2025 (10) TMI 554 - AT - Customs

Appeal allowed; CHA licence revocation and forfeiture quashed where department failed to prove broker's complicity

M/s SK International Versus Commissioner of Customs Hyderabad - Customs

CESTAT (Hyderabad) - AT allowed the appeal and set aside revocation of the CHA licence and related forfeiture. Tribunal found department failed to prove ... Revocation of CHA License of the appellant - forfeiture of the security amount deposited in terms of regulation 20(1) read with regulation 22 of Customs House Agents Licensing Regulations, 2004 - some exporters were attempting to export fertilizer items by declaring them as ‘Cephalexin Monohydrate’ to avail undue drawback benefits - involvement of CHA/CB or not - contravention of Regulation 13(a), 13(b), 13(d), 13(n), 13(o), 17(2), 19(5) and 19(8) of CBLR, 2013 - HELD THAT:- The learned Counsel has argued that the exporters have not turned up despite summons were issued twice and also there were directions to search the premises of the exporters. There was no action initiated against the exporters. It is also argued that duty or responsibility of CHA ends once the goods are cleared and are out of premises. The appellants have relied on the order of Coordinate Bench of this Tribunal at Chennai in the case of OTA Falloons Forwarders Pvt Ltd Vs CC, Ludhiana [2021 (6) TMI 61 - CESTAT CHANDIGARH], wherein, it was held that no investigation was done from transporter who had transported goods during transit. The role of Customs Broker ended when examination was conducted by customs officials at CFS and the consignment was allowed to be transported to port or export. In the absence of any evidence of involvement, benefit of doubt given to Customs Broker and the impugned order imposing penalty is set aside. The facts of the instant appeal are quite similar and therefore, the findings in the above case are applicable in the present appeal also. The adjudicating authority has revoked the license by OIO dt.08.11.2013, which was already revoked by OIO dt.09.09.2013. Therefore, the order passed by the adjudicating authority is not sustainable and is liable to be dismissed. Learned AR has submitted that the appellant has previously been found guilty in a similar case i.e., SK International Vs CC (Import), Mumbai [2006 (2) TMI 551 - CESTAT, MUMBAI] and is accustomed to engage in such activities. It is true that appellant was found guilty in that matter, however, merely being found guilty in any other case, cannot be the basis for holding him guilty in the present case. The department must prove the case against the individual independently in each case, which they failed to do so in the present appeal. The appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjudicating order revoking a Customs House Agent (CHA) licence is sustainable where a prior order of revocation by the same authority already exists. 2. Whether a CHA can be held liable for misdeclaration and penalised by revocation of licence where the consignments were examined and cleared by Customs officials and there is no direct evidence of the CHA's active participation or collusion in the misdeclaration. 3. Whether initiation of disciplinary action against a CHA is sustainable in the absence of independent action or adverse findings against the exporters or other parties allegedly involved in the fraudulent export. 4. Whether past convictions or adverse findings in unrelated or prior matters can, by themselves, justify revocation of a CHA licence in a separate proceeding. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of a subsequent revocation order where an earlier revocation already exists Legal framework: Regulatory scheme contemplates issuance of an order to revoke a CHA licence; revocation cancels an existing licence and effects a change in status. Precedent Treatment: Coordinate bench decisions have interpreted the regulatory provisions to mean that there can be only one operative revocation cancelling an existing licence; there is no provision for issuing a further or 'deemed' revocation by the same authority to take effect later. Interpretation and reasoning: A second revocation order by the same authority purporting to revoke a licence already cancelled by an earlier order is legally unnecessary and unsupported by the regulatory text. The purpose of revocation is to cancel an existing licence; once cancelled, a subsequent order labelled 'revocation' cannot meaningfully operate to cancel what no longer exists. Ratio vs. Obiter: Ratio - where an adjudicating authority has already issued an operative revocation, a later revocation order by that authority is unsustainable for want of legal effect. Obiter - observations on procedural propriety of issuing parallel orders. Conclusion: The subsequent revocation order is not sustainable and must be set aside on this ground. Issue 2 - Liability of CHA where Customs officials examined and cleared consignments and no direct evidence of CHA's active role or collusion exists Legal framework: Obligations and duties of CHAs under the licensing regulations include due diligence obligations, verification of documents, and adherence to prescribed procedures; liability requires proof of breach of those obligations or culpable conduct such as collusion, negligence amounting to contravention, or