D.M Mehta & Bros. v. Commissioner Of Customs (General), Mumbai .

[Order per : P.R. Chandrasekharan, Member (T)]. - The appeal is directed against Order-in-Original No. 108/2013/CAC/CC(G)/PKA/CHA, dated 4-9-2013 passed by the Commissioner of Customs (General), New Custom House, Mumbai.

2. Vide the impugned order, the learned adjudicating authority has revoked the CHA licence of M/s. D.M. Mehta & Bros., CHA Licence No. 11/139 and also ordered forfeiture of the entire amount of security deposit. Aggrieved of the same the appellant is before us.

3. The learned counsel for the appellant submits that the impugned order is not sustainable in law on the following grounds :

3.1 While coming to the conclusion that the appellant-CHA had contravened the provisions of Regulations 12, 13(a), 13(b) and 13(d) of CHALR, 2004, the learned Commissioner has relied on the statements of Shri Bhavesh P. Mehta, Power of Attorney holder of the appellant and Shri Prashant Popat which were recorded by the Directorate of Revenue Intelligence (DRI) under Section 108 of the Customs Act, 1962. As per Regulation 22 of CHALR, 2004, oral evidence of the persons involved should have been taken and opportunity to cross-examine the witnesses should have been afforded to the appellant. In the present case, neither Shri Bhavesh Mehta nor Shri Prashant Popat were examined in the proceedings nor were they made available for cross-examination as envisaged under Regulation 22 and therefore, the department could not have relied on the statements recorded under Section 108 of the Customs Act, 1962 and could not have made the same as basis for coming to the conclusions in the inquiry proceedings. This is more so, as both Mr. Bhavesh Mehta and Mr. Prashant Popat had retracted their statements recorded under Section 108. In the list of prosecution witnesses, the names of Shri Bhavesh Mehta and Shri Prashant Popat also figure and they were not examined during inquiry nor were they offered for cross-examination. Therefore, all these omissions would render the entire inquiry proceedings null and void. Reliance is placed on the decisions of this Tribunal in the case of Thakkar Shipping Agency v. Collector - , Final Order Nos. A/191/2005-WZB/C-I, dated 28-9-2005 in the case of Exfin Shipping (I) Ltd. and Order No. A/1114/2006/WZB, dated 12-9-2006 in the case of J.B. Udani Co.

3.2 The learned counsel further submits that the reliance placed by the learned Commissioner on the decision of the Delhi High Court in the case of Jasjeet Singh Marwah v. Union of India [] for relying on the statements under Section 108 of the Customs Act, 1962 would not apply to the facts of the present case as the said decision was rendered in the context of suspension of a CHA licence which was pending enquiry and not in respect of a case where revocation of licence was ordered. In the present case, if the inquiry officer was of the opinion that the examination of a person is not relevant or material, he should have recorded his reasons in writing for doing so. It is also pointed out that some of the findings made in the inquiry report are factually incorrect inasmuch as Shri Bhavesh Mehta in the personal hearing held on 20-11-2008 had not admitted to the correctness of the statement recorded by DRI on 29-3-2006. In any event, the adjudicating authority should not have placed reliance on statements of Shri Bhavesh Mehta recorded under Section 108 of the Customs Act, 1962 since his cross-examination was not granted to the appellant.

3.3 Similarly, Shri Prashant Popat has also retracted his statement vide letter addressed to DRI from Arthur Road Jail wherein he was lodged after his arrest. Similarly, there is no evidence forthcoming from the statement of Shri Ajay Awate, official of the transporter.

3.4 It is contended that, no evidence has been brought on record to show that the appellant-CHA had sold or otherwise transferred their CHA licence for monetary consideration to Shri Prashant Popat. It is also contended that merely because Mr. Prashant Popat was an intermediary who brought clearance work to the appellant and the appellant accepted the same in good faith cannot lead to the conclusion that the appellant had sold or transferred their CHA licence to Mr. Prashant Popat. It is contended that all the import documents had been examined and signed by the appellant’s officials and therefore, it cannot be alleged that they got their work done through Shri Prashant Popat who was an employee of CHA-firm whose proprietor was related to appellant’s partner. The appellant had obtained letters of authority in undertaking the transactions from the various importers and these letters had not been taken note of by the adjudicating authority.

