Arvind C' Bhagat v. Commissioner Of Customs, Chennai

V.S Sirpurkar, J.:— Feeling aggrieved by the dismissal of the writ petition by the learned single Judge of this Court, the appellant has comp up in this writ appeal. In the writ petition, the appellant had challenged the order of the second respondent dated 02.09.1998 whereby his application for renewal of Customs House Agent Licence was rejected. In exercise of the powers under Section 146(2) of the Customs Act, the Central Board has formulated Regulations under the title “Customs House Agents Licensing Regulations, 1984”. These regulations deal with the subject of Customs House Agents, the manner of awarding licence to the Customs House Agents and the conditions on which the licence could be given and/or renewed. The licence is granted under Regulation 10 on an application under Regulation 5. The conditions are prescribed in Regulation No. 6. Regulation 12 provides the period of validity of a licence which is for five years and also provides that it can be renewed. Regulation 12(2) specifies the conditions for such renewal. Regulation 12(2)(b) is relevant for our purpose which provides as follows:—

“12(2)(b). absence of instances of delay either in the clearance of goods or in the payment of duty for any reason attributable to such licensee and any complaints of misconduct including non-compliance of any of the obligations specified in Regulation 14.”

2. Regulation 14 provides for the obligation of Customs House Agent. Regulation 14(g) is relevant for our purpose which runs as follows:—

“14(g). promptly pay over to the Government, which due, sums received for payment of any duty, tax or other debt or obligations owing to the Government and promptly account to his client for funds received for him from the Government or received from him in excess of Governmental or other charges payable in respect of the clearance of cargo or baggage on behalf of the client.”

3. The appellant had applied for his licence on 12.02.1992 as it was due to expire on 08.03.1992 The same was renewed only for a period of six months instead of normal period of three years as an filed before the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) by the appellant relating to import of Cyclohexanone on the basis of fabricated documents and concessional duty was pending. It seems from the order that the appeal filed before the CEGAT was dismissed as not tenable and it was observed by the CEGAT that it was open to the department to take up such proceedings as are open to it in law for recovery of amounts from the appellant. It is then mentioned in the order that a separate Civil Suit has been filed by the department for the recovery of the surety amount. Under such circumstances, the Assistant Commissioner of Customs seems to have refused to renew the licence.

4. The learned single Judge has taken a view that the refusal to renew the licence was perfectly legal and valid and it is on that ground that the writ petition was dismissed. A short factual background would highlight the controversy. While working as the Custom House Agent, the appellant filed two Bills of Entry for home consumption of Cyclohexanone imported by two companies viz., M/s. Magnatapa Co., Kanpur and M/s. Wellow Magnetic Tape Co., Kanpur. The value of each consignment was declared at Rs. 3,66,580/-. Under the rules, the importers were bound to pay concessional duty at 35% on the ground that the imported goods were required for the manufacture of ferrites, capacitors and magnetic tapes. At the time of import, the importers executed a bond that they would ultimately produce an end user certificate from the competent authority of the Excise Department or an end use affidavit to the satisfaction of the Collector that the imported material was used for the manufacture of blank tapes and on their failure, they would pay Rs. 3,16,1757- in each case on demand. The department demanded a surety for the said amount of Rs. 3,16,1757- on both the transactions and, therefore, the Punjab and Sind Bank, IBD Branch, Nariman Point, Bombay stood guarantee to an extent of about Rs. 78,0447- in each case, while for the rest of the amount Rs. 2,37,1317- out of Rs. 3,16,1757-, the appellant offered himself to be a surety. The surety was for a period of six months. It is needless to mention, the appellant offered his surety in respect of both the importers. Even before the expiration of the guarantee given by the appellant, the department found out that both the importers were fictitious persons and in fact, the material imported was not for home consumption at all and, therefore, it invited the duty of Rs. 3,16,1757- on each consignment. The department, therefore, served a show cause notice on the importer, the bank as also the appellant requiring them to show cause as to why the money should not be recovered under the contract of guarantee from the appellant. The appellant replied to the show cause notice by way of a reply dated 22-11-1989 that he had no occasion to suspect the bona fides of the importers, that the said surety was given by him only on the directions of the department and that he himself was taking all the efforts to bring home the culprits. He also sought personal hearing. Ultimately, the Collector of Customs passed an order on 03.01.1991 directing the appellant to pay an amount of Rs. 2,37,131/- for each transaction. The appellant filed an appeal before the CEGAT vide Appeal Nos. C/141 and 142 of 1991 and as mentioned earlier, CEGAT passed final orders on the appeals holding that since the order passed by the Collector of Customs was not an order of adjudication within the meaning and mischief of the Customs Act, it had no jurisdiction to decide the matter. It also observed that in case the department was felt, it could enforce the guarantee given by the appellant for Rs. 2,37,131/- in each case by taking recourse to law. It is significant to note that during all these periods, the appellant was allowed to operate as a Customs House Agent. His period had expired on 08.03.1992, but considering the pendency of the appeal before the CEGAT, that period was already extended by six months. However, later on, the renewal was refused by order dated 02.09.1998, which was challenged by the appellant by way of writ petition before the learned single Judge.

