S.K. Logistics v. Commr. of Cus. (General), New Delhi

[Order per : R.K. Singh, Member (T)]. - Appeal has been filed against order dated 10-4-2015 in terms of which the Customs broker license of the appellant was revoked and security deposit forfeited.

2. The facts of the case, in brief, are as under :

On 12-1-2010, seventeen shipping bills covering consignments of readymade garments namely rayon scarves in 356 packages were filed under Duty Drawback Scheme. These shipping bills pertained to five exporters including M/s. Reliable Overseas and were filed by customs broker M/s Sunil Dutt. On examination, the goods were not only found to be short but also of inferior quality vis-a-vis the value declared for claiming drawback benefit. Thereafter the past exports of the said exporters including M/s. Reliance Overseas were also taken up for investigation. It was found that -

(i)    Four shipping bills of M/s. Reliance Overseas were filed by the appellant on 28-7-2009 and

(ii)    The exporter was non-existent. The Commissioner held that the appellant had not obtained authorisation from the exporter who was not in existence and thus violated Regulation 13(a), (d), (e) and (o) of the CHALR, 2004 and on that basis revoked the appellant’s license and forfeited the security deposit.

3. The appellant has contended that :

(i)      Shipping bills were filed in July, 2009 but investigations took place much later in 2011.

(ii)   It is possible that the exporter was not found at the given address after so much time had elapsed from the time it filed the shipping bills in July 2009.

(iii)  At the time of exportation the cargo was examined and nothing objectionable was noticed.

(iv)   Drawback amount was duly credited in the account of the exporter in Punjab & National Bank.

(v)     Regulation 13(o) of CHALR was introduced on 8-4-2010 and therefore it cannot be held guilty of violation thereof.

(vi)   The proceedings are vitiated because the time limit prescribed under Regulation 22 of the CHALR, 2004 had not been adhered to and cited the judgment of Delhi High Court in the case of Schankar Clearing & Forwarding v. CC (Import & General) - (Del.).

(vi)   No proforma for obtaining authorisation was prescribed and in such circumstances obtaining signature of the exporter on the Bill of entry/shipping bills was sufficient compliance of the obligation under Regulation 13(a) as was held in the case of P.P. Dutta v. Commissioner of Customs, New Delhi - (Tri. - Del.).

(v)    The C.B.E. & C. circular No. 9/2010-Cus. prescribing KYC norm was issued on 8-4-2010 and prior to that no KYC norms were prescribed.

(vi)   The timeline for completion of proceeding under CHA license under Regulation 22 were reiterated by the CBEC vide circular No. 9/2010-Cus. dated 8-4-2010 for proper compliance.

4. Ld. DR for the Revenue on the other hand argued that it is a fact on record that the appellant never met the exporter or got in touch with it and therefore violation of Regulation 13(a) (d) and (e) is clearly established. The timeline prescribed in Regulation 22 is not mandatory and is to be treated to be directory.

5. We have considered the contentions of both sides. It is evident from the facts and evidence on record and is not contested by the appellant that the appellant did not take any authorisation from the exporter and had never met it (i.e. exporter) or got in touch with it (i.e. the exporter) even on telephone. In such a scenario, it was obviously not possible for the appellant to claim that the documents were signed by the exporter. [In the case of P.P. Dutta (supra) it was recorded as a fact that the documents were signed by the exporter.] Thus, the violation of Regulation 13(a) is established. When the appellant never met the exporter and was never even in touch with it, it was obviously not in a position to advise it (i.e. the exporter) to comply with the provisions of the Customs Act and thus it failed to fulfil its obligation under Regulation 13(d) ibid and thereby stood in violation thereof. For the same reason, the appellant was not in position to impart any information to its client and hence the violation of Regulation 113(e). We however agree with the appellant that Regulation 113(o) came into existence 8-4-2010 and therefore it cannot be held guilty of violation thereof as the shipping bills were filed in July 2009.

6. The appellant has contended that the proceedings have violated the timeline prescribed under Regulation 22 of CHALR, 2004. Sub-Regulation (5) of Regulation 22 is reproduced below :

“(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).”

As is evident from the Regulation 22(5) quoted above the Deputy Commissioner of Customs or Assistant Commissioner of Customs was required to submit enquiry report within a period of 90 days from the date of issue of notice under sub-regulation (1) of Regulation 22. In this case, such notice was issued on 14-10-2011 while enquiry report was submitted on 19-1-2015 which is more than three years after the notice was issued under Regulation 22(1). Ld. DR has contended that the timeline prescribed under Regulation 22 should not be read to be mandatory. She pleaded that the timeline provision is more in the nature of a directory provision. We find that the Delhi High Court in the case of Schankar Clearing & Forwarding (supra) has relied upon these timelines in the case involving suspension of license. The issue involved in the present case is not suspension of license but revocation thereof. However, even if the timeline is held to be directory and not mandatory, it can hardly be anybody’s case that the prescribed timeline can be completely ignored as that would make Regulation 22 otiose. When the said Regulation requires an enquiry report to be submitted within 90 days of the issue of notice, even if this period is taken to be directory, it cannot be accepted that such a report should not be held to have violated Regulation 22(5) even if it was not submitted for years. Timelines prescribed under subordinate legislation even if held to be directory are required to be shown some or due respect and cannot be completely ignored. In the present case, as is evident, as against the time limit of 90 days prescribed under Regulation 22(5), the report was submitted after more than three years which renders the proceedings in such gross and blatant violation of Regulation 22 that to sustain them would not merely mean showing disrespect to or ignoring the said provision; it would mean insult to the said provision. Therefore, the said proceedings have to be held to be unsustainable.

7. Ld. DR referred to various judgments like in the case of Noble Agency v. Commissioner of Customs, Mumbai - (Tri. - Mumbai), Skyways v. Commissioner of Customs (Gen.), New Delhi - (Tri. - Del.) and Sri Kamakshi Agency v. Commissioner of Customs, Madras - (Mad.) to press the proposition that violation of the provisions of Regulation 13 would justify revocation of licence. We need not analyse these judgments in detail as none of these judgments deals with the situation involving such gross and blatant violation of Regulation 22 of CHALR, 2004.

8. In the light of the foregoing analyses, we set aside the impugned order and allow the appeal.