CESTAT restores Customs House Agent license after finding excessive delay in proceedings and minimal negligence warranting reduced penalty

CESTAT Hyderabad set aside the revocation of a Customs House Agent license, finding that while time limits for issuing show cause notices are directory rather than mandatory per Kerala HC precedent, the Department took excessive time to issue notices and finalize proceedings. The tribunal noted no direct reference to the appellant in show cause notices issued to importers, and the alleged offense was committed by an H-cardholder employee operating at Chennai while the appellant was located in Hyderabad during COVID-19 with minimal staff oversight. Though no direct involvement was established, some negligence was found warranting penalty, which was reduced to Rs. 5,000 considering the appellant's business loss from being out of operation for over one year. The CHA license was ordered to be immediately restored.

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Issues:
1. Delay in issuing show cause notice and order-in-original by Customs Authorities
2. Compliance with statutory provisions of Regulation 17(7) of CBLR
3. Alleged lack of active role or connivance of the appellant in the offence
4. Vicarious liability of the appellant for acts of its employee
5. Interpretation of time limits as mandatory or directory

Analysis:

1. The appellant raised a preliminary objection regarding the delay in issuing the show cause notice by the Customs Authorities. The appellant argued that the notice was issued beyond the prescribed time frame of 90 days from the date of receipt of the offence report, as required by Regulation 17(1) of CBLR 2018. The appellant contended that the entire proceedings were vitiated due to this delay, as highlighted by the legal representative.

2. The appellant further challenged the delay in passing the order-in-original, citing Regulation 17(7) of CBLR. The appellant pointed out that the order was passed more than 7 months after the submission of the enquiry report, contravening the statutory provision. The appellant asserted that this delay rendered the impugned order legally unsustainable, providing additional grounds for setting it aside.

3. On the merits of the case, the appellant argued that the Department failed to establish the active role or connivance of the appellant in the alleged offence. The appellant highlighted that they were not made co-noticee in the show cause notices issued to the importers, indicating their lack of involvement in the contraventions. The appellant emphasized the absence of any grounds linking them to the offence, asserting their innocence in the matter.

4. The appellant's legal representative also raised the issue of vicarious liability, contending that the appellant was vicariously responsible for the acts of their employee who committed the offence. The appellant argued that the employee's actions should not automatically attribute liability to the appellant, especially considering the circumstances under which the transactions took place during the COVID pandemic.

5. The Tribunal analyzed the interpretation of time limits as mandatory or directory, referencing a judgment of the Hon'ble Telangana and Andhra Pradesh High Court. While acknowledging that the time limits in Regulation 17(7) were not mandatory, the Tribunal noted the undue delay in issuing the show cause notice and finalizing the order-in-original after receiving the enquiry report. The Tribunal considered the impact of these delays on the proceedings, despite the non-mandatory nature of the time limits.

6. In the final decision, the Tribunal set aside the revocation of the Customs House Agent (CHA) License and directed the Authorities to restore it immediately. Acknowledging some negligence on the part of the appellant, the Tribunal imposed a reduced penalty of Rs. 5,000, taking into account the appellant's business losses due to the suspension of the license. The appeal was partially allowed based on these findings.

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