2015 (8) TMI 143 - HC - Customs

Court upholds forfeiture of security deposit, sets aside license revocation as disproportionate.

The court set aside the revocation of the appellant's Custom House Agents License as disproportionate to the breach committed but upheld the forfeiture of ... Revocation of CHA license - Submission of forged certificate - Held that:- The license issued to the appellant is under the provisions of the Regulations 2004. Clause 19 of the Regulations regulates 'Employment of Persons'. As per Clause 19(8), it is the responsibility of the Customs House Agent to exercise such supervision as is necessary to ensure the proper conduct of his employees in the transaction of his business as agent. This provision further provides that the agent shall be held responsible for all acts or omissions of his employees in regard to their employment. The consequence of breach of Clause 19(8) is provided in Regulation 20, which provides that the Commissioner may revoke the licence of a Customs House Agent and order forfeiture of part or whole of the security, or only order forfeiture of part or whole of security. - It was while working in that capacity that he has forged the signature of the proprietor of the appellant on the Bill of Entry, in the applications for issue of 'H' card and 'G' card and various other documents submitted to the Customs Department. He was enabled to do all the forgeries and derive the benefit thereof only because of his employment under the appellant and obviously on account of the failure of the appellant in effectively supervising the activities of his employees to ensure that they conduct themselves properly in the transaction of his business as a Customs House Agent. Therefore, the appellant cannot be absolved of his lapse of supervision attracting Clause 19 of the Regulations warranting action against him under Regulation 20. Even though the appellant functioned as a Customs Office of Agent on the basis of the license that was issued under the Regulations and was liable to be proceeded against under Clauses 19 and 20 of the Regulations penalty to be levied on the appellant should certainly be proportionate to the gravity of the breach proved to have been committed by him. While examining this issue, the fact that the appellant did not have any role in what was done by Sri.Vipin Kumar and his team and that the lapse found is supervisory lapse assumes importance the absence of any previous misconduct on the part of the appellant has also to be considered. - termination of the license ordered in Annexure A8 order and confirmed in Annexure A9 order of the Tribunal is too harsh and disproportionate. This view that we take, is supported by the principles laid down in the judgment in Ashiana Cargo Services v. Commissioner of Customs (I & G) 2014 (302) ELT 161 (Del) - Revocation of license is set aside - Decided in favour of appellant. Issues Involved:1. Revocation of Custom House Agents License.2. Forfeiture of Security Deposit.3. Vicarious Liability of the employer.4. Proportionality of the penalty imposed.Issue-wise Detailed Analysis:1. Revocation of Custom House Agents License:The appellant's license was revoked under Regulation 20(1) of the Custom House Agents Licensing Regulations, 2004, due to the actions of their employee, Sri. Vipin Kumar, who submitted forged documents to clear goods. The appellant argued that they were not aware of the fraudulent activities and thus should not be held liable. The court, however, noted that Regulation 19(8) imposes a duty on the agent to supervise employees and held the appellant responsible for the acts of their employees. The court acknowledged that the appellant had suffered penalties by being kept out of business since the suspension of the license.2. Forfeiture of Security Deposit:The security deposit of Rs. 50,000/- was ordered to be forfeited along with the revocation of the license. The court upheld this part of the order, confirming that the forfeiture was consistent with the breach of Regulation 19(8) by the appellant due to the lack of proper supervision over their employee, Sri. Vipin Kumar.3. Vicarious Liability of the Employer:The court discussed the principle of vicarious liability, which holds an employer liable for the acts of their employees if such acts occur within the scope of employment. The court referenced the Bombay High Court decision in the case of Commissioner of Customs (General) vs. Worldwide Cargo Movers, which upheld the revocation of a license due to an employee's involvement in smuggling activities. The court concluded that the appellant could not absolve themselves from responsibility for their employee's actions.4. Proportionality of the Penalty Imposed:The court considered whether the penalty of revocation was proportionate to the misconduct. It noted that the appellant was not directly involved or aware of the fraudulent activities and had no prior record of misconduct. The court found the penalty of revocation too harsh and disproportionate, citing the Delhi High Court's judgment in Ashiana Cargo Services, which emphasized that penalties should be proportional to the violation. Consequently, the court set aside the revocation of the license while confirming the forfeiture of the security deposit.Conclusion:The court set aside the order revoking the appellant's Custom House Agents License, deeming it disproportionate to the breach committed. However, it upheld the forfeiture of the security deposit, affirming the appellant's responsibility for the lack of supervision over their employee. The appeal was disposed of accordingly, balancing the need for penalty with the principle of proportionality.