3.5 Reliance is placed on the decisions of this Tribunal in the case of K.S. Sawant & Co. v. Commissioner - and Thawerdas Wadhoomal v. Commissioner of Customs - .

3.6 It is also contended that as regards the re-warehousing certificate issued by the importer and furnished by the appellant to the Customs authorities, the Customs authorities had discharged the bond and bank guarantee by accepting the re-warehousing certificates. The appellant had no knowledge that the re-warehousing certificates furnished by them to the Customs authorities were fake or bogus, as alleged.

3.7 It is also submitted that the appellant has been carrying on CHA business since 1929 and they handled large volumes of business. Therefore, the action of revocation of licence is disproportionate to the gravity of the offence committed and reliance is placed on the decisions of this Tribunal in the case of Baraskar Brothers v. Commissioner - and the orders dated 27-3-2012 in the case of Dhimant P. Doshi and order dated 18-1-2012 in the case of Ganpati Warehousing Ltd. [ (Tri.).

3.8 In the light of the above submissions, the learned counsel for the appellant submits that the impugned order be set aside and the appeal allowed.

4. The learned Dy. Commissioner (AR) appearing for Revenue, on the other hand, submits that the appellant had handled 82 consignments involving a value of imported goods of ` 22.08 crores with the duty involved of ` 8.19 crores. They had undertaken the import transactions without actually knowing who the importers were. All the documents were received through one Shri Prashant Popat, who was an employee of another CHA-firm M/s. P.H. Mehta and Shri P.H. Mehta, the proprietor of the said firm is the son of Shri D.M. Mehta, who is the partner of the appellant CHA-firm involved in the present transactions. From the statements of Shri Prashant Popat and Shri Bhavesh Mehta, who is the power of attorney holder for the appellant, it is clear that they never met the importers and had obtained documents through one Mr. Narendra Dhomse, who in turn was undertaking the transactions as per the directions of one Shri Amarjeet Singh. The import documents were signed by Shri Bhavesh Mehta and, thereafter the entire work of documentation, examination and clearance was done by Shri Prashant Popat. Bills of Entry for re-warehousing were filed by the appellant-CHA in respect of 82 consignments and these consignments were required to be warehoused in Delhi in the warehouse of X-Cellent Overseas, Ranbankura Brothers and Shubh Mangal Exports. However, the consignments were diverted after clearance from Bombay Customs and did not go to the destined warehouses and fake re-warehousing certificates were sent to Shri Prashant Popat, who in turn submitted the same to the Customs to get the bond and bank guarantee cancelled. Thus, the magnitude of the offence is substantial and significant and the modus operandi adopted involves fraud and forgery. Under these circumstances, the revocation of the CHA licence ordered by the adjudicating authority merits validation and therefore, cannot be faulted at all. Accordingly, he prays for upholding the impugned order.

5. We have carefully considered the submissions made by both the sides.

5.1 Though Shri Prashant Popat and Shri Bhavesh Mehta were not subjected to examination by the inquiry officer or offered for cross-examination by the appellant CHA, it is evident from the inquiry proceedings that Shri Bhavesh Mehta was the Defence Assistant of the CHA, M/s. D.M. Mehta and Brothers. Further, Shri Prashant Popat was an employee of the CHA-firm M/s. P.H. Mehta and Company, and the proprietor of the said firm, Shri P.H. Mehta, is the son of Shri D.M. Mehta, partner of the appellant-CHA firm. Thus, both Shri Prashant Popat and Shri Bhavesh Mehta were under the control of the appellant-CHA M/s. D.M. Mehta and Brothers. Even if the prosecution had not examined these persons, the appellant-CHA could have produced them as defence witnesses and subjected them to examination which they have not done. Further, it is seen that even though the summons were issued to all the prosecution witnesses, many of them did not turn up in spite of a number of opportunities given and therefore, the inquiry was completed without recording the statements of Shri Prashant Popat or Shri Bhavesh Mehta. It is seen from the records that the notices for appearance were issued by the inquiry officer on three occasions and they did not appear for examination by the inquiry officer.

