Case Law Details

Case Name : M/s. A.B.Agencies Vs Customs, Excise and Service Tax Appellate Tribunal (Kerala High Court)
Appeal Number : Cus.Appeal.No. 2 of 2014
Date of Judgement/Order : 17/07/2015
Related Assessment Year :
Courts : All High Courts (4592) Kerala High Court (224)

Brief of the Case

In the case of M/s.A.B.Agencies Vs. Customs, Excise and Service Tax Appellate Tribunal, it was held by Kerala High Court that a CHA cannot be absolved of his lapse of supervision and misconduct of his employees attracting Clause 19 of the Regulations warranting action against him under Regulation 20. However, termination of the license of CHA is too harsh and disproportionate on the basis of principles laid down in the judgment in Ashiana Cargo Services v. Commissioner of Customs (I & G) 2014 (302) ELT 161 (Del).

Brief Facts

The appellant was the holder of a license issued under the Custom House Agents Licensing Regulations, 2004. It would appear that apart from its office in Cochin, the appellant had 12 other branches. Among the various persons employed by the appellant to transact its business in the Cochin Custom House, one of them was Sri.Vipin Kumar who was issued an identity card and ‘G’ card bearing Sl.No.48 valid upto 22.8.2014.

It appears that Bill of Entry No.7690810 dated 17.8.2012 on behalf of M/S Madeena Dates, Trivandrum was filed in the name of appellant for clearance of goods which required Clearance Certificate from Plant Quarantine Agencies and Port Health Officers. The required documents were produced and the goods were cleared. On investigation, it was revealed that Sri.Vipin Kumar, the ‘G’ card holder of the appellant had submitted the forged certificate of the Port Health Officer to clear the goods. It was also revealed that the signature of the proprietor of the appellant was forged in the Bill of Entry by Sri.Vipin Kumar. Enquiry also revealed that Sri.Vipin Kumar had submitted forged application for ‘H’ card and ‘G’ card in the Customs Office and on the basis of these applications, cards were obtained in the name of two persons by name Kannan and Anil Kumar Alex.

Alleging that these actions of Vipin Kumar, the employee of the appellant, amounted to irregularities in terms of the provisions contained in the Regulations 2004, the license issued to the appellant was suspended by order dated 18.1.2012. Subsequently, order was issued by the Commissioner ordering continuance of suspension of the licence.

Thereafter, show cause notice dated 19.11.2012 was issued to the appellant requiring it to show cause why the Custom House Agents License issued to it should not be revoked and security deposited not forfeited. On receipt of the notice, the appellant submitted reply. The allegations were held by an order.

This order was confirmed by the Tribunal by order, in which the Tribunal has placed reliance on the decision of the Bombay High Court in CC v. Worldwide Cargo Movers [2010 (253) ELT 190 (Bom,)]. It is in this background, this appeal is filed.

Contentions of the Assessee

The appellant contended that the irregularities which are relied on by the Department to cancel the licence of the appellant were the fraudulent activities of Sri.Vipin Kumar. It is argued that in the impugned order there is no finding that the appellant was either a party to that fraudulent activities of Sri.Vipin Kumar nor is there any finding that the appellant was even aware of his fraudulent activities. Therefore, it is contended that the acts committed by Sri.Vipin Kumar were outside the scope of his employment and that, therefore, the provisions of 19(8) of the Regulations 2004 are not attracted. It is, therefore, contended that the termination of license ordered by the Commissioner and which has been confirmed by the Tribunal order is not sustainable.

Contentions of the Department

The Revenue contended that it was in the course of the employment that Sri.Vipin Kumar has committed irregularities and according to him, in view of Clause 19 of the Regulations 2004, the agent is responsible for all acts and omissions of his employees and that therefore the appellant cannot be absolved of the consequences for the irregularities committed by its employees.

Held by Hon’ble High Court of Kerala

The Hon’ble High Court stated that in so far as this case is concerned, admittedly, Sri.Vipin Kumar was an employee of the appellant and he was also issued ‘G’ card, enabling him to transact the business of the appellant as a Customs House Agent. It was while working in that capacity that he has forged the signature of the proprietor of the appellant on the Bill of Entry, in the applications for issue of ‘H’ card and ‘G’ card and various other documents submitted to the Customs Department. He was enabled to do all the forgeries and derive the benefit thereof only because of his employment under the appellant and obviously on account of the failure of the appellant in effectively supervising the activities of his employees to ensure that they conduct themselves properly in the transaction of his business as a Customs House Agent. Therefore, the appellant cannot be absolved of his lapse of supervision attracting Clause 19 of the Regulations warranting action against him under Regulation 20.

The Hon’ble Court further stated that the remaining issue to be considered is whether in the facts of the case the extreme penalty of revocation of license and forfeiture of security was warranted. Department does not also have a case that on any previous occasion, the appellant was proceeded against on the allegation of breach of the provisions of the Regulations.

While examining this issue, the fact that the appellant did not have any role in what was done by Sri.Vipin Kumar and his team and that the lapse found is supervisory lapse assumes importance the absence of any previous misconduct on the part of the appellant has also to be considered. Yet another aspect that is required to be noticed is that from 18.10.2012 when order was issued, the license issued to the appellant remained suspended and by order dated 31.5.2013 the license has been terminated. In other words, for the misconduct of his workers, for which the appellant is also responsible, it has suffered the penalty of being kept out of business from 18.10.2012.

The Hon’ble Court stated that considering all these, termination of the license is too harsh and disproportionate. The Hon’ble Court further relied on the principles laid down in the judgment in Ashiana Cargo Services v. Commissioner of Customs (I & G) 2014 (302) ELT 161 (Del).

In view of the above, the order of the Tribunal to the extent the license of the appellant is revoked is set aside and these orders to the extent security is forfeited is confirmed. Appeal is disposed of accordingly.

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