2010 (1) TMI 1057 - AT - Customs

Appeal dismissed, CHA license revoked for breaching regulations. Upheld punishment includes license revocation and deposit forfeiture.

The appeal was dismissed, and the revocation of the CHA licence was sustained. The Tribunal found that the appellant committed breaches of Regulations ... Transfer/sale of CHA licence - Obligations of Customs House Agent - Duty to obtain written authorisation from client - Transacting business through an employee duly approved by the proper officer - Duty to advise client and report non-compliance - Due diligence to ascertain correctness of information imparted to client - Liability of CHA for mis-declaration in shipping bills - Revocation of CHA licence as disciplinary punishmentTransfer/sale of CHA licence - First charge under Regulation 12 (sale/transfer of CHA licence) not proved - HELD THAT: - The Tribunal found no evidence of sale or transfer of the CHA licence to Shri Vikas Doshi; no proof of valuable consideration was shown. The shipping bills were signed by an employee of the appellant and the CHA licence number was used by that employee, not by any third party claiming transfer. Reliance on precedents where similar facts negatived transfer supported this conclusion. [Paras 7]The charge of sale/transfer of the CHA licence under Regulation 12 is not established and is therefore not proved.Duty to obtain written authorisation from client - Obligations of Customs House Agent - Breach of Regulation 13(a) established for failure to obtain written authorisation from exporters - HELD THAT: - Regulation 13(a) requires a CHA to obtain and produce authorisation from each principal when required by the proper officer. The appellant had no written authorisations from the exporters; the Managing Director admitted absence of such authorisation and that the CHA dealt through an intermediary (Shri Vikas Doshi) who canvassed consignments and to whom the CHA billed. The circumstances differ from earlier cases where the importer/exporter themselves were shown to have authorised the CHA; here the CHA did not know the identity of the exporters and rendered services to the intermediary, so the requirement of written authorisation was not satisfied. [Paras 8]The appellant committed breach of Regulation 13(a); the charge stands proved.Transacting business through an employee duly approved by the proper officer - Obligations of Customs House Agent - Breach of Regulation 13(b) established for permitting an unapproved non-employee to handle customs clearance - HELD THAT: - Regulation 13(b) requires a CHA to transact business personally or through an employee duly approved by the Deputy/Assistant Commissioner. Evidence showed that Shri Vikas Doshi, not an employee nor an approved representative, did the clearance work and was present at re-examination; the apparent role of the appellant was limited to having an employee sign the shipping bills. The contract of service and admissions supported the finding that the appellant enabled an unauthorised person to handle the consignments. [Paras 9]The appellant violated Regulation 13(b); the charge is proved.Duty to advise client and report non-compliance - Obligations of Customs House Agent - Breach of Regulation 13(d) established for failure to advise exporters or report non-compliance - HELD THAT: - Regulation 13(d) mandates that a CHA advise clients to comply with the Act and report non-compliance to the proper officer. The appellant transacted through an intermediary and did not know the exporters or enquire into IEC details; there was no interface enabling the appellant to advise or report. This lapse resulted from the appellant's chosen mode of dealing with consignments and therefore constituted a breach of the obligation. [Paras 10]The appellant breached Regulation 13(d); the charge stands proved.Due diligence to ascertain correctness of information imparted to client - Liability of CHA for mis-declaration in shipping bills - Breach of Regulation 13(e) established for failure to exercise due diligence regarding correctness of declared particulars - HELD THAT: - Regulation 13(e) requires a CHA to exercise due diligence to ascertain correctness of information imparted to clients. The intermediary supplied documents and conducted clearance; the intermediary admitted gross overvaluation and payments per piece. The Tribunal relied on High Court authority holding that a CHA has an obligation to ensure true and correct declarations, particularly where drawback is claimed. Given the appellant's lack of direct contact with exporters and the arrangement under the contract of service, the appellant failed to exercise due diligence and thereby breached Regulation 13(e). [Paras 11]The appellant violated Regulation 13(e); the charge is proved.Revocation of CHA licence as disciplinary punishment - Obligations of Customs House Agent - Revocation of licence and forfeiture of security upheld as proportionate punishment - HELD THAT: - Having found breaches of