5.2 Further, it is seen that Shri D.M. Mehta, partner of the appellant-firm was examined on 16-11-2009 and 17-11-2009 by the inquiry officer. The record of proceedings clearly reveal that the importers were introduced by Shri Prashant Popat not in person but by submission of documents and it was Shri Prashant Popat who was allotting the work of import clearance to both the firms, namely, P.H. Mehta & Co. and D.M. Mehta & Bros. Shri Prashant Popat used to bring all papers such as invoice, bill of lading, warehousing certificates, etc., and used to give these documents to the appellant-CHA. The appellant-CHA never met any of the importers but they seem to have spoken over telephone to one Shri Amarjeet Singh who was representing the firms of the importers, namely, M/s. Rabankura Brothers, M/s. X-Cellent Exim Overseas and M/s. Shubh Mangal Exports. It is also admitted by the appellant that they never checked the ownership details of the importers-firm represented by Shri Amarjeet Singh but merely relied on Shri Prashant Popat, who used to bring import clearance work through one Shri Narendra Dhomse. Owners of these firms were different from Amarjeet Singh and there is no explanation offered as to why they did not check the power of attorney, if any, given to Shri Amarjeet Singh before handling the transactions. It is further on record that the goods were purchased on high seas sales basis in favour of the above mentioned three firms and the appellant-CHA did not even verify the high seas sale agreement and whether the parties were genuine or not. The only reply given to the department by the appellant is that they have checked the IEC numbers from the website but they have never verified any details of the importers or their whereabouts and whether the authorisation letters issued by the so-called importers were in fact signed by them or not. For bringing the business, the appellant-CHA was making payments to Shri Prashant Popat. They have handled about 82 consignments in this way without knowing anything about the importer and therefore, contravention of Regulation 13(a) is clearly established beyond any doubt. Shri H.D. Mehta, the other partner of the appellant-CHA firm was also examined on 17-11-2009 by the Inquiry Officer and he has also corroborated the statement of Mr. D.M. Mehta. He has also admitted that the signatures of the importers were attested in absentia by either P.D. Mehta or Bhavesh Mehta. If the appellant-CHA never met the importer, he could not have tendered any advice to the importer to comply with the provisions of the Customs Act. Therefore, once violation of Regulation 13(a) is established, contravention of Regulation 13(d) is also established, for compliance to 13(d), the CHA should know and meet the importer, which is not the position in the present case. Thus when the partners of the appellant-CHA firm themselves have admitted to not knowing the importer, there is no need to prove the case by the department as the settled legal position is that admitted facts need not be proved. The decisions of the Hon’ble Apex Court in the case of Systems and Components Pvt. Ltd. [ (S.C.)] and of the Hon’ble Madras H.C. in the case of Govindasamy Raghupathy [ (Mad.)] refer. Therefore, it cannot be said that the appellant’s interests were prejudicially affected by non-examination of Shri Bhavesh Mehta or Shri Prashant Popat.

