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Schankar Clearing & Forwarding v. Commissioner Of Customs (Import & General)

Delhi High Court

Jul 30, 2012

Judgment

Subsequent
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Structured Summary of the Court's Order (S. Ravindra Bhat, J.)

Factual and Procedural Background

This appeal challenges the suspension of the Customs House Agent (CHA) licence held by the appellant, Schankar Clearing & Forwarding, under the Customs House Agents Licensing Regulations, 2004 (CHALR).

Key factual and procedural points contained in the opinion:

A report alleging malpractices by the appellant was received from an investigating authority on 09.03.2011.
On 10.10.2011 the Commissioner of Customs issued an order suspending the appellant's CHA licence with immediate effect; that suspension order was accompanied by a notice. The suspension order was later confirmed on 24.01.2012.
The appellant challenged the suspension before the Central Excise and Service Tax Appellate Tribunal (CESTAT); CESTAT dismissed the appeal on 11.05.2012.
The appellant's counsel argued the suspension contravened Regulations 20, 20(1) and 20(2) of the CHALR, particularly as time limits for emergent action had lapsed.
The respondent's counsel accepted notice and defended the validity of the procedure taken, relying in part on precedent relied upon in the proceedings.
The present Court issued notice and heard arguments before delivering the order setting aside the suspension.

Legal Issues Presented

Whether the order of suspension of the appellant's CHA licence was contrary to Regulation 20(2) of the Customs House Agents Licensing Regulations, 2004.

Arguments of the Parties

Appellant's Arguments

The appellant's counsel relied on Regulations 20, 20(1) and 20(2) of the CHALR and submitted that a plain reading of these provisions demonstrates that the suspension could not have been sustained.
It was emphasised that the time limit for emergent action in Regulation 20(2) is 15 days from the date of receipt of the investigating authority's report; that 15-day period had long lapsed by the date the suspension was ordered on 10.10.2011.
The counsel further asserted that even the 90-day time limit referred to in the procedure was exceeded and that the suspension was ordered without any show-cause notice or prior hearing.

Respondent's Arguments

The respondent's counsel submitted that the appellant could not claim to be aggrieved because no final order had been issued at the time and that the legality of the suspension could be contested in proceedings that were pending; no prejudice had been caused.
It was argued that the timelines in Regulation 20(2) should not be read as absolute ("written in stone") and that the Court had discretion, relying on the decision in Vinod Tomar v. Union of India, W.P. (C) No. 12448/2009 dated 28.10.2009, where in similar circumstances the Court permitted the aggrieved party to continue to participate in the inquiry without prejudice.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Vinod Tomar v. Union of India, W.P. (C) No. 12448/2009 (dated 28.10.2009)	The respondent relied on this decision for the principle that, in similar circumstances, a Court may permit an aggrieved party to continue to participate in the inquiry and that no prejudice would ensue.	The precedent was relied upon by the respondent in argument. The Court's decision in the present opinion is based on its textual interpretation of Regulations 20 and 22 of the CHALR and the timing of actions taken by the Commissioner; the order in this case does not adopt that precedent as a reason to sustain the suspension.

Court's Reasoning and Analysis

The Court's analysis proceeds from a textual reading of the CHALR provisions relevant to suspension and procedure (Regulations 20, 21 and 22) and the undisputed chronology of events.

The Court noted Regulation 20 generally empowers the Commissioner of Customs to revoke or suspend a CHA licence for specified grounds, including misconduct.
Regulation 20(2) is an overriding provision that confers an emergency power to the Commissioner to suspend a licence "in appropriate cases where immediate action is necessary" and specifically prescribes that such immediate suspension must be taken within fifteen days from the date of receipt of a report from the investigating authority.
Regulation 22 sets out the detailed procedure for suspension or revocation: issuance of a notice within ninety days from receipt of an offence report, an opportunity to submit a written statement and seek personal hearing, inquiry steps and timelines for the inquiry report and the Commissioner's decision thereafter. The proviso to Regulation 22(1) clarifies that the normal procedure in Regulation 22 does not apply to the emergency power in Regulation 20(2).
The Court identified the critical chronological fact: the report from the investigating agency was received on 09.03.2011. The Commissioner did not invoke the emergency power within fifteen days of that receipt; instead, the Commissioner issued the suspension order on 10.10.2011.
Because the Commissioner did not act within the 15-day period prescribed by Regulation 20(2), the Court held that the Commissioner could not validly rely on Regulation 20(2) after that period had lapsed. The "non-obstante" language in Regulation 20(2) and the proviso to Regulation 22(1) were read as confining the emergency power strictly to that 15-day window.
The Court concluded that once the emergency period had lapsed, any suspension would have to follow the full procedure laid down in Regulation 22 (i.e., notice, inquiry, report, representations and decision within the prescribed timelines).
The Court observed the actual procedural chronology in the case: the final inquiry report was prepared on 07.05.2012 and the appellant received a show-cause notice on 05.06.2012 — indicating that the full inquiry process occurred only after the impugned suspension had already been imposed.
On that basis, the Court held that the suspension order of 12.10.2011 (confirmed on 24.01.2012) could not be sustained because it was contrary to the CHALR, 2004 as properly interpreted with respect to timing and procedure.

