TaxTMI 
TaxTMI 
2006 (11) TMI 281
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....or the sake of convenience, the Commissioner of Customs (General) is hereinafter referred to as "the appellant" and the Firm as "the respondent". 2. Amongst others, we are concerned in these Appeals with the provisions of the Customs House Agents Licensing Regulations, 2004 which are framed under Section 146(2) of the said Act. The respondent was holding the Custom House Agent licence bearing CHA licence No. 11/430 issued under these regulations. The same was suspended by the appellant by order dated 2-11-2005 in view of serious allegations of misconduct against the Firm for the act of its employee one Rehman Iqbal Shaikh authorised under Regulation 8 of these regulations (referred as Regulation 8 employee). The allegations were arising out of two incidents viz. (i) misdeclaration of the value of a Volkswagen Car and deliberately giving wrong name of country of export and also of the importer to avoid the correct duty. This was in April 2005 at Air Cargo Complex at Sahar and (ii) the other incident was in May 2005. That was concerning the outright smuggling of a Mercedes Benz Car at JNPT Nhava Sheva. 3. The respondent herein challenged this suspension by filing Writ Petition ....
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.... the licence when otherwise the order was in favour of the Custom House Agent ? Both the Appeals have been heard together. 7. The appellant has enclosed to the Appeal the following documents as Exhibits A to D :- (1) Exh. A - Copy of Inquiry Officer's Report. (2) Exh. B - Copy of order-in-original No. 02/2006 passed by the Appellant. (3) Exh. B-1 - Copy of Memo of Appeal filed before CESTAT by the Respondent. (4) Exh. C - Copy of impugned order No. A/317/WZB/06 C-II (C.S.T.B.) passed by the CESTAT, Mumbai. (5) Exh. D - Copy of the Customs House Agents Licensing Regulations, 2004. The appellant has filed an additional affidavit of one Mr. A.J. Shetty, Deputy Commissioner of Customs and has placed on record the Notice dated 23rd November 2005 which was issued to the respondent prior to the enquiry enclosing therewith I. Grounds of imputation, II. Articles of charges (which were six in all) III. List of documents and witnesses relied upon by the Departmen....
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....address and whereabouts were not known. He further stated that his financial condition was not so sound that he could purchase even a small car. He was working with M/s. Metro Electronics at Bandra and earning a salary of Rs. 5,000/- per month. He further stated that this was all done at the instance of the said Sumesh Menon who did not want the car in his own name because he had manipulated the invoice presented to the Customs. He stated that as per the telephonic discussion with the said Sumesh Menon he wanted to clear the said car on payment of duty on the actual value of the goods. 10. Rehman Shaikh in his statement under Section 108 of the said Act, admitted that the invoice submitted to the Customs was a fake one since it was not showing the extra company fittings. He also admitted that the port of loading was not from Germany but was from Dubai. Thus, it was claimed to be a clear case of mis-declaration of the value of the imported car, a case of non-declaration of the correct name of the importer and not declaring the correct name of the place from which the car was exported. The respondent was, therefore, charged for the vicarious liability as the employer of Rehman Sha....
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....id Act, freight manifest and Bill of Lading showing Sanjay Chhabria as the consignee and various panchanamas at the time of arrest and recovery of the vehicle. 13. The regulations which were invoked against the respondent in the first case were Regulations 13(d), 13(e), 13(1) and 19(8). Regulation 13 gives the obligations of the customs house agents. In the second case, the regulations invoked were Regulations 19(8), 13 (n) and 20(1) (c). These clauses of the above-referred regulations read as follows :- "13. Obligations of Customs House Agent - A Customs House Agent shall - (d) advise his client to comply with the provisions of the Act and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs ,- (e) exercise due diligence to ascertain the correctness of any information which i.e. parts to a client with reference to any work related to clearance of cargo or baggage; (l) ensure that all documents, such as bills of entry and shipping bills delivered in the Customs Station by him show the name of the importer or exporter, as the case may be, and the name of the Customs House Agent, prom....
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.... respondent, it filed one reply dated 6th January 2006. This reply is in three parts. In the first part, it is stated that the grounds of imputation are framed against the respondent. In the second part, the respondent has dealt with the incident at the Air Cargo Complex and in the third part, it has dealt with the incident at the Jawaharlal Nehru Port. As far as the incident at Jawaharlal Nehru Port is concerned, the respondent has stated that it was not even aware of these activities of Rehman Shaikh and whether there was any flouting of the provisions of the Customs Act. It is stated that no show cause notice was issued to it regarding the smuggling/clandestine removal of car. It is further stated that had the respondent been aware of the same, it would not have encouraged its employee into any such thing. It is stated that Rehman Shaikh has been removed from its service, though it is further stated that Rehman Shaikh has contended that his arrest was illegal and that he had got an order in his favour in that connection in the High Court. Thus, it is clear that the respondent is not defending him with respect to what happened at Jawaharlal Nehru Port, though it is contending tha....