5.3 Shri Bhavesh Mehta, in his statement recorded under Section 108 of the Customs Act, 1962 has clearly admitted that he has merely signed the documents on behalf of M/s. D.M. Mehta & Bros. and all the work relating to documentation, examination and clearance of the imported goods were undertaken by Shri Prashant Popat. There is no reason to disbelieve the statements of Shri Bhavesh Mehta even though he had subsequently retracted the same. Further, this retraction was done by means of an affidavit before a Notary and not addressed to the officer who had recorded the statement. There is no evidence brought before us that the said retraction was ever made known to the department at all. Therefore, the so-called retraction of Shri Bhavesh Mehta is clearly an afterthought as it has not been made before the officer who recorded the statement and it has not been informed to the department that the statement is being retracted. Further, in his statement Shri Bhavesh Mehta has admitted to having undertaken the transactions on the strength of documents submitted by Shri Prashant Popat and the documents were brought by Shri Prashant Popat from one Shri Narendra Dhomse, who was representative of Shri Amarjeet Singh. Shri Bhavesh Mehta had never met Mr. Amarjeet Singh or Mr. Narendra Dhomse. He has admitted to signing the import documents on behalf of the CHA and handed over the documents to Shri Prashant Popat, who had, thereafter, undertaken documentation, examination and clearance of the goods under importation. The goods after clearance were handed over by Shri Prashant Popat to the transporter, Ambala-Bombay Roadways and the goods were diverted and did not go to the destined warehouses. Fake re-warehousing certificates were sent to Shri Prashant Popat, who, in turn, submitted the same to the Customs department, thereby allowing mis-use of CHA licence of M/s. D.M. Mehta & Bros. The above statement of Shri Bhavesh Mehta is also corroborated by the statement of Shri Prashant Popat who is said to be an employee of M/s. P.H. Mehta, whose proprietor is related to the appellant-CHA. In his statement Shri Prashant Popat has also admitted to knowing that the goods were diverted and the warehouses where the goods were declared to be warehoused were not in existence and the re-warehousing certificates received were fabricated and the consideration for the transactions were received in cash on per container basis. The transporter who was present during the enquiry proceedings and who was examined by the inquiry officer has also confirmed that the goods after clearance from the Customs were diverted and were never sent to the declared destinations. The facts contained in the statements of Shri Bhavesh Mehta and Shri Prashant Popat were also corroborated in the examination proceedings of Mr. D.M. Mehta, and Mr. H.D. Mehta, partners of the appellant-CHA. Thus, if we look at the whole transactions, it is clear that the CHA did not exercise any control, whatsoever and everything was done by Shri Prashant Popat with the active connivance of Shri Bhavesh Mehta, for a consideration. The subsequent retraction of their statements by these two persons do not reduce the evidentiary value of their original statements for the reason that the retractions were made after a lapse of time and it was not done before the officer who had recorded the statement. The facts narrated therein were also corroborated by the partners of the CHA firm who were examined during the inquiry proceedings. The decision of the Hon’ble Allahabad High Court in the case of Zaki Ishrati [ (All.)] is relevant and applicable in the facts of the present case. The argument of the ld. Counsel that the reliance cannot be placed on the statement recorded under Section 108 of the Customs Act in a proceeding under CHALR is clearly not tenable as in the Jasjeet Singh Marwaha case (supra), the Hon’ble Apex Court in Para 15 of the judgment clearly held that - “in our view a statement recorded under Section 108 of the Customs Act, 1962 by the Customs authorities is admissible in evidence and can form the sole basis for suspending CHA’s licence, however, subject to the usual safeguards that is voluntary and truthful. Where the statement under Section 108 is retracted it can only be relied upon if on examination of evidence one arrives at a conclusion, that the retracted statement is true and voluntary.” Since in the present case we have held that the retraction made is not valid and the facts recorded in the statements have been corroborated by others involved in the transaction, the said statements can be taken as a valid piece of evidence in a proceeding under CHALR also and we hold accordingly.

5.4 In the present case, the following facts stand clearly proved. The CHA did not know the importers. The CHA allowed Shri Prashant Popat to do the clearance work relating to the imported goods. The CHA did not verify the re-warehousing certificates and Shri Bhavesh Mehta, Power of Attorney holder of the appellant-CHA firm was fully aware that the re-warehousing certificates were fake and bogus and the entire transactions were undertaken for monetary consideration. The CHA is vicariously liable for the action of its employees. Thus, the contravention of Regulations 12, 13(a), 13(b) and 13(d) stand clearly proved against the appellant.