Holding and Implications

The Court set aside the impugned suspension order dated 12.10.2011 (as confirmed on 24.01.2012) and allowed the appeal.

Consequences and practical implications expressly stated in the opinion:

The suspension order is quashed as being contrary to the CHALR, 2004.
The authorities remain at liberty to proceed with the statutory inquiry and to pass any order in accordance with law, but must do so after granting the appellant an opportunity and by following the procedures prescribed in the Regulations (notably Regulation 22).
All other contentions raised are left open for determination in the appropriate proceedings.

The opinion does not elaborate any broader precedent beyond its application to the facts; the direct effect is the setting aside of the suspension and the direction to follow the procedural safeguards in the CHALR for any further action.

Show all summary ...

ORDER

S. RAVINDRA BHAT, J.: (OPEN COURT)

Issue Notice.

Mrs. Sharma, Sr. Standing Counsel accepts notice on behalf of the respondent.

1. The appeal is directed against an order of the Central Excise and Service Tax Appellate Tribunal (CESTAT) dated 11.05.2012 The question of law which arises for consideration in this case is whether order of suspension of the appellant's CHA license is contrary to the regulations 20(2) of the Customs House Agents Licensing Regulations, 2004 (‘CHALR’ for short).

2. Briefly the appellant Schankar Clearing & Forwarding a CHA license in terms of the Customs House Agents Licensing Regulations, 2004 was issued an order dated 10.10.2011 by the Commissioner of Customs suspending its license with immediate effect. The impugned order of the CESTAT would disclose that the Commissioner had based his order on a report dated 09.03.2011 about alleged malpractices adopted by the appellant. The suspension order of 10.10.2011 was also accompanied by a notice; the appellant was given post-decisional hearing and finally on 24.01.2012 the suspension order was confirmed. In the meanwhile the appellant was aggrieved by the passing of the suspension order. He alleged violation of the CHALR and approached the CESTAT which on 11.05.2012 dismissed the appeal. The appellant's counsel relies upon Regulation 20, 20(2) and 20(1) of CHALR and submits that a facial reading of these clearly demonstrates that the order of suspension could not have been sustained on any ground whatsoever. It is emphasised that the time limit for emergent action spelt out in Regulation 20(2) is 15 days from the date of receipt of report which had long lapsed and even the time limit of 90 days prescribed in Regulation 20(2) had passed when the suspension, without any show-cause or hearing, was ordered on 10.10.2011

3. Learned counsel for the respondent submitted that the Appellant cannot claim to be aggrieved since no final order has been issued. It is urged that the legality of the suspension order can be alleged in the proceedings that are pending and no prejudice has been caused. Counsel states that the provision in Regulation 20, 20(2) laid down the time lines and they cannot be read as if written in stone. She relies on the order of this Court in Vinod Tomar v. UOI, W.P (C) No. 12448/2009 dated 28.10.2009 where it was held that in similar circumstance the Court may permit the aggrieved party to continue to participate in the inquiry and that no prejudice would ensue.

4. It is evident from the above discussion that the suspension order in this case dated 10.10.2011 was in effect passed in terms of Regulation 20(2) of CHALR. It was not preceded by any show-cause or notice calling for the appellant's remarks or response to the allegations. Regulations 20, 21 & 22 to the extent they are relevant for our purpose are extracted below: -

“REGULATION 20. Suspension or revocation of licence. - (1) The Commissioner of Customs may, subject to the provisions of regulation 22, revoke the licence of a Customs House Agent and order for forfeiture of part or whole of security, or only order forfeiture of part or whole of security, on any of the following grounds, namely: -

(a) failure of the Customs House Agent to comply with any of the conditions of the bond executed by him under regulation 10;

(b) failure of the Customs House Agent to comply with any of the provisions of these regulations, within the jurisdiction of the said Commissioner of Customs or anywhere else;

(c) any misconduct on his part, whether within the jurisdiction of the said Commissioner of Customs or any where else which in the opinion of the Commissioner renders him unfit to transact any business in the Customs Station.

