TaxTMI 
TaxTMI 
2026 (8) TMI 737
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....nt operates a Container Freight Station (hereinafter referred to as "CFS") at Nhava Sheva, known as M/s. ICTPL/Globicon CFS, and functions as a CCSP. Its approval was initially suspended by vide dated 13.4.2026. A post-decisional hearing was granted on 16.4.2026 and thereafter again on 4.5.2026, at the conclusion of which the impugned order dated 5.5.2026 was passed, continuing the suspension without indicating any outer time-limit. It is this open-ended continuation of suspension that is under challenge before us. 3. This appeal was earlier decided by this Tribunal vide order dated 8.6.2026. That order was challenged before the Hon'ble High Court of Judicature at Bombay in Customs Appeal (L) No. 20420 of 2026 and the Hon'ble High Court vide order dated 18.6.2026 set aside the order of the Tribunal and remanded the matter back for fresh decision, with the following observations: "6. On the other hand Mr. Nankani, the learned Senior Counsel appearing on behalf of the CFS, submitted that Regulation 11(2) can be invoked only as a preventive measure and not as a punitive action. According to Mr. Nankani, in the facts of the present case, all the material that was re....
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....Service Provider (CCSP) approval, "until further orders", is legally sustainable? 6. The facts leading to the filing of the instant Appeal are stated in brief as follows. The Appellant was appointed "custodian" of ICTPL/Globicon CFS under Sections 45 (1) and 141 (2) of the Customs Act, 1962, and was approved as a CCSP by the Commissioner of Customs (General), JNCH, Nhava Sheva, under Regulation 10 of HCCAR, 2009, by notification dated 23.12.2016. The approval was renewed from time to time, the last renewal being on 8.8.2023. 7. By letter dated 12.4.2026 addressed to the jurisdictional Commissioner of Customs, DRI, MZU informed that two consignments of fireworks/firecrackers in Container Nos. INKU2208675 (declared as "CMS Granules") and ONEU6262323 (declared as "Gypsum Plaster") had been seized at the Appellant's CFS on 11.4.2026. The letter further stated that another container, No.TGHU6099161, covered by Bill of Lading No. JSSONSA2603010 dated 18.3.2026 and imported in the name of M/s. CK International (IEC: CSNPD7021D), had been declared to contain "Household Items", had reached the Appellant's premises on 9.4.2026, and that its contents were being unauthorisedly re....
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....te for the procedure mandatorily prescribed for suspension under Regulation 11(1). Regulation 11(2), it was submitted, does not contemplate the indefinite continuation of suspension without even a show cause notice being issued to commence inquiry under Regulation 12. 11. It was further submitted that there was no independent application of mind by the Commissioner, either while passing the initial suspension order dated 13.4.2026 or the impugned order dated 5.5.2026, both of which were founded entirely on DRI's investigation. The initial order rested solely on DRI's letter dated 12.4.2026, without any indication of independent evaluation by the Commissioner of the material said to justify "immediate action"; the impugned order, likewise, was substantially founded on phrases such as "as informed by DRI", "as per the findings of DRI", "the facts brought on record by DRI", and "the investigation conducted by DRI clearly reveals". 12. Learned counsel submitted that the Appellant extended full and unequivocal cooperation to the DRI investigation: its personnel were produced before the investigating agency as and when required; assistance was rendered in identifying person....
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....ecurity, and that the episode raised the further question of the extent to which such practices may have been occurring, undetected, in the past. He submitted that Regulation 11(2) is fundamentally preventive and regulatory, invoked where the conduct of a CCSP discloses lapses so serious and systemic as to pose an ongoing risk to revenue and to the security of the customs area. 15. Learned Special Counsel submitted that the initial and impugned orders demonstrate that the Commissioner did not merely adopt DRI's opinion but independently evaluated the factual matrix, arriving at her subjective satisfaction after considering DRI's findings and the Appellant's submissions within the statutory framework of HCCAR, 2009. He submitted that the SOPs relied upon by the Appellant do not instantaneously cure a compromised operational environment, and that the Commissioner was accordingly right to hold that they would be verified before any subsequent action was contemplated. He further submitted that the investigation into the offences and lapses remains actively pending, which itself furnishes sufficient reason not to lift the suspension. Learned Special Counsel placed strong ....
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....event illegal activities; (vi) Regulation 6(1)(q) failure to abide by the provisions of the Customs Act and the rules, regulations, notifications and orders issued thereunder. 19. The impugned order of suspension was passed under Regulation 11(2) of HCCAR, 2009. The relevant Regulations are extracted below for ready reference: "Regulation 5. Conditions to be fulfilled by Customs Cargo Service provider The Customs Cargo Service provider for custody of imported goods or export goods and for handling of such goods in a customs area shall fulfill the following conditions, namely:- (1) Provide the following to the satisfaction of the 2[Principal Commissioner of Customs or Commissioner of Customs, as the case may be], namely : (i) Infrastructure, equipment and adequate manpower for loading, unloading, stacking, handling, stuffing and de-stuffing of containers, storage, dispatch and delivery of containers and cargo etc., including :- xxx xxx xxx (n) security and access control to prohibit unauthorized access into the premises, and xxx xxx xxx Regulation 6. Responsibilities of Customs Cargo Service provider: (....