wilful facilitation. Precedent Treatment: Tribunal precedent recognises that the CHA's responsibility may cease once Customs examinations are conducted and consignments are cleared; in absence of evidence showing CHA's involvement in misdeclaration or omission to perform required due diligence, benefit of doubt may be given to the CHA. Interpretation and reasoning: Where Customs officials examined the goods and cleared them, and there is no factual material demonstrating that the CHA attended the examinations, directed or concealed misdeclaration, or knowingly permitted unauthorized persons to handle clearance, the causal nexus between the alleged contravention and the CHA's conduct is missing. Allegations that the CHA failed to verify antecedents or IEC details must be linked to material showing such verifications were practicably required and omitted; blanket assertions without corroborative evidence do not satisfy the burden of proof. Ratio vs. Obiter: Ratio - absent evidence of active participation, collusion, or a clear breach of due diligence obligations by the CHA, disciplinary action revoking licence is not sustainable. Obiter - commentary that regulation-based obligations apply where CHA directly attends or handles export clearance tasks. Conclusion: The findings of contravention against the CHA are not tenable on the record where examination and clearance were performed by Customs and no evidence establishes the CHA's culpable role; the CHA is entitled to benefit of doubt. Issue 3 - Sustainability of disciplinary action in absence of independent proceedings or adverse findings against exporters/other implicated parties Legal framework: Disciplinary action against a CHA requires proof of violation of regulatory obligations; investigation may involve multiple parties (exporter, transporter, CHA), and evidence may need to be gathered from those participants to establish culpability. Precedent Treatment: Decisions have treated absence of parallel action against exporters, transporters or other involved persons, and failure to investigate those parties as weakening the case against a CHA where the CHA's role is not directly evidenced. Interpretation and reasoning: If the departmental investigation does not proceed to examine or prosecute exporters or other participants whose conduct is central to the alleged fraud, and if summonses to those exporters prove ineffective without further investigation, then reliance on inferences against the CHA is infirm. The department bears the burden to prove individual culpability; omission to pursue likely sources of direct evidence undermines the completeness and reliability of findings against the CHA. Ratio vs. Obiter: Ratio - disciplinary action against a CHA cannot be sustained where the departmental case fails to investigate or adduce evidence from other implicated parties and there is no other direct evidence of the CHA's culpability. Obiter - standards of inquiry the department ought to undertake in such complex investigations. Conclusion: In the absence of independent evidence or prosecution of exporters/other implicated parties, action against the CHA is not sustainable. Issue 4 - Relevance of prior convictions or adverse findings in unrelated matters to current disciplinary proceedings Legal framework: Disciplinary proceedings under the licensing regulations focus on conduct in the specific matter under adjudication; proof required is specific to the alleged contravention. Precedent Treatment: Courts and Tribunals have held that while past misconduct may be a relevant consideration in assessing overall reliability, each case must be proved on its own facts and evidence; past findings cannot substitute for proof of present guilt. Interpretation and reasoning: Reliance solely on past adverse findings without contemporaneous evidence linking the CHA to the misconduct in the instant matter violates the principle that each disciplinary finding must be independently established. Past misconduct may inform credibility but cannot automatically justify revocation in a separate factual matrix. Ratio vs. Obiter: Ratio - past convictions or findings alone do not suffice to sustain revocation in a distinct and separate proceeding absent independent proof of culpability in that proceeding. Obiter - cautionary note on using past matters as corroborative evidence only where probative links exist. Conclusion: The department's reliance on prior adverse findings is insufficient to uphold revocation in the absence of independent proof in the present case. Interrelationship and Final Disposition Cross-reference: Issues 1-4 are interrelated - insufficiency of evidence regarding the CHA's role (Issue 2) and failure to investigate other implicated parties (Issue 3) render disciplinary findings vulnerable, while past misconduct (Issue 4) cannot cure evidentiary gaps; additionally, procedural impropriety in issuing a subsequent revocation (Issue 1) independently undermines the impugned order. Conclusion: The impugned revocation is unsustainable both on substantive grounds (lack of evidence of CHA's culpability and failure to investigate other parties) and on procedural grounds (a second revocation order where an earlier revocation by the authority already existed); the appeal is allowed with consequential relief as per law.