(2) Notwithstanding anything contained in sub-regulation (1), the Commissioner of Customs may, in appropriate cases where immediate action is necessary, [within fifteen days from the date of receipt of a report from investigating authority, suspend the licence] of a Customs House Agent where an enquiry against such agent is pending or contemplated.

xxxx xxxx xxxx

REGULATION 21. Prohibition. - Notwithstanding anything contained in regulation 22, the Commissioner of Customs may prohibit any Customs House Agent from working in one or more sections of the Customs Station, if he is satisfied that such Customs House Agent has not fulfilled his obligations as laid down under regulation 13 in relation to work in that section or sections.

REGULATION 22. Procedure for suspending or revoking licence under Regulation 20. - (1) The Commissioner of Customs shall issue a notice in writing to the Customs House Agent within ninety days from the date of receipt of offence report, stating the grounds on which it is proposed to suspend or revoke the licence and requiring the said Customs House Agent to submit within thirty days, to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by him, a written statement of defense and also to specify in the said statement whether the Customs House Agent desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs.

Provided that the procedure prescribed in regulation 22 shall not apply in respect of the provisions contained in sub-regulation (2) to regulation 20.

(2) The Commissioner of Customs may, on receipt of the written statement from the Customs House Agent, or where no such statement has been received within the time-limit specified in the notice referred to in sub-regulation (1), direct the Deputy Commissioner of Customs or Assistant Commissioner of Customs to inquire into the grounds which are not admitted by the Customs House Agent.

(3) The Deputy Commissioner of Customs or Assistant Commissioner of Customs shall, in the course of inquiry, consider such documentary evidence and take such oral evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings, and he may also put any question to any person tendering evidence for or against the Customs House Agent, for the purpose of ascertaining the correct position.

(4) The Customs House Agent shall be entitled to cross-examine the persons examined in support of the grounds forming the basis of the proceedings, and where the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing.

(5) At the conclusion of the inquiry, the Deputy Commissioner of Customs or Assistant Commissioner of Customs shall prepare a report of the inquiry recording his findings and submit his report within ninety days from the date of issue of a notice under sub-regulation (1).

(6) The Commissioner of Customs shall furnish to the Customs House Agent a copy of the report of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, and shall require the Customs House Agent to submit, within the specified period not being less than thirty days, any representation that he may wish to make against the findings of the Deputy Commissioner of Customs or Assistant Commissioner of Customs.

(7) The Commissioner of Customs shall, after considering the report of the inquiry and the representation thereon, if any, made by the Customs House Agent, pass such orders as he deems fit within ninety days from the date of submission of the report by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, under sub-regulation (5).

(8) Any Customs House Agent aggrieved by any decision or order passed under regulation 20 or sub-regulation (7) of regulation 22, may prefer an appeal under section 129A of the Act to the Customs, Central Excise and Service Tax Appellate Tribunal established under subsection (1) of section 129 of the Act.”

5. Regulation 20 empowers the Commissioner of Customs to revoke or suspend the license of CHA, in certain eventualities including in the case of misconduct. Regulation 20(2) is an overriding provision conferring emergency powers upon the Commissioner to - without any previous show-cause or any previous hearing - wherever immediate action is warranted, direct suspension of license pending an inquiry. Regulation 22 spells out the procedure for suspension or regulation of license. It is in effect the procedure to be adopted for the purpose of holding an inquiry. However, proviso to Regulation 22(1) reserves the right of the Commissioner of Customs to order immediate suspension of the CHA license. A close reading of these provisions would disclose that the power to direct immediate action is confined to taking it within 15 days from the date of receipt of a report from the investigating authority. In this case the report of the investigating agency was received on 09.03.2011 - a fact which is borne out in the order of the Tribunal and contentions of the parties before us. Concededly the Commissioner did not seek recourse to the power under Regulation 20(2). The immediacy or urgency of the situation was allowed to lapse and eventually the Commissioner issued the suspension order on 10.10.2011; even then, the power invoked was Regulation 20(1). This was later modified through a corrigendum. However, the fact remains that this power could not have been taken recourse to after the lapse of 15 days which is underlined by a ‘nonobstante’ clause in Regulation 20(2) and further underlined by the proviso to Regulation 22(1). The net result is that where immediate suspension is called for, the Commissioner has to take swift action and cannot wait; if he does so suspension can be made only after the full inquiry is held as provided by Regulation 22. In this case the final report of the inquiry was made on 07.05.2012; the appellant was issued with a show-cause notice on 05.06.2012

6. Having regard to the above discussion this Court is of the opinion that the suspension order impugned in this case dated 12.10.2011 as confirmed on 24.01.2012 cannot be sustained; it is clearly contrary to the CHALR, 2004. It is, therefore, set-aside. The authorities are, however, at liberty to proceed with the inquiry and pass any order in accordance with law after granting opportunity to the appellant and following the procedure prescribed in the rules. All contentions are left open. The appeal is allowed in above terms.

Order dasti.