2025 (5) TMI 1766 - AT - Customs

Customs broker licence revocation set aside due to licensing authority's failure to meet mandatory timelines under Regulations 2018

CESTAT Mumbai allowed the appeal and set aside the order revoking a customs broker's licence and forfeiting security deposit. The licensing authority ... Delay in inquiry proceedings against a customs broker - Revocation of the licence - forfeiture of security deposit under regulation 18 of Customs Broker Licensing Regulations, 2018 - Non-fulfilment of regulation 1(4), regulation 10(a), 10(b), 10(d), 10(e), 10(m), and 10(n) of Customs Broker Licensing Regulations, 2018 in connection with six shipping bills - shipment of ‘readymade garments’ were allegedly overvalued to avail ineligible drawback - imposition of penalty of ₹ 50,000 under regulation 14 Customs Broker Licensing Regulations, 2018 - HELD THAT:- It is seen that the enquiry report was submitted on the 11th July 2023 consequent upon the show cause notice dated 6th September 2021. The impugned order has drawn attention to the ‘midstream’ change in enquiry authority consequent upon transfer of the first enumerated officer which serves to justify the delay that occurred at the first stage. The enquiry report held the charges to be not proved and it took the licensing authority over nine months to conclude that he was not in agreement with the exoneration by the enquiry authority. Even thereafter, another six months elapsed before the impugned order concluded that the most severe of the detriments was deserving in the matter. It is on record that the appellant herein represented at the personal hearing on 14th September 2023, following submission of the written response to the disagreement memo, that there wass no elaboration of the events that occurred between date of disagreement memo and the date of personal hearing to justify the delay. At all events, the decision to disregard the enquiry report was made manifest only nine months after the enquiry report which is in breach of the stipulations prescribed in Customs Broker Licensing Regulations, 2018. On perusal of the impugned order, there is no finding that the acts, omission or commission on the part of the customs broker was cause of one or more of the delays. In addition to the circumstances of failure to suggest that delays were occasioned by dereliction on the part of the customs broker, there is no explanation whatsoever in the impugned order that delay was either from unavoidable circumstances or beyond human control. That is irresponsible discharge of responsibility fastened on the licencing authority in the Regulations and certainly not in accordance with the leeway afforded by the Hon’ble High Court of Bombay in re Unison Clearing Pvt Ltd. [2018 (4) TMI 1053 - BOMBAY HIGH COURT]. In the absence of any finding that the appellant herein was responsible for the delay in concluding the proceedings after submission of the enquiry report, the stipulations in the Customs Broker Licensing Regulations, 2018 are to be treated as mandatory as set out supra. The deadlines not having been adhered to, the findings and consequence in the impugned order stand invalidated. Accordingly, the impugned order is set aside and appeal allowed. The core legal questions considered in this judgment revolve around the interpretation and application of the Customs Broker Licensing Regulations, 2018, particularly concerning the procedural timelines and consequences of delay in inquiry proceedings against a customs broker. Specifically, the issues include:1. Whether the licensing authority was justified in revoking the customs broker's license and imposing penalties despite the enquiry authority having held the charges as not proved.2. The legal effect and nature (mandatory or directory) of the timelines prescribed under Regulation 20 of the Customs Broker Licensing Regulations, 2018, for completing inquiry proceedings.3. Whether the delay of over fifteen months in issuing the impugned order after the enquiry report was justified or excusable.4. The accountability of the licensing authority for delays in concluding inquiry proceedings and the impact of such delays on the validity of adverse actions against the customs broker.Issue-wise Detailed Analysis:Issue 1: Justification for revocation and penalty despite enquiry report exonerating the customs brokerThe relevant legal framework includes the Customs Broker Licensing Regulations, 2018, particularly regulations 1(4), 10(a), 10(b), 10(d), 10(e), 10(m), and 10(n), which set out the obligations of customs brokers, and regulation 18 which empowers the licensing authority to revoke licenses and forfeit security deposits. Regulation 14 authorizes imposition of penalties.The enquiry authority, after investigation, found the charges against the customs broker not proved. However, the licensing authority issued a disagreement memo and ultimately revoked the license and imposed penalty, relying on its own assessment rather than the enquiry report.The Court noted that the licensing authority took over nine months after the enquiry report to disagree with the exoneration and another six months to finalize the order imposing the most severe sanction. There was no justification or explanation in the impugned order for this delay or for disregarding the enquiry report findings.The appellant contended that such disregard without adequate reasons and the prolonged delay violated the procedural fairness and statutory framework. The Court emphasized that the licensing authority must provide reasons for rejecting the enquiry report and must act within prescribed timelines.Issue 2: Nature of timelines prescribed in Regulation 20 of Customs Broker Licensing Regulations, 2018Regulation 20 prescribes specific time limits for completing inquiry proceedings against customs brokers. The question was whether these timelines are mandatory (strict compliance required) or directory (flexible compliance allowed).The Court extensively analyzed precedents, particularly a decision of the Hon'ble High Court of Bombay and the CESTAT, which have grappled with this question. The High Court held that while the word 'shall' in the regulation generally indicates a mandatory obligation, it cannot be construed rigidly in every instance without regard to the purpose and consequences of such strictness.The Court noted that:'Adherence to the time schedule prescribed in the Regulation 20 in a rigid way would lead to a situation where non-compliance with the time frame