Regulations 13(a), (b), (d) and (e), the Tribunal considered the degree of misconduct and prevailing authorities on disciplinary measures. Observations of High Courts emphasising the special trust reposed in CHAs and the disciplinary responsibility of the Commissioner were applied. In view of the serious breaches and misuse of the CHA position, the Tribunal held that revocation coupled with forfeiture of security deposit was an appropriate and not disproportionate punishment. [Paras 13]The revocation of the CHA licence and forfeiture of security deposit is sustained; the appeal is dismissed.Final Conclusion: The Tribunal set aside the finding of sale/transfer of the CHA licence but upheld findings of breach of Regulations 13(a), (b), (d) and (e); accordingly, revocation of the CHA licence and forfeiture of security deposit were held to be appropriate and the appeal was dismissed. Issues Involved:1. Suspension and revocation of CHA licence.2. Breach of Regulations 12, 13(a), 13(b), 13(d), and 13(e) of the CHALR, 2004.3. Examination of evidence and findings of the Inquiry Officer.4. Validity of the charges and the appropriateness of the punishment.Issue-wise Detailed Analysis:1. Suspension and Revocation of CHA Licence:The appellant-company's CHA licence was suspended by the Commissioner of Customs on 19-3-2008 under Regulation No. 20(2) of the Customs House Licensing Regulations, 2004. This suspension was challenged and subsequently, the licence was revoked by the Commissioner of Customs through orders issued on 25-8-2008 and 22-8-2008 under Regulation 22(7) of the CHALR, 2004. The revocation was due to customs clearance work related to two shipping bills filed by M/s. Darshan International and six shipping bills filed by M/s. Kumar Enterprises, where the CHA was found to have committed breaches of several regulations.2. Breach of Regulations 12, 13(a), 13(b), 13(d), and 13(e) of the CHALR, 2004:- Regulation 12: The appellant was accused of violating Regulation 12 by allowing Shri Vikas Doshi to use their CHA licence. However, the Tribunal found no evidence of the CHA licence being sold or transferred to Shri Vikas Doshi, as all shipping bills were signed by an employee of the CHA. Thus, the first charge was not proved.- Regulation 13(a): The appellant was found to have violated Regulation 13(a) by filing export documents without written authorization from the exporters. The Tribunal noted that the appellant did not have any written authorization from the exporters, and the case law cited by the appellant's counsel was not applicable due to the specific facts of this case. Therefore, the charge of breach of Regulation 13(a) was proved.- Regulation 13(b): The appellant was charged with violating Regulation 13(b) by allowing Shri Vikas Doshi, who was not an employee, to handle the export consignments. The Tribunal found that the appellant allowed Shri Vikas Doshi to transact business at the Customs Station, which was a violation of Regulation 13(b). Hence, this charge was also proved.- Regulation 13(d): The appellant was accused of not advising the exporters to comply with the Customs Act and not bringing non-compliance to the notice of the department. The Tribunal found that the appellant did not have any direct interaction with the exporters and thus could not have advised them. This charge was proved based on the appellant's chosen method of dealing with the export consignments.- Regulation 13(e): The appellant was charged with not exercising due diligence to ascertain the correctness of the information imparted to the client. The Tribunal found that the appellant did not ensure the correctness of the declared particulars in the shipping bills, particularly when filed under claim for duty drawback. This charge was also proved.3. Examination of Evidence and Findings of the Inquiry Officer:The Inquiry Officer found all charges against the appellant to be proved, and the Commissioner upheld these findings. The Tribunal reviewed the records and evidence, including statements under Section 108 of the Customs Act, and found substantial evidence supporting the charges of breach of Regulations 13(a), 13(b), 13(d), and 13(e).4. Validity of the Charges and the Appropriateness of the Punishment:The Tribunal upheld the findings of the Commissioner and noted the serious nature of the breaches committed by the appellant. The Tribunal referenced the observations of the High Courts in Sri Kamakshi Agency and Worldwide Cargo Movers, emphasizing the responsibility and trust reposed in a CHA. The Tribunal concluded that the revocation of the licence coupled with the forfeiture of the security deposit was a fitting punishment for the appellant's serious offences.Conclusion:The appeal was dismissed, and the revocation of the CHA licence was sustained. The Tribunal found that the appellant committed breaches of Regulations 13(a), 13(b), 13(d), and 13(e) of the CHALR, 2004, and upheld the punishment of licence revocation and forfeiture of the security deposit.