5.5 Even if it is held that there were some minor procedural irregularities in the inquiry proceedings conducted, that by itself does not vitiate the conclusions/findings of the inquiry and the adjudicating authority. In the present case, the infractions and the contraventions of CHALR have taken place over a period of time in respect of 82 consignments involving a huge revenue of more than Rs. 8 crores and these contraventions have taken place with the full knowledge and connivance of the appellant-CHA. The gravity of the offence committed is quite serious as it involved forgery and fraud to which the appellant and its official were a party. Therefore, reliance placed by the counsel on the various decisions of this Tribunal in support of their contentions is of no help.

5.6 A case of sub-letting of licence by CHA, obtaining customs pass for non-employees, removal of goods without obtaining authorization from importers was considered by the Hon’ble High Court of Gujarat in OTA Kandla Pvt. Ltd. [ (Guj.)]. The Hon’ble High Court upheld the contention of the Revenue that sub-letting amounted to transfer of CHA licence and refused to interfere with the punishment of revocation of CHA licence awarded by the Commissioner of Customs, the Licensing Authority. Similarly in a matter pertaining to HB Cargo Services [ (A.P.)], wherein also the license was sub-let and no authorisations were obtained from the exporters, the Hon’ble A.P. High Court upheld the punishment of revocation of CHA licence by holding that in a Customs area, it is the Commissioner who is responsible for the happenings, discipline to be maintained and he is best placed to understand the importance of CHA and if he takes a decision for that purpose, CESTAT should not interfere on the basis of its own notions of difficulties likely to be faced by the CHA or its employees and should not be swayed by considerations of mis-placed sympathy. The Hon’ble Bombay High Court in the Commissioner of Customs v. Worldwide Cargo Movers [ (Bom.)], while dealing with a case relating to smuggling of cars, held as follows :-

“17. … … … … … … … ….. We are conscious that the punishment has to be commensurate with the misconduct and that by revocation the respondent and its employees are going to suffer. At the same time, we cannot forget that though it is the right of a citizen to carry on his business or profession, it is subject to reasonable restrictions and conditions. In the present case, those conditions were already stipulated. In the case of Arvind Bhagat (supra), the order of the Madras High Court has been left undisturbed by the Apex Court. It was a case where the CHA had failed to discharge his obligation to exercise proper supervision. In the case of Sri Kamakshi Agency (supra), the CHA was held responsible for the fraudulent activities of a third party whom it had delegated its functions. That was also left undisturbed by the Supreme Court. Here, the CHA has brazenly defended his Regulation 8 employee who gave a fake name of his brother as importer for undervaluing the imported car. Thus, the employee of the CHA was party to the Firm. The CHA has not disowned him in the reply filed by him before the appellant. That being so, he is clearly responsible vicariously.

In our view, the Tribunal has committed a grave error in interfering with the decision of a domestic authority. In a departmental proceeding one has to see whether the principles of natural justice are followed and the findings are justified from material on record. Once both these aspects are satisfied if an outsider Tribunal interferes, its findings and order will be improper and perverse which is what has happened in the present case. Similarly when one comes to the disciplinary measures, one must not lose sight of the fact that the appellant-Commissioner of Customs is responsible for the happenings in the Customs area and for the discipline to be maintained over there. If he takes a decision necessary for that purpose, the Tribunal is not expected to interfere on the basis of its own notions of the difficulties likely to be faced by the CHA or his employees. The decision is best to be left to the disciplinary authority save in exceptional cases where it is shockingly disproportionate or mala fide. That is not the case here.” (emphasis supplied)

In our considered view, the ratio of the above decisions apply to the facts of the case before us.

6. In the factual and legal matrix discussed above, we do not find any reason to interfere with the decision of the adjudicating authority and accordingly, we dismiss the appeal as devoid of merits.

(Operative part pronounced in Court on 17-11-2014)