and even deviation by a single day would resultantly invalidate the entire action and the licence which is under suspension or which is revoked, is liable to be restored.'Conversely, treating the timelines as directory without accountability could encourage undue delay by the revenue, harming the customs broker's interests.The Court referred to the principle that when a statute prescribes a public duty with a time frame, the provision is generally directory unless non-compliance defeats the statute's purpose. The Court emphasized the need to balance strict adherence with practical considerations and fairness, stating:'The time limit need to be rigidly applied, fairness would demand that when such time limit is crossed, the period subsequently consumed for completing the inquiry should be justified by giving reasons and the causes on account of which the timelimit was not adhered to.'This ensures accountability and prevents unnecessary delays while not invalidating proceedings for minor or justified delays.Issue 3: Justification for delay of over fifteen months in issuing the impugned orderThe timeline of events shows the enquiry report was submitted on 11th July 2023, following a show cause notice dated 6th September 2021. The licensing authority issued a disagreement memo on 28th April 2023 (more than nine months after the enquiry report) and took another six months to pass the impugned order.The Court observed that the only justification offered for initial delay was a 'midstream' change in the enquiry authority due to transfer of the officer. However, there was no explanation for the subsequent nine-month delay in disagreeing with the enquiry report or the further six-month delay in issuing the final order.The appellant had represented at a personal hearing that no elaboration was provided for these delays. The Court held that in the absence of findings attributing delay to the customs broker or unavoidable circumstances, the delay was unjustified and amounted to a breach of the procedural stipulations.Reliance was placed on the principle that the licensing authority must discharge its statutory duty responsibly and cannot rely on procedural delays to impose detriments on the customs broker.Issue 4: Accountability of licensing authority for delays and impact on validity of adverse ordersThe Court examined the consequences of the licensing authority's failure to adhere to prescribed timelines and to justify delays. Precedents cited emphasized that inordinate delays caused by the revenue in completing inquiry proceedings violate the customs broker's fundamental right to livelihood and procedural fairness.While the timelines are directory, the licensing authority must record reasons for delay and be accountable for non-adherence. Failure to do so invalidates the adverse order.The Court noted:'In the absence of any finding that the appellant herein was responsible for the delay in concluding the proceedings after submission of the enquiry report, the stipulations in the Customs Broker Licensing Regulations, 2018 are to be treated as mandatory.'Thus, the impugned order revoking the license and imposing penalty was set aside due to procedural irregularity and unjustified delay.Competing Arguments and TreatmentThe licensing authority argued that the delay was due to procedural necessities, including insistence on cross-examination of witnesses by the customs broker, which was a legitimate assertion of defense and not dilatory conduct. The Court accepted that assertion of defense rights is not delay but found no justification for the overall delay in issuing the final order.The Court rejected the licensing authority's attempt to rely on the directory nature of timelines to justify delay without accountability, emphasizing that the timelines cannot be treated as a mere formality allowing indefinite prolongation of proceedings.ConclusionsThe Court concluded that:The timelines prescribed in Regulation 20 are directory but require strict adherence and accountability for any deviation.Unjustified and unexplained delays by the licensing authority in concluding inquiry proceedings and issuing orders invalidate adverse actions against customs brokers.In the absence of any finding that the customs broker caused or contributed to the delay, the licensing authority's action revoking the license and imposing penalty was not sustainable.The impugned order was set aside and the appeal allowed.Significant Holdings:The Court articulated key principles regarding procedural timelines and accountability in customs broker licensing inquiries:'The timelimit contained in Regulation 20 cannot be construed to be mandatory and is held to be directory. As it is already observed above that though the time line framed in the Regulation need to be rigidly applied, fairness would demand that when such time limit is crossed, the period subsequently consumed for completing the inquiry should be justified by giving reasons and the causes on account of which the timelimit was not adhered to.'Further, the Court emphasized the necessity of balancing the purpose of the Regulation with practical realities:'Strict adherence to the said time limit and not making it even slightly flexible would warrant a situation where even one day deviation from the time line would be equally fatal as a delay of one year. This surely is not the intention in framing the Regulation.'On the consequences of delay and accountability, the Court held:'One step by which the unnecessary delays can be curbed is recording of reasons for the delay or non-adherence to this timelimit by the Officer conducting the inquiry and making him accountable for not adhering to the time schedule. These reasons can then be tested to derive a conclusion whether the deviation from the time line prescribed in the Regulation, is 'reasonable'. This is the only way by which the provisions contained in Regulation 20 can be effectively implemented in the interest of both parties, namely, the Revenue and the Customs House Agent.'Finally, the Court invalidated the impugned order due to procedural irregularity and lack of justification for delay:'In the absence of any finding that the appellant herein was responsible for the delay in concluding the proceedings after submission of the enquiry report, the stipulations in the Customs Broker Licensing Regulations, 2018 are to be treated as mandatory as set out supra. The deadlines not having been adhered to, the findings and consequence in the impugned order stand invalidated.'