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.... the grounds on which it is proposed to suspend or revoke the approval, and requiring the said Customs Cargo Service provider to submit, within such time as may be specified in the notice, not being less than thirty days, to the Assistant Commissioner or Deputy Commissioner of Customs nominated by him, a written statement of defence, and also to specify in the said statement whether the Customs Cargo Service provider desires to be heard in person by the said Assistant Commissioner or Deputy Commissioner of Customs. (2) On receipt of the written statement from the Customs Cargo Service provider, or where no such statement has been received within the time-limit specified in the notice referred to in sub-regulation (1), the Assistant Commissioner or Deputy Commissioner of Customs may inquire into such of the grounds as are not admitted by the Customs Cargo Service provider. (3) The Assistant Commissioner or Deputy Commissioner of Customs shall, in the course of the inquiry, consider such documentary evidence and take such oral evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings, and he may also put any....
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....iate action is necessary, a consideration that must be explicitly reflected in the order of suspension itself. An order under Regulation 11(2), is a preventive measure taken pending a final determination that may or may not culminate in punishment. 21. Regulation 11(2) can be invoked only where the Commissioner concludes, on an application of mind, that immediate action is necessary. Material that would justify initiating and sustaining action under Regulation 11(1) cannot, without more, constitute the sole basis for action under Regulation 11(2). There must exist independent reasons before the Commissioner to the effect that, unless immediate suspension is ordered, the damage already caused would continue or would be likely to continue. In other words, a suspension under Regulation 11(2) must rest on the principle that prevention is better than cure. It is not enough for the authority to state an intention to prevent the continuance of illegality, there must, in fact, exist circumstances demonstrating a real threat of such continuance, stated in clear and categorical terms, together with the reasons underlying the authority's apprehension. 22. It is also relevant that Re....
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.... been informed that around 800 regular and contractual employees of the Appellant are being adversely affected, their livelihoods placed at stake on account of a suspension purportedly imposed as an "immediate" measure. 25. To permit the suspension to continue, on the sole ground that DRI's investigation remains incomplete, would amount to rewriting Regulation 11(2) by substituting the words "an enquiry" with "DRI investigation", which is impermissible. This brings us to what we consider the crux of the controversy: the point at which a suspension that begins as a preventive measure under Regulation 11(2) transforms, by reason of its indefinite continuance, into something indistinguishable from a punitive order under Regulation 11(1), without the licensee ever having had the benefit of the safeguards Regulation 12 mandates before such a consequence may lawfully follow. The distinction between the two sub-regulations is not merely procedural but one of substance and duration. Regulation 11(2) draws its legitimacy entirely from the urgency of the situation it addresses; it dispenses with prior notice and hearing precisely because the mischief it seeks to prevent is ongoing and....
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.... of the Code of Criminal Procedure, the Hon'ble Supreme Court has held that if Parliament considered it necessary that a person be released from incarceration after the expiry of 90 days even when accused of the most heinous crimes, a fortiori a suspension ought not to continue beyond a similar period where a memorandum of charges or charge-sheet has not been served on the person suspended. The relevant paragraph of the said decision is extracted as under: "20. It will be useful to recall that prior to 1973 an accused could be detained for continuous and consecutive periods of 15 days, albeit, after judicial scrutiny and supervision. The Code of Criminal Procedure, 1973 contains a new proviso which has the effect of circumscribing the power of the Magistrate to authorise detention of an accused person beyond a period of 90 days where the investigation relates to an offence punishable with death, imprisonment for life or imprisonment for a term of not less than 10 years, and beyond a period of 60 days where the investigation relates to any other offence. Drawing support from the observations contained of the Division Bench in Raghubir Singh v. State of Bihar (1986) 4 SCC 48....
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.... being prescribed for their handling. If immediate action was truly necessary, it is difficult to appreciate why no additional safeguards were directed for the clearance of these very containers so as to mitigate the threat to revenue, cargo security or national security that the suspension order purported to address. This circumstance itself indicates the absence of the urgency that Regulation 11(2) presupposes, and is consistent with the absence of any intentional violation on the part of the Appellant. 31. We are not oblivious that the Report prepared by the Customs team headed by the Assistant Commissioner of Customs following its inspection of the appellant's ICTPL/Globicon CFS on 18.12.2025 does not record any deficiency in the existing security or access control mechanism, nor does it indicate that the prevailing arrangements were inadequate to prevent unauthorised access into the CFS premises. Likewise, the earlier inspection conducted by the Customs authorities on 08.01.2025 is also conspicuously silent on any shortcomings relating to the security infrastructure or access control systems maintained by the appellant. These contemporaneous official records assume signific....
