TaxTMI 
TaxTMI 
2015 (10) TMI 2332
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.... under Regulations 11(2) of HCCAR, 2009. 3. In this appeal, we would like to highlight the point that the potentiality of our Nation is being exploited for exportation to get unlawful self enrichment. 4. It is known fact that, of late, the global ball, while moving around, has been wobbling. The reason why is, the drastic change in the environmental condition as the prohibitory activities of eco-cide has been continuing unbridledly by certain section of people by removing the valuable and precious timbers, which are absolutely necessary for maintaining the ecological balance and for economic growth. 5. It is unfortunate that no special law to deal exclusively with the offences relating to red sanders and to combat red sanders smuggling, has been enacted by the law-makers. 6. Though the above facts may superficially appear to be irrelevant, still they are absolutely relevant, as they are intertwinedly connected with the factual scenario of the present case. 7. The appellant viz. , M/s. Chandra Container Freight Station(CFS) and Terminal Operators Private Ltd. , was appointed by the first respondent as the custodian for the import and export goods as per Section 45 of ....
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.... 16. Heard, Mr. Vijaya Narayanan, learned Senior Counsel appearing on behalf of Mr. Hari Radha Krishnan, learned counsel, who is on record for the appellant and Mr. K. Mohana Murali, learned Standing Counsel for the first respondent, viz. , the Commissioner of Customs. 17. From the grounds of appeal as well as from the materials placed before us, the following substantial questions of law arise for our consideration:- (a) whether the order of suspension of custodianship dated 23. 12. 2014 was passed in violation of the principles of natural justice? (b)Whether the Commissioner of Customs was justified in invoking the provisions of Regulation 11(2) of Handling of Cargo in Customs Area Regulations 2009, when no enquiry against the appellant was pending or contemplated? 18. What it transpires from the records is that an information was received by the Directorate of Revenue Intelligence Unit, Chennai Zonal Unit on 13. 12. 2014 saying that Red Sanders (prohibited for Export) were being attempted to be smuggled by M/s. Jayam Plast Co. , having its registered office at Old No. 217, New No. 84, Room No. 9-A, Angappan Naicken Street, vide Shipping Bill No. 9913305, dated 6. 2. ....
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....that one of the seized container No. SEGU 1697558 seized by DIU under the mahazar, dated 6. 3. 2014 containing red sanders, was removed unauthorisedly from the appellant's CFS. 28. In this connection, a file note was placed by the Joint Commissioner (Docks) saying that, it was a serious and very urgent matter and required intervention by DIU as there was a pressure on those goods. It also prima facie appeared that there was a role for custodian in that case and therefore, necessary orders were solicited. 29. On the next day, i. e. , on 20. 12. 2014, this fact was informed to the first respondent by one M. V. Sathyanarayana, who was the Assistant General Manager of the appellant CFS, through a letter, dated 20. 12. 2014. 30. Apart from this information, he had also lodged a police complaint with E3 Minjur Police Station, on the same date. 31. Based on his complaint, a case in Cr. No. 558/14 under Sections 420 and 380 I. P. C. was registered on the file of E3 Minjur Police Station on 22. 12. 2014. 32. At about 3. 15 p. m. on the same day, the Inspector of Police attached to E3 Minjur Police Station had seized the container trailer lorry bearing Registration ....
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....pellant, vide their letter, dated 9. 1. 2015 along with a copy of the seizure mahazar, dated 8. 1. 2015. 40. Ultimately, the appellant had addressed a letter to the first respondent, viz. , the Commissioner of Customs, dated 16. 2. 2015, requesting to revoke the order of suspension of custodianship granted to them and to permit them to operate as custodian pending enquiry, if any. 41. Since the first respondent had not revoked the order of suspension of the custodianship granted on the appellant, they had filed an appeal before the second respondent Tribunal, which was dismissed on 29. 6. 2015. Challenging the legality of the order, present appeal is filed. 42. It is obvious to note here that the Commissioner of Customs, who is the first respondent herein, by her letter, dated 23. 12. 2014 had suspended the custodianship of the appellant CFS in terms of the provisions of the Regulation 11(2) of HCCAR, 2009, alleging that the appellant had contravened the provisions of Regulations 6(1)(f), 6(1)(i) and 6(1)(q) of HCCAR, 2009. 43. It is also significant to note here that on 29. 12. 2014, a corrigendum to the said order was issued by the first respondent, wherein, it is sta....
