CHA liability for post-clearance diversion requires conscious knowledge; technical lapses alone do not justify licence revocation.

A CHA cannot be held liable for aiding and abetting diversion of imported goods, or for failing to report non-compliance, where the record shows only delivery instructions and there is no proof of conscious knowledge, manipulation of transport documents, or participation after clearance. The CHA's duty was treated as ending once delivery was taken by the importer, and there was no requirement to investigate post-clearance transportation arranged by the importer. Failure to intimate a change in constitution was treated as a technical lapse, so revocation of the licence was held disproportionate and the lesser consequence of forfeiture of security was considered sufficient.

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Issues: (i) Whether the CHA could be held guilty of aiding and abetting diversion of imported goods and of contravening the duty to advise the client and report non-compliance, on the basis of the delivery and transport documents kept in its records; (ii) Whether the failure to intimate the change in constitution of the firm and the alleged use of an unauthorised signatory justified revocation of the CHA licence, or only a lesser penalty.

Issue (i): Whether the CHA could be held guilty of aiding and abetting diversion of imported goods and of contravening the duty to advise the client and report non-compliance, on the basis of the delivery and transport documents kept in its records.

Analysis: The available material showed that the CHA had produced delivery instructions asking delivery at the importer's godown, and the record did not establish that the CHA knew that the goods would not thereafter be taken to the stated factory or that the transport documents were manipulated. The duties of a CHA were treated as ending once the goods were cleared and delivery was taken by the importer. The regulations did not require the CHA to investigate the genuineness of post-clearance transportation arranged by the importer or to maintain records beyond such delivery. In the absence of evidence of conscious knowledge or participation, the allegation of aiding and abetting, and the alleged breach of the duty to report non-compliance, could not be sustained.

Conclusion: The finding of guilt on this issue was set aside in favour of the assessee.

Issue (ii): Whether the failure to intimate the change in constitution of the firm and the alleged use of an unauthorised signatory justified revocation of the CHA licence, or only a lesser penalty.

Analysis: The non-intimation of the change in constitution was treated as a breach, but it was regarded as a technical lapse and not a grave misconduct warranting the extreme consequence of revocation. The regulation governing punishment conferred discretion to revoke the licence or impose forfeiture of security, and the facts did not justify the harshest measure. Since the core misconduct established was limited, a lesser civil consequence was considered sufficient to meet the ends of justice.

Conclusion: Revocation of the licence was not justified on this issue, and forfeiture of the whole security was substituted.

Final Conclusion: The revocation order was interfered with, the serious charges of diversion and abetment were disbelieved, and the matter was disposed of by sustaining only the lesser consequence of forfeiture of security.

Ratio Decidendi: A CHA cannot be visited with revocation of licence for post-clearance diversion of goods absent proof of conscious knowledge or participation, and where the established lapse is only technical, the punishment must be proportionate to the misconduct proved.

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