2026 (3) TMI 419 - AT - Customs

Natural justice requires communicating adverse material and granting opportunity to rebut before revoking a licence.

Commissioner's revocation of a customs broker licence was set aside because the Commissioner disagreed with an inquiry report favourable to the broker but ... Revocation of the customs broker licence - Failure to communicate reasons for disagreement with inquiry report breaches principles of natural justice - right to be informed of adverse material - opportunity to rebut - non-binding nature of inquiry report - duty to communicate reasons for disagreement - Violations of Regulation 10(d), 10(e), 10(q) and Regulation 13(12) of the Customs Broker Licence Regulations, 2018, recording specific findings of compliance and absence of proof of violations. Whether it was open to the Commissioner to disagree with the findings recorded by the Inquiry Officer without providing reasons to the appellant for such disagreement and further providing an opportunity to the appellant to reply. Failure to communicate reasons for disagreement - HELD THAT:- The Tribunal held that although the Commissioner is not bound to accept an inquiry report favourable to the customs broker, principles of natural justice require that where the Commissioner intends to disagree with such a report he must record and communicate the adverse material or reasons for disagreement to the broker so that the broker may rebut, qualify or explain the same. The inquiry report in this case had exonerated the broker after detailed findings on alleged breaches of Regulations 10(d), 10(e), 10(q) and 13(12). The Commissioner disagreed with that report but did not disclose the reasons or adverse material to the appellant nor afforded an opportunity to file representations on those reasons. This failure rendered the impugned order procedurally infirm. The Tribunal relied on the reasoning in the cited decision of the Delhi High Court in Him Logistics [2015 (11) TMI 380 - DELHI HIGH COURT] to conclude that non-communication of reasons for disagreement amounts to a breach of natural justice. [Paras 13, 15] Impugned order set aside for failure to communicate reasons for disagreement with the inquiry report; appeal allowed. Final Conclusion: The revocation of the customs broker licence was set aside because the Commissioner disagreed with an inquiry report favourable to the broker without communicating the adverse reasons/material or providing an opportunity to reply, thereby breaching principles of natural justice. Issues: Whether the Commissioner of Customs could lawfully disregard an inquiry report favourable to the customs broker without communicating the reasons/adverse material for disagreement and without affording the broker an opportunity to respond, and whether the impugned order revoking the customs broker licence should be set aside on that ground.Analysis: The Tribunal examined the inquiry officer's detailed report which exonerated the broker on alleged violations of Regulation 10(d), 10(e), 10(q) and Regulation 13(12) of the Customs Broker Licence Regulations, 2018, recording specific findings of compliance and absence of proof of violations. The Commissioner, however, disagreed with that report and revoked the broker's licence without communicating the reasons or the adverse material forming the basis of disagreement, and without providing the broker an opportunity to make representations. The Tribunal applied the principle from the Delhi High Court decision in Him Logistics which holds that while a Commissioner is not bound to accept an inquiry report favourable to a broker, if the Commissioner intends to disagree he must record and communicate the adverse material/reasons for disagreement so that the broker can rebut or explain before an adverse order is passed. The Tribunal found that this procedure was not followed in the present case and that failure amounted to a breach of natural justice.Conclusion: The Commissioner's order revoking the customs broker licence is set aside for failure to communicate reasons/adverse material and to afford opportunity to the broker to reply; the appeal is allowed and the impugned order dated 12.09.2024 is quashed.