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....rm is not responsible for the alleged two incidents. In sub-para (a) of para 2.1, it stated that there is no question of vicarious liability since the Firm was not served with any Show Cause Notice for the alleged complexity in clearance of the Volkswagen car at Sahar. As far as the clearance of Mercedes car at JNPT is concerned, the Tribunal says that the Firm came to know about it only after the arrest of Rehman Shaikh. In sub-para (b) it observed as follows :- "There is no material which could be shown to us from the statements of Shri Rehman I. Shaikh to even remotely suggest that the partners of the said firm or the firm in any way was privy to or in concert to these activities of Rehman. The activities are not the duties to be performed by Shri Rehman I. Shaikh in the course of his employment." The Tribunal lastly held in para 3.1 that the CHA licence was the only means of earning livelihood of the appellant and his other employees. It has relied upon the judgment of CESTAT at Chennai in the case of Nanda International v. Commissioner of Customs, Chennai reported in 2004 (176) E.L.T. 524 in that behalf. That was a case where the appellant had allowed their licence to be....
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....s a case where the CHA had stood surety for a party without satisfying himself that the importer was a real one and was an actual user. The Department found that the importer was a fictitious entity and refused to renew the licence of the CHA. The action of the Department was upheld by the Division Bench. An SLP against this judgment being SLP (Civil) Nos. 19713-19714 of 2000 has been dismissed by the Apex Court as recorded in Arvind C. Bhagat v. Commissioner - 2001 (129) E.L.T. A191 (S.C.). 22. A similar view is taken by another Division Bench of the Madras High Court in Sri Kamakshi Agency v. Commissioner of Customs, Madras reported in 2001 (129) E.L.T. 29 (Mad.). In that matter, the CHA had given a Power of Attorney to another party. That party misused the licence and signed blank documents without knowing the importers/exporters and the nature of goods. This CHA was responsible for the fraudulent activity carried out by the Power of Attorney leading to the revocation of the licence. The Department's action was upheld by the High Court; SLP (Civil) No. 631 of 2001 filed by the Kamakshi Agency was dismissed by the Apex Court as recorded in 2002 (142) E.L.T. A87 (S.C.). Mr. Jet....
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...., one could perhaps understand. The fact, however, remains that the appellant has not taken any such stand. This being the position, the Tribunal had no reason to come to the conclusion as it has done in sub-para (a) of para 2.1 that the Firm was not liable for the alleged acts of its employees. The Firm was clearly told that it was being proceeded for failure of its obligations under Regulations 13(d), (e), (1) and (n) of the CHA Licensing Regulations. These regulations clearly stated that the CHA has to advise its clients correctly, exercise due diligence, ensure that the correct documents and information are given and discharge its duties in accordance with law. The respondent knew that the appellant was relying upon Regulation 19(8) which clearly stated that the CHA will be responsible for all acts or omissions of its employees. In the present case, Rehman Shaikh had no authority to go into the Customs area except as the Regulation-8 employee of the respondent-firm. He having functioned for the respondent-firm and the respondent having been clearly told in advance that these are the rules, it was its obligation to observe. In any case, as stated above from the reply filed by th....
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....hat the Commissioner of Customs has to invite the application for grant of such number of licence as assessed by him to act as an CHA. There is an examination to become a CHA and the Commissioner has to satisfy himself that the persons concerned are persons of integrity. Thus, Regulation 11(2)(b) states that when it comes to renewal, also the Commissioner has to be satisfied of absence of instances of any complaint or misconduct, including non-compliance of any of the obligations specified in Regulation 13. In the present case, the Assistant Commissioner had clearly held that as far as the first incident at Sahar was concerned, the violation of Regulations 13(d), (e), (1), (n) and 19(8) was clearly established. This being the position, as the authority in-charge of the Customs, it was his responsibility to see to it that such agents are no longer continued. As stated above, under Regulation 4, he has a right to regulate the number of licences. Even at the time of renewal, he may refuse to renew the licence in the event of a single incident of misconduct and for non-compliance of any of the obligations. In the present case, the respondent is justifying the fraud that the Regulation-....