2016 (2) TMI 478 - SC - Customs

Supreme Court reinstates Customs House Agent license revocation emphasizing compliance, revenue protection

Commissioner of Customs Versus M/s K.M. Ganatra & Co.

The Supreme Court allowed the appeal, setting aside the decisions of the High Court and the Tribunal, and reinstated the Commissioner's order of ... Jurisdiction of tribunal to exercise its discretion and grant relief to the respondents - Miss-use of the DEEC and DEPC Scheme and submitting fictitious or forged shipping bills either with a view to obtain inadmissible Duty Entitled Pass Books (DEPBs) or for fulfilling the export obligations against advance licences under Duty Exemption Entitlement Certificate (DEEC) Scheme, and to obtain waiver of BG conditions against the DEEC Licence as per the Exim Policy, though in reality no physical export of goods was taking place. On a perusal of the order passed by the Commissioner, it is clearly perceptible that there has been number of violations by the respondent. The enquiry report which formed the plinth of the order of the Commissioner demonstrates that by virtue of the transfer of the licence in contravention of the Regulations, on many an occasion, immense financial loss has been caused to the revenue. As the factual matrix would exposit, it is a serious violation. The misconduct reflects a chain of acts. In such a situation, we are disposed to think that the discretion exercised by the tribunal is inappropriate. Resultantly, we allow the appeal and set aside the orders of the High Court and the tribunal and restore that of the Commissioner. - Decided in favor of Revenue. Issues Involved:1. Misuse of Customs House Agent (CHA) license.2. Suspension and revocation of the CHA license.3. Tribunal's discretion in modifying the revocation period.4. High Court's affirmation of the Tribunal's decision.5. Supreme Court's review of the Tribunal and High Court's decisions.Detailed Analysis:1. Misuse of Customs House Agent (CHA) license:The respondent, a CHA, was found to have allowed unauthorized persons to use its license for monetary consideration, leading to fraudulent export activities. Investigations revealed that certain firms misused the DEEC and DEPB schemes by submitting fictitious or forged shipping bills to obtain inadmissible Duty Entitled Pass Books (DEPBs) or fulfill export obligations against advance licenses under the Duty Exemption Entitlement Certificate (DEEC) Scheme. The fabricated documents falsely indicated that goods were exported.2. Suspension and revocation of the CHA license:Following the investigation, the respondent's license was suspended under Regulation 21(2) of the 1984 Regulations, and an enquiry was conducted under Regulation 23. The enquiry officer confirmed the misconduct, establishing violations under Regulations 12, 13(b), 13(d), 20(1)(c), and 13(n) of the 2004 Regulations. Consequently, the Commissioner of Customs revoked the respondent's license and forfeited the security deposit, citing serious misuse of the license and involvement in fraudulent activities affecting revenue.3. Tribunal's discretion in modifying the revocation period:The respondent appealed to the Customs, Excise & Service Tax Appellate Tribunal, which acknowledged the violations but considered the permanent revocation too harsh. The Tribunal modified the revocation period to three years from the date of suspension (1.3.2004) and upheld the forfeiture of the security deposit. The Tribunal justified its leniency by noting that the respondent had already faced a two-year suspension, and a permanent revocation would deprive the CHA of its livelihood.4. High Court's affirmation of the Tribunal's decision:The revenue challenged the Tribunal's decision in the High Court, arguing that subletting the CHA license was a serious violation and that the respondent was a habitual offender. The High Court dismissed the revenue's appeal, agreeing with the Tribunal's exercise of discretion and finding the three-year revocation period reasonable.5. Supreme Court's review of the Tribunal and High Court's decisions:The Supreme Court examined whether the Tribunal appropriately exercised its discretion in modifying the revocation period. The Court noted that the Tribunal has the jurisdiction to confirm, modify, or annul decisions. However, the discretion must be exercised in accordance with law and based on the factual matrix. The Court found that the respondent's violations were serious and habitual, causing significant financial loss to the revenue. The Tribunal's leniency was deemed inappropriate given the gravity of the misconduct.The Supreme Court relied on the precedent set in Noble Agency v. Commissioner of Customs, Mumbai, emphasizing the CHA's critical role and the trust placed in them by both importers/exporters and government agencies. The Court held that any contravention of CHA obligations, even without intent, warrants serious consequences.Conclusion:The Supreme Court allowed the appeal, set aside the orders of the High Court and the Tribunal, and restored the Commissioner's order of permanent revocation of the CHA license. The decision underscored the importance of strict adherence to regulations by CHAs to maintain the integrity of customs procedures and safeguard government revenue.