. 62 OF 2018
law. In the instant case, the Tribunal took note of the undisputed fact whereby
the respondent was completely exonerated from the proceedings initiated under
Section 124 of the Act where there was allegation of abetment to smuggling.
Thus, the factual matrix based on which the proceedings were initiated under
CHALR, 2004 appears to have been effaced. However, we have to tred a
cautious approach since the respondent is under obligation to act in
accordance with law, in terms of the license granted to him under the CHALR,
2004. The respondent has bound himself by executing a bond and furnishing
security to scrupulously abide by the terms and conditions of the license.
Therefore, even if the respondent has been fully exonerated in the proceedings
initiated under Section 124 of the Act, yet the competent authority under
CHALR is entitled to examine the case of the respondent qua the requirement
under the regulations. It is an admitted fact that the respondent did not obtain
the authorization from the exporter but they are stated to have received the job
order from another CHA whose license had been suspended. If such is the
case, it tantamounts to a clear violation of Regulation 13(a) of the Act. In Noble
Agency Versus Commissioner of Customs 10, the learned Tribunal had
explained the important position played by a Customs House Agent in the
Customs House in the following terms:
"The CHA occupies a very important position in the
Customs 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
2002 (142) ELT 84 (Tri-Mumbai)
CUSTA NO. 62 OF 2018
importer would find it impossible to clear his goods through
these agencies without wasting valuable energy and time.
The CHA is supposed to safeguard the interests of both the
importers and the Customs. A lot of trust is kept in CHA by
the importers/ exporters as well as by the Government
Agencies. To ensure appropriate discharge of such trust, the
relevant regulations are framed. Regulation 14 of the CHA
Licensing Regulations lists out obligations of the CHA. Any
contravention of such obligations even without intent would
be sufficient to invite upon the CHA the punishment listed in
the Regulations...."
11. The above decision of the learned Tribunal was approved by the Hon'ble
Supreme Court in K.M. Ganatra & Co. Thus, any contravention of the
obligations cast on the CHA even without intent would be sufficient to invite
action against the CHA. In Shri Kamakshi Agency Versus Commissioner of
Customs 11 the role of the CHA was explained in the following terms:
"The very purpose of granting a license to a person
to act as Customs 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 license 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 license 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 customs station, he
2001 (129) ELT 29 (Mad.)
CUSTA NO. 62 OF 2018
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 should 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 license 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 of 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 reaching
consequences in the transaction of business by the Custom
House officials."
12. Thus, if the conduct of the respondent is viewed bearing in mind the
above legal principles, it no doubt shows that the respondent had violated the
conditions of license. The respondent having received the export order from a
third party is also to be held guilty for not being able to advise his client to
comply with the provisions of the Act as the respondent did not know who his
client was and it is through a third party they had received the job order.
Therefore, the respondent cannot be fully exonerated from the proceedings.
Thus, taking into consideration the reasoning of the learned Tribunal which
was arrived at taking note of the fact that the respondent was completely
exonerated in the proceedings initiated under Section 124 of the Act and
CUSTA NO. 62 OF 2018
proposal to levy penalty was dropped and also the fact, that the respondent
cooperated with the investigating agency, we are of the view that the discretion
exercised by the learned Tribunal cannot be termed to be either arbitrary or
perverse. The period during which the license stood revoked, i.e., commencing
from the date of suspension till the date of revocation vide order dated April 13,
2012 and till date would be a deterrent to the respondent to carry on his
functions in future as a Customs House Agent strictly in accordance with the
terms of the license and faithfully and diligently undertake the activities
bearing in mind the important role played by a CHA in the Customs House.
However, the order passed by the learned Tribunal setting aside the forfeiture
of the security deposit appears to be granting over indulgence to the
respondent. Therefore, to that extent, the order passed by the learned Tribunal
has to be interfered and the respondent has to be directed to make a fresh
security deposit to be entitled for renewal of his license.
13. In the result, the substantial questions of law are answered in the
following terms:
(i) The order passed by the learned Tribunal setting aside the revocation
of license cannot be held to be wholly perverse considering the facts
and circumstances of the case, however, setting aside the order
forfeiting the security deposit is not tenable.
(ii) The respondent having failed to adhere to Regulation 13(a) of the
CHALR, 2004 cannot be exonerated completely and, therefore, the
period during which the license stood revoked till it is restored shall
CUSTA NO. 62 OF 2018
be treated as a penalty and the order of confiscation of security
deposit passed by the competent authority stands restored with a
direction to the respondent to furnish fresh security deposit to the
satisfaction of the Department.
14. In the result, the appeal is allowed in part and the substantial
questions of law are answered in the above terms.
15. The Customs House Agents License granted to the respondent, shall be
renewed upon the respondent furnishing fresh security to the satisfaction of
the authorities and the order of revocation of license till it is restored and
renewed, shall be taken as a punishment imposed on the respondent in lieu of
the punishment of permanent revocation of the license as ordered in the order
dated April 13, 2012. This direction shall be complied with within eight weeks
from the date of receipt of the server copy of this order. No costs.
(T.S. SIVAGNANAM, J.)
I agree
(SUPRATIM BHATTACHARYA, J.)
(P.A.- PRAMITA)