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....e, direct the Commissioner of Customs to give personal hearing to the appellants and pass a speaking order under the Sub Regulation (2) of Regulation 21." 48. In the very same decision, the Larger Bench has made reference to the observations of Hon'ble Mr. Justice V. R. Krishna Iyer, in Maneka Gandhi's case, in which, His Lordship, has expounded his views on the subject as under:- "Hearing is obligatory-meaningful hearing, flexible and realistic, according to circumstances, but not ritualistic and wooden. In exceptional cases and emergency situation, interim measures may be taken, to avoid the mischief of passportee becoming an escapee before the hearing begins. 'Bolt the stables after the horse has been stolen' is not a command of natural justice. But soon after the provisional seizure, a reasonable hearing must follow, to minimise procedural prejudice." 49. In Automative Tyre Manufacturers Association, cited second supra, while speaking on behalf of the Division Bench of the Apex Court, Hon'ble Mr. Justice D. K. Jain, in paragraph 58 has observed as under:- "58. It is thus, well settled that unless a statutory provision, either specific....
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.... 52. In Commissioner of Customs (Gen), Mumbai, cited fifth supra, a Division Bench of Bombay High Court, has held that, it is not mandatory that in all cases of suspension, Regulation 22(1) ought to be followed. Whereas in cases where immediate action is necessary the Commissioner of Customs is fully empowered to suspend the licence where an enquiry against such an agent is pending or contemplated as per Regulation 20(2). 53. Secondly, Mr. Vijayanarayanan, learned Senior Counsel has argued that the customs have already completed their investigation and a show cause notice, dated 5. 2. 2015 was issued for confiscation of the impugned seized goods and also for imposing penalty on the appellant for the alleged violation of the provisions of HCCAR, 2009, without any reference to the order of suspension or any proposal either to continue with the suspension or to cancel the custodianship of the appellant's CFS. 54. He has also laid emphasis on the point that the show cause notice, dated 5. 2. 2015 was issued without even referring to the order of suspension of custodianship of the appellant, dated 23. 12. 2014 after the completion of detailed investigation and after recording....
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....ay CFS, informed over phone (9840363622) that container No. SEGU 1697558 (20') which was seized by DIU on 6. 3. 2014 and containing red sanders, was removed unauthorisedly form Chandra CFS." 61. With reference to the informant V. Baskaran, he would submit that he was the representative of the appellant company and it was quite apparent that it was the appellant company, who had brought it to the knowledge of the department and not by the Superintendent, who was on duty at the CFS. 62. The learned Senior Counsel has also drawn our attention to the letter, dated 22. 12. 2014 addressed to the Commissioner, by the appellant. 63. This letter reveals that in pursuant to the registration of the case in Cr. No. 558 of 2014, dated 22. 12. 2014, the investigating officer had seized the container and brought it back to the appellant's CFS and due information was also given to the Assistant Commissioner of Customs (Docks). 64. It is also revealed that two employees of the appellant's CFS were arrested with reference to the unauthorised removal of the seized container and subsequently, remanded to judicial custody and thereafter, they were also placed under suspension. ....
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.... appellant for an alleged attempt to export Muriate of Potash (MoP), a restricted item, for which, they, including the appellant, were penanlised vide O-in-On No. 15880/2011, dated 5. 5. 2011 for their role in permitting entry and storing of the goods inside the CFS without any export documents like shipping Bill and invoice. 73. Mr. K. Mohanamurali, has also argued that the appellant challenging the above said order had preferred an appeal before CESTAT vide C/252 and 253 of 2011 and the Tribunal, vide Miscellaneous Order No. 405752013-405762013, dated 28. 2. 2013, had directed the appellant and the said employee of the appellant to deposit an amount of Rs. 5,00,000/- and Rs. 2,00,000/- respectively and to report compliance on 23. 4. 2013 . 74. He has also referred to yet another offence case, which was registered against one M/s. M. M. Industries, an exporter, for the alleged illegal export of red sanders logs about 14. 750 MTs. The investigation in this case revealed that the containers, which were stuffed under customs supervision and sealed with Customs Seal at the appellant's premises, had been given way for substitution of the declared cargo with red sanders, an it....
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....e by their employees and the appellant could not isolate themselves from the acts committed by its employees. 82. Apart from this, he has also maintained that the appellant had also violated the Regulation 6(2) of HCCAR, 2009 by employing the persons for security service from outside without obtaining prior permission from the Commissioner of Customs. 83. In support of his contentions, he has placed reliance upon the following decisions:- a. Commissioner of Customs (Gen), Mumbai vs. Raj Clearing Agency (2006 (199) ELT 602 (Bom. ). b. Pinkcity Logistics Ltd. vs. Commissioner of Customs (2015 (320) ELT 241 (Raj. ). c. S. R. Sale & Co. vs. Union of India (2013 (296) ELT 289 (Bom. ). d. Ujwal International Ltd. vs. Commissioner of Customs, Kochi (2015 (319) ELT 490 (Ker. ). 84. In Raj Clearing Agency's case, cited first supra, a Division Bench of the Bombay High Court has observed that, "In the facts and circumstances of the instant case, it was a case for invoking Regulation 20(2) of the said Regulations which is meant only in cases where immediate action is necessary. In such a case even without giving notice the licence could be suspended. We make i....