5. The most important fact is that till today, the appellant has not paid a single farthing to the department out of the liability covered by his guarantee to the department. The gravamen was that the appellant was not an importer and it was not his liability to pay the duty and still if there was any liability, it was only a civil liability and if the department so felt, it could always enforce the civil liability and if a Civil Suit has already been filed for the recovery of that amount, then the question of liability has to be decided only before the Civil Court. Under such circumstances, when the liability itself was under dispute, the renewal of licence could not be rejected.

6. This contention was contested by the department suggesting that it was the appellant who had given a guarantee for the differential duty on behalf of the importers and he was bound to discharge the liability of the importers. The department relied on Regulation 14(g), which has already been quoted above, and pointed out that if the appellant failed to make the payment to the department of the duty for which he stood surety, then the appellant had breached Regulation 14(g) and as such, the department was, therefore, justified in not renewing the licence. The department also relied on Regulation 12(2)(b) which entitles the department not to renew a licence in case, it is found that the concerned Customs House Agent has breached any of the Regulations under Regulation 14.

7. The learned single Judge took a view that since the appellant had given the guarantee to the department regarding the differential duty and has offered surety for the same amount, in law, it would be deemed as if, he had received the payment of duty so far as the departmental liability was concerned and if he failed to discharge his obligation contemplated under Regulation 14(g), then the department was justified in refusing to renew the licence. The learned single Judge also took the view that the department was perfectly justified in taking into consideration the conduct on the part of the appellant for the purposes of deciding as to whether the licence should be renewed or not.

8. The learned Counsel appearing for the appellant has, more or the less, toed the same line of argument as was placed before the learned single Judge. According to the appellant, the learned single Judge has erred in interpreting Regulation 14(g), According to him, Regulation 14(g) could be attracted only if the concerned Customs House Agent had actually received any money from the importers towards the duty and had further failed to remit the same to the department. Much stress was laid on the words “when due, sums received for payment of any duty, tax or other debt or obligations owing to the Government and promptly account to his client for funds received for him from the Government or received from him in excess of Governmental or other charges payable in respect of the clearance of cargo or baggage on behalf of the client”. The learned Counsel very fervently argued that in fact, the appellant had received not a single farthing from his client, though he had given a guarantee to the department and had offered himself as a surety for the payment of differential duty. Now if the appellant has offered himself as a surety and had given a guarantee to the department for the payment of differential duty, he was bound to discharge his obligations. It was his duty to ascertain and know about the status of the person for whom he gave the guarantee and stood as a surety. Not only this, but the guarantee offered by the appellant had been accepted and acted upon and, therefore, the appellant became all the more liable to make good the evaded duty which was due to the department. The learned single Judge has taken a correct view that once the appellant had given the guarantee for the payment of differential duty and had offered as a surety then, it would be deemed in law that he has received the payment of duty. There would, therefore, be no question of the appellant raising an objection that he had not received anything from the importers and that he had not failed to pass any amount which had been received by him towards the duty or tax. The learned Counsel then pointed out that he had not so far received the summons of the Civil Suit which was allegedly filed by the department. We are not at all impressed by that argument. The question is not as to whether the department had filed the Civil Suit or not. The question is not about the liability of the appellant or the importers towards the duty which was due to the department. The main question here is whether the department was justified in refusing the licence for the reasons suggested by the department in the order. The department has clearly taken a view that the appellant, who had given a guarantee for the payment by the two parties, had failed to honour his commitment, though he stood as a surety for that payment. Therefore, in law, the appellant was bound to pass without any undue delay the amounts to the department and he having failed in passing these amounts, there was breach on his part of Regulation 14(g). The learned single Judge has correctly interpreted Regulation 14(g) and has correctly come to the conclusion that by offering himself as a surety, the appellant had stepped into the shoes of the importers. The appellant has accepted to fulfil the commitment of the importers, if the importers failed to do so. In that view, we do not find any substance in the arguments of the learned Counsel for the appellant. The learned Counsel for the appellant also fervently argued that the appellant had guaranteed to the department in all possible manners and in fact, the appellant, who himself as a Customs House Agent, had hardly any idea that the imports were not for the actual users and he could not as such have any idea of facts. It was for the appellant to ascertain all these things before he recklessly offered himself as a surety, guaranteeing part of the payment duty. Now the appellant cannot turn around and say that he did not have the idea regarding his own importers and that the whole blame would be that of either the importers or that of the department.

9. The learned Additional Solicitor General contended that the appellant, who was granted the licence of Customs House Agent, was in fact acting in trust for the department. He took us through various responsibilities that the Customs House Agent has to bear. He pointed out that the licence was given on the basis of the confidence built by the Customs House Agent and that a turn about on the part of the appellant from paying the amounts had shaken the confidence. We are in entire agreement with the Additional Solicitor General when he says that the attitude on the part of the appellant was not in keeping with the trust reposed in him by the department and, therefore, the department was well justified in refusing to renew the licence. It is really strange that an amount of over Rs. 5 lakhs which would have gone into the State Coffers way back in 1992 should have been held back by the appellant even till today. If the department, therefore, choose not to renew the licence on account of this peculiar conduct of the appellant, which is well covered under Regulation 12(2)(b), and, in our opinion rightly, the learned single Judge has taken resume of all these provisions and has arrived at a correct conclusion. The order needs no interference. The writ appeal is without any merits and is dismissed with costs which is quantified at Rs. 5,000/-. C.M.P No. 119 of 1999 is dismissed.