2024 (1) TMI 347 - AT - Customs

Tribunal Reduces Penalty, Maintains Customs Broker License for Fraud, Extends Validity to 2027.

M/s. Dachser India Pvt. Ltd. Versus The Commissioner of Customs

M/s. Dachser India Pvt. Ltd. Versus The Commissioner of Customs - 2024 (388) E.L.T. 658 (Tri. - Bang.) ISSUES PRESENTED AND CONSIDERED 1. Whether a penalty and prohibition imposed under Regulations 22 and 23 of the Customs Broker Licensing Regulations (CBLR) by one Commissionerate (prohibiting a customs broker from working in a jurisdiction pending adjudication) is rendered ineffective or mitigated by a subsequent adjudication and penalty imposed by another Commissionerate on related misconduct. 2. Whether separate show cause notices issued by different Commissionerates for misconduct committed by different employees of the same customs broker, arising out of distinct factual acts and locations, must be treated as a single adjudicatory incident or as distinct grounds justifying independent proceedings and penalties. 3. Whether and to what extent supervisory lapses by a customs broker for acts of its employees (including unauthorized procurement of government records and facilitation of fraudulent drawback claims) attract liability under the applicable CBLR provisions and whether mitigation (including non-revocation of licence) is appropriate where misconduct is not found to be wilful transgression with intent to defraud. 4. Whether a suspension of a customs broker's licence limited in the impugned order 'till the completion of adjudication proceedings' must be vacated once the parent adjudication is concluded and the licence renewed, and what is the appropriate quantum of penalty in the circumstances. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effect of subsequent adjudication by another Commissionerate on prior penalty and prohibition Legal framework: The Court considered the interplay between orders under the CBLR regime where one Commissionerate imposed prohibition pending adjudication (Regulations 22/23), while another Commissionerate later completed adjudication and imposed penalty under Regulation 18 (CBLR 2018) and forfeiture of security. Precedent Treatment: No external judicial precedents were cited or relied upon in the judgment; adjudicatory weight was given to the findings and reasoning in the prior Commissionerate's Order-in-Original and Inquiry Officer report. Interpretation and reasoning: The Court observed that the prohibition in the impugned order was expressly tied to the pendency of adjudication by the parent Commissionerate (Mumbai). Once the Mumbai adjudication concluded, the temporal basis for suspension ceased. However, the Court reasoned that the Mumbai adjudication addressed a distinct show cause (fraudulent drawback) involving a different employee and different Commissionerate; therefore, while the conclusion of that adjudication removed the procedural ground for continued suspension in the Cochin jurisdiction, it did not automatically exonerate the broker from liability arising under the separate Cochin proceedings. Ratio vs. Obiter: Ratio - a suspension tied to the pendency of adjudication must be reconsidered or vacated once that adjudication concludes; Obiter - comments about administrative comity between Commissionerates. Conclusions: The suspension of licence in the Cochin jurisdiction limited to the period of Mumbai adjudication was set aside because the parent adjudication was completed and the licence renewed. The earlier Mumbai order did not entirely negate the Cochin proceedings but removed the basis for continued suspension. Issue 2 - Distinctness of show cause notices from different Commissionerates and employees Legal framework: Principles governing separate administrative proceedings under CBLR where misconduct may arise in different jurisdictions and from acts of different employees; applicability of Regulations 10(a), 10(d), 10(e), 13(12) (formerly Regulations 13(a), 13(d), 13(e), 19(8) of CHALR 2004) and Sub-clauses 11(h), 11(i). Precedent Treatment: No authority was treated as overruling prior law; the Court relied on factual distinctions and regulatory provisions to treat the notices separately. Interpretation and reasoning: The Court emphasized that the two show cause notices were 'completely on different grounds' - one concerned fraudulent drawback claims via signing of blank shipping bills (Coimbatore/Mumbai proceedings involving Shri Murthy) and the other concerned unauthorized procurement of an unsigned letter from government records (Cochin proceeding involving Shri Pradeep Nangia). Given differing employees, differing offences, and differing locations/Commissionerates, the Court found that the Mumbai adjudication could not completely exonerate the broker from penalty in the Cochin matter. Ratio vs. Obiter: Ratio - distinct factual bases and separate employees justify independent proceedings and penalties by respective Commissionerates; Obiter - none beyond the factual distinctions. Conclusions: The Court treated the two SCNs as independent: the Mumbai order did not preclude imposition or reconsideration of penalty for the Cochin misconduct, though it affected the basis for suspension. Issue 3 - Liability of broker for acts of employees, degree of culpability, and appropriate remedial measure Legal framework: CBLR imposes duties on customs brokers to supervise employees and prescribes liability for failure to discharge duties under specified regulations. Sanctions may include penalty, forfeiture of security, or revocation of licence depending on findings of culpability and intent. Precedent Treatment: The inquiry report and the Mumbai Commissioner's findings were treated as persuasive within their factual context; no judicial precedents were applied or overruled. Interpretation and reasoning: In the Mumbai adjudication, the Inquiry Officer and Commissioner found that the employee's acts occurred in the course of employment and evidenced laxity and negligence by the broker, but did not constitute wilful transgression with intent to defraud; on that basis licence revocation was not imposed though penalty and forfeiture were directed. In the Cochin matter the broker admitted lack of prior knowledge, expressed regret, took disciplinary action against the erring employee and urged leniency. The Court recognized supervisory lapses rendering the broker accountable under the cited regulations but also acknowledged mitigating factors (admissions, corrective measures, lack of evidence of wilful intent by management). Ratio vs. Obiter: Ratio - supervisory lapses by a customs broker render it accountable for employees' acts under CBLR, but absence of wilful transgression and prompt remedial action are relevant mitigation factors in determining the quantum of penalty and whether licence revocation is warranted; Obiter - observations on internal disciplinary steps as mitigating considerations. Conclusions: The Court accepted that the broker was liable for lapses but that the misconduct did not warrant licence revocation given findings of negligence rather than intentional fraud and evidence of prompt remedial steps; accordingly, a reduced penalty was appropriate. Issue 4 - Appropriate relief: setting aside suspension and quantification/reduction of penalty Legal framework: Discretionary power to modify administrative penalties and suspensions in light of completed adjudications, renewal of licence, distinctness of offenses, and mitigating facts. Precedent Treatment: The Court exercised its appellate discretion without invoking external precedent, relying on the text of the impugned order, the Mumbai adjudication, and regulatory duties. Interpretation and reasoning: Because the Cochin suspension was expressly limited 'till the completion of the adjudication proceedings by Mumbai,' and those adjudications were completed with licence renewal through 2027, the temporal basis for suspension no longer existed. Nonetheless, the Cochin offence remained independently justiciable. Balancing the broker's admitted supervisory lapses, corrective action, lack of willful management involvement, and the distinctness of the two SCNs, the Court reduced the penalty imposed by the impugned order from Rs.50,000 to Rs.25,000 and set aside the suspension within the Cochin jurisdiction. Ratio vs. Obiter: Ratio - where suspension is expressly time-limited to pending adjudication, completion of that adjudication and licence renewal justify vacating the suspension; appellate authority may reduce penalty in light of mitigation though independent liability may remain; Obiter - none beyond factual balancing. Conclusions: The Court allowed the appeal partially: it set aside the suspension in the Cochin jurisdiction (as it was tied to the Mumbai adjudication which had ended) and reduced the penalty to Rs.25,000 while recognizing that separate proceedings based on distinct employee acts remain valid grounds for independent liability.