2022 (7) TMI 1039 - AT - Customs

Customs Tribunal: Appeal Partially Allowed, Emphasizes Compliance

The Tribunal partially allowed the appeal by M/s Star CHA Management Services LLP, setting aside the security deposit forfeiture but upholding the ... Application of successor regulation to licence granted under prior regime - mandatory reporting of change in constitution of firm/LLP - temporal scope of regulatory proviso - forfeiture of security and imposition of penalty for breach of licensing regulation - principle that mis reference to statutory provision does not vitiate substantive charges - limited judicial leniency in imposition of fiscal penaltiesApplication of successor regulation to licence granted under prior regime - temporal scope of regulatory proviso - Whether the second proviso to Regulation 7(2) of the Customs Broker Licensing Regulations, 2018 applies to a licensee who was granted licence under CBLR, 2013. - HELD THAT: - The second proviso to Regulation 7(2) CBLR, 2018 requires that where a company or firm granted a licence under 'this regulation' undergoes any change in directors or partners, such change shall be communicated within one month. The Tribunal held that the language confines the proviso to entities granted licence under CBLR, 2018 itself. Since the appellant's licence was granted under CBLR, 2013, the specific one month reporting obligation in the 2018 proviso does not apply to it. Consequently the allegation framed solely under Regulation 7(2) of CBLR, 2018 cannot be sustained against the appellant on that textual basis. [Paras 10]The second proviso to Regulation 7(2) CBLR, 2018 does not apply to the appellant, whose licence was granted under CBLR, 2013, and therefore the charge under that specific proviso cannot be sustained.Mandatory reporting of change in constitution of firm/LLP - principle that mis reference to statutory provision does not vitiate substantive charges - forfeiture of security and imposition of penalty for breach of licensing regulation - limited judicial leniency in imposition of fiscal penalties - Whether the appellant violated the reporting requirement under CBLR, 2013 and, if so, whether the forfeiture of security and penalty imposed were justified. - HELD THAT: - Regulation 13 of CBLR, 2013 required firms or companies holding a licence to report any change in constitution and make a fresh application within sixty days from the date of such change. The Tribunal found that the change (partnership deed) occurred on 11.12.2017 but was reported to Customs only on 10.10.2018, well beyond the sixty day period, thereby constituting a breach of CBLR, 2013. The Tribunal accepted the departmental submission that incorrect citation of the later regulation in the show cause notice does not nullify the substantive charge of delayed reporting. However, on facts the Tribunal observed mitigating circumstances (death of a partner, no business carried on during the period) and noted that the adjudicating authority already took a lenient view by not revoking the licence. Considering proportionality, the Tribunal held that forfeiture of the security deposit was excessive while maintaining that some penalty was warranted for the lapse; accordingly the forfeiture was set aside and the monetary penalty was sustained. [Paras 12, 13, 14, 15]There was a violation of CBLR, 2013 for delayed reporting; mis reference to CBLR, 2018 does not vitiate the charge. Taking a lenient and proportionate view, the forfeiture of security is set aside but the penalty is sustained.Final Conclusion: Appeal partly allowed: finding of breach of CBLR, 2013 for delayed intimation sustained, but, on grounds of proportionality and mitigating circumstances, forfeiture of the security deposit is set aside while the penalty is upheld. Issues:- Forfeiture of security and imposition of penalty on M/s Star CHA Management Services LLP for violating Customs Broker Licensing Regulation, 2018.- Interpretation of the second proviso to Regulation 7(2) of CBLR 2018 regarding reporting changes in the constitution of a company or firm.- Examination of the provisions of CBLR, 2013 in comparison to CBLR, 2018 for reporting changes in the constitution of a Customs Broker.Analysis:1. Forfeiture of Security and Imposition of Penalty:- M/s Star CHA Management Services LLP appealed against the forfeiture of security and penalty imposed for violating Customs Broker Licensing Regulation, 2018.- The appellant argued that the delay in reporting the change of LLP constitution was due to a partner's death and subsequent mental state issues, emphasizing that no business was conducted during the period.- The appellant contended that the penalty and forfeiture were excessive, seeking a full waiver based on the circumstances.2. Interpretation of Second Proviso to Regulation 7(2) of CBLR 2018:- The second proviso to Regulation 7(2) of CBLR 2018 mandates the immediate communication of changes in directors or partners to Customs.- The Tribunal noted that this provision applies to companies or firms licensed under CBLR, 2018, not CBLR, 2013 under which the appellant was licensed.- It was established that the delay in reporting the LLP constitution change did not violate CBLR, 2018, as incorrectly invoked in the show cause notice.3. Examination of CBLR, 2013 Provisions:- Regulation 13 of CBLR, 2013 requires reporting changes in the Customs Broker's constitution within 60 days for license renewal.- The Tribunal found a clear violation of CBLR, 2013 due to the delay in reporting the LLP constitution change.- Despite the violation, the Tribunal noted the lenient view taken in not revoking the license and considered the circumstances, leading to a partial allowance of the appeal.- The Tribunal set aside the security deposit forfeiture but upheld the penalty, recognizing the delay as the primary issue rather than a significant violation.In conclusion, the Tribunal partially allowed the appeal by M/s Star CHA Management Services LLP, emphasizing the importance of timely reporting changes in the Customs Broker's constitution while considering the circumstances surrounding the delay in this case.