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....., its telephonic intimation at 19:45 hrs., and the Appellant's own call to DRI at 20:14 hrs. is not in dispute, and it was this timely disclosure by the Appellant that led to the halting of the de-stuffing activity. 35. We have also been informed, by learned counsel that none of the Appellant's employees investigated to date have made any allegation implicating any member of the Appellant's management in the alleged illegal acts. About 18 persons in the Appellant's employment including the AGM (Operations), Deputy Manager (Operations), senior executives, and operational staff such as seal-cutters, surveyors, and Reach Stacker/Kalmar operators appeared before DRI pursuant to summons and gave voluntary statements, none of which, as of now, implicates management. The services of several surveyors have been suspended, and one has been terminated. No statement of any employee investigated by DRI has been placed before us to support the Revenue's stand that management was actively involved in the alleged illegal activities. 36. One factor that appears to have weighed with the Commissioner, while ordering continuation of suspension, was that Assistant Manager (E....
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.... containers, storage, dispatch and delivery of containers and cargo etc., including:- xxx xxx xxx (b) free of cost or rent fully furnished office accommodation for Customs, Customs Electronic Data Interchange (EDI) Service Centre, with required amenities and facilities and residential accommodation and transportation facilities for customs staff; xxx xxx xxx (2) Undertake to bear the cost of the Customs officers posted, at such customs area, on cost recovery basis, by the Commissioner and shall make payments at such rates and in the manner prescribed, unless specifically exempted by an order of the Government of India in the Ministry of Finance; xxx xxx xxx" [emphasis supplied] Therefore, while deciding the issue involved in the present case, it cannot be overlooked that Customs Officers remained continuously posted at the CFS premises throughout the relevant period by the Commissioner. This is a material circumstance that cannot be ignored while assessing the alleged lapses on the part of the appellant. 40. As regards the allegation of unauthorised outsourcing of services, it was brought to our notice, as mentioned in preceding paragraphs also, ....
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....sentatives and labour; (iii) termination of Assistant Manager (Exports) Milind Joshi (absconding at the time of the impugned order but subsequently arrested on 16.5.2026 and released on bail on 12.6.2026), and of surveyor Harshal Suryavanshi (arrested on 30.6.2026); (iv) investigation of 18/19 employees by DRI pursuant to summons; (v) production of CCTV footage, gate records, and vehicle and labour entry data; (vi) compliance, on 13.7.2026, with DRI's further requisitions by e-mail dated 5.7.2026 and summons dated 9.7.2026; and (vii) clearance, during the period of suspension, of more than 3000 containers from the CFS without any reported incident. 43. Though the impugned order records the Appellant's cooperation with the investigation and its disciplinary action against certain employees were also noted, but holds that the Appellant cannot claim immunity from action under the Regulations merely on the ground of such cooperation. It also records that the corrective and preventive measures claimed by the Appellant viz. strengthened gate controls, digitisation, enhanced CCTV surveillance, and new SOPs, were taken on record for v....
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....ion of clandestine removal of goods in the past, nothing prevents the Revenue from taking action, as and when evidence in support of such allegation is obtained, under Regulation 11(1). Learned Special Counsel for the Respondent contended that the impugned order refers to all the violations alleged against the Appellant, and must therefore be construed as an order of immediate action. We are unable to accept this submission. As already noted, suspension under Regulation 11(2) is preventive and not punitive in character, and the mere existence of alleged violations cannot, without more, constitute the sole basis for invoking that provision. 48. Learned Special Counsel vehemently contended that the Appellant has violated various procedures contemplated under the Regulations, all of which are set out in the impugned order, and that the suspension is accordingly justified. It bears noting, however, that after the alleged incident and the suspension order, the Appellant was permitted to clear more than 3,000 containers which must have taken quite a few days that itself indicates the absence of any imminent threat to revenue or national security, which are sine qua non for continuatio....
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....t that the first instance, as pointed out by Revenue, was not an isolated one but reflected a wider pattern in the area, necessitating the Public Notice dated 28.7.2023 issued by the Commissioner of Customs, NS-III, JNCH, addressing pilferage, removal and replacement of goods from containers, especially marked as suspicious by CSD officers, enroute to the CFS from the respective scanning points. As to the second, it was pointed out that the area in question was subsequently regularised as part of the Appellant's CFS by a notification dated 11.7.2025, issued by the Commissioner under Section 8(a) of the Act. In these circumstances, it is difficult to regard the allegations as being of such a gravity as to warrant recourse to the extraordinary power of immediate suspension under Regulation 11(2), particularly when such action is taken after a considerable lapse of time. The prolonged interval between the alleged violations and the order of suspension itself belies the existence of any compelling or imminent necessity for invoking the preventive power under Regulation 11(2). As to the allegation of false recording of scanning, learned counsel submitted that, under Public Notice da....