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....r observed that, where immediate action is warranted to prevent a customs house agent from carrying out activities which are prejudicial, a prohibitory order can be passed under Regulation 21 for a limited period. During that period an opportunity of hearing can be afforded in compliance with the principle of natural justice. Where immediate action is necessary, a pre-decisional hearing can be dispensed with if such a hearing will defeat the requirement of public interest in the orderly and proper functioning of the Customs Station. On the other hand, where immediate action is not required, a prohibitory order can await compliance with the requirements of natural justice. Ordinarily, a pre-decisional hearing must be the rule. Dispensation is to be an exception. 88. In Ujwal International Ltd. , cited fourth supra, the learned Single Judge of Kerala High Court has held that, "No specific opportunity of hearing is intended in prohibition proceedings as per Regulation 23 of Customs Brokers Licensing Regulations, 2013. However, the Regulations being silent, the necessity to give opportunity of hearing has to be interpreted widely and has to be read into it. Moreover, such o....
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....a customs area; or sub contract or outsource functions permitted or required to be carried out by him in terms of these regulations to any other person, without the written permission of the Commissioner of Customs." 95. In so far as the present case on hand is concerned, we are in consensus to endorse the finding of the CESTAT that the appellant being the custodian of the seized container, viz. , SEGU 1697558 containing red sanders had violated the Regulations enshrined in 6(1)(a), 6(1)(f), 6(1)(i), 6(1)(k) and 6(1)(q) of HCCAR, 2009. 96. Regulation 11 of HCCAR, 2009 contemplates, Suspension or revocation of approval for appointment of a Customs Cargo Service provider . 97. Sub-Regulation (1) and (2) of Regulation 11 reads as under:- a. Sub-Regulation (1) of Regulation 11 says that, if there is any failure to comply with any of the provisions of the Act and the rules, regulations, notifications and orders made thereunder on the part of the custodian, the Commissioner of Customs may suspend or revoke the approval granted to the Customs Cargo Service provider subject to the observance of procedure prescribed under Regulation 12 and also order for forfeiture of security, ....
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..... But in this case, neither pre-decisional hearing nor post decisional hearing was given to the appellant by the customs authorities and therefore, he has urged that the Commissioner had violated all the tenets of natural justice. 105. This portion of argument is discernible. In this connection, we find that it may be more appropriate to have reference to the decision in Automative Tyre Manufacturers Association vs. Designated Authority, cited supra. 106. In this case, a Division Bench of the Apex Court, while speaking through the Hon'ble Mr. Justice D. K. Jain, in paragraph No. 55, has observed as under:- "55. It is trite that rules of natural justice are not embodied rules. The phrase natural justice is also not capable of a precise definition. The underlying principle of natural justice, evoked under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly i. e. fair play in action. In A. K. Kraipak (supra), it was observed that the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice." 107. Again, we find it bett....
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....the seized container should not be confiscated and penalty should not be imposed on the appellant. 116. From the perusal of the materials available on record, we find that there was laxity in the supervision on the part of the appellant and no surprise checks were conducted during night hours to ensure that the staffs were on night duty would remain vigilant. 117. In the counter filed by the first respondent before the Tribunal, it is stated that apart from the violation of Regulation 6(k), the appellant had also violated Regulation 6(2) of HCCAR, 2009 by outsourcing the security functions without obtaining permission from the Commissioner of Customs as stipulated in Regulation 6(2) of HCCAR, 2009. 118. It is an admitted fact that there was illegal removal of seized container from the CFS of the appellant and thereafter, based on the complaint lodged by the General Manager of the appellant's CFS, a case was registered and while proceeding with the case, the investigating officer had seized the container. Subsequently, in pursuant to the order of the learned Judicial Magistate No. II, interim custody of the seized container was given to the appellant on condition that t....
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....basic rule of law (Ref: International Cargo Services, cited supra). 127. The appellant, as a custodian appointed by the Commissioner of Customs under Section 45 of the Customs Act, 1962, is bound to be diligent enough in discharging their duties and obligations as per the provisions of HCCAR, 2009. 128. The Tribunal in its order has observed that, in the present case, the Commissioner of Customs already issued SCN dated 5. 2. 2014 where the appellant is a co-noticee for contravention under the Customs Act, we also noticed the appellant had outsourced the security CFS to other persons without approval/permission from competent authorities. The above repeated instances of smuggling of goods in the appellant CFS confirms that there are serious lapses on the part of custodian and this cannot be overlooked or treated as isolated incident as claimed by the appellant. In the interest of Government revenue and safety and security of Customs goods, the Department has the right to take action under Regulation 11(2) of HCCAR, 2009. 129. The finding of the Tribunal does not require our interference and therefore, we answer the second question of law as against the appellant. 130. Whil....