Case Law Details
Cappithan Agencies Vs Commissioner of Customs (CESTAT Bangalore)
In Cappithan Agencies Vs Commissioner of Customs, the appellant contested a penalty of ₹10,000 imposed by the Adjudicating Authority under the Customs Broker Licensing Regulations (CBLR), 2013. The penalty stemmed from the involvement of an importer, M/s Antoni & Decourel Organic Chemical Company, which imported raw materials for drug manufacturing without the necessary clearance from the Assistant Drug Controller (ADC). While the Adjudicating Authority acknowledged that the appellant was not directly involved in the alleged infractions, it concluded that the appellant had failed to adequately supervise its employees, resulting in a breach of Regulation 17(9) of the CBLR.
During the hearing, the appellant’s counsel argued that the right to cross-examine witnesses was denied, violating Regulation 20(4) of the CBLR. This regulation grants customs brokers the opportunity to challenge statements made by individuals whose testimonies form the basis of the inquiry. The appellant contended that without the chance to cross-examine, the findings against them were unsubstantiated. The counsel also highlighted that the inquiry officer had not found direct involvement of the appellant in the violations, emphasizing that penalties should not be levied based solely on employee misconduct unless the customs broker itself was shown to have engaged in wrongdoing.
After reviewing the arguments, the CESTAT determined that the proceedings were flawed, particularly regarding the denial of cross-examination. The tribunal noted that the findings were based on statements from the importer’s employees, which warranted scrutiny through cross-examination to ensure fairness. Consequently, the tribunal allowed the appeal, emphasizing that due process must be upheld in regulatory actions. The ruling reinstated the necessity of proper procedural compliance, allowing the appellant to contest the basis of the penalty effectively.
FULL TEXT OF THE CESTAT BANGALORE ORDER
In the present appeal, Appellant is challenging the penalty of Rs.10,000/- imposed by the Adjudicating authority on the Appellant under Regulation 22 of Customs Broker Licensing Regulation (CBLR), 2013. As per the impugned order, it is alleged that an importer M/s Antoni & Decourel Organic Chemical Company had imported raw material used for manufacture of drugs and pharmaceutical without clearance from the Assistant Drug Controller (ADC) and without proper import license. The consignments imported by M/s Antoni & Decourel Organic Chemical were cleared through different clearing agents including the Appellant. They have cleared 33 consignments through Air Cargo Complex, Chennai during December, 2012 to April 2013. 30(thirty) Bills of entry were filed by Customs Broker M/s Ever Trust Shipping and Logistics Pvt., Ltd., and 3(three) Bills of entry were filed by the Appellant herein. Though the Adjudicating authority held that the Appellant is not directly involved in the act of their authorized signatory at Chennai, it is held that the Appellant had failed to supervise his employees and thereby violated Regulation 17(9) of CBLR, 2013. Accordingly, penalty of Rs.10,000/- was imposed. Aggrieved by said order, present appeal is filed.
2. When the matter came up for hearing, the Learned Counsel for the Appellant reiterated the contentions in the reply to Show cause notice and further submitted that as per Regulation 20(4) of CBLR, the Appellant being a Customs Broker is entitled to cross examine the witnesses whose statement were relied upon by the Inquiry officer/ Adjudication authority. Accordingly during Inquiry, Appellant had requested for cross examination of the persons examined in support of the grounds forming the basis of proceedings as per Regulation 20(4) of the CBLR, 2013. However the Inquiry officer has not extended the same on the ground that considering the documentary evidence and other oral evidence as relevant in the above proceedings. Thereafter during Adjudication proceedings also, the Appellant requested for cross examination. However it is denied on the ground that “I find that the Assistant Commissioner who conducted the inquiry had given her reasons for declining cross examination which reasons I find to be valid one. Hence the contention raised by the CB in this regard would not sustain and they are rejected.”
3. In support the same, the Learned Counsel relied on large number of decisions including the decision of the Hon’ble High Court of Telangana in the matter of M/s Shasta Freight Services Pvt Ltd vs CC, Hyderabad (2019 (368) E.L.T 41 (Telangana), maintained by Hon’ble Supreme Court reported in 2022 (381) E.L.T 436 (SC)).
4. Regarding alleged violation of Regulation 17(9) of CBLR, 2013, the Learned Counsel submits that there is neither an allegation regarding violation of Regulation 17(9) of CBLR, nor any action for the said violation was proposed in the Show Cause notice or Inquiry report. The finding of the Commissioner with respect to the violation of Regulation 17(9) is totally unsustainable. The Appellant cannot be held responsible for the omission on the part of the employees. The Learned Counsel relied on the following judgments/decisions, where it is held that for the employee’s mis conduct, the CB shall not be penalized in the absence of any positive finding that the CB had failed to comply with the Regulations or engaged in the mis-conduct, which rendered them unfit to transact the business:-
i. M/s ARK Logistics Pvt Ltd vs CCE, Hyderabad (2010 (261) E.L.T 648)
ii. M/s Sreeganesh Shipping Agency vs CC, Bangalore (2011 (271) E.L.T 236).
iii. M/s Trans Freight Marine Services Pvt Ltd (2016 (343) E.L.T 295)
5. Learned Authorised Representative(AR) reiterated the findings in the impugned order and submits that the Customs Broker is responsible for the omissions of their employees. As regarding not extending opportunity for cross examination, Learned AR reiterated the finding of the Adjudication authority.
6. Heard both sides. The limited issue in the appeal is whether the Appellant can be penalized for the omissions of its employees as held in the impugned order. It is an admitted fact that as per the finding of the Inquiry officer and the Adjudicating authority, the Appellant is not directly involved in the act or omission on the part of their authorized signatory at Chennai. Further there is no allegation that they have got any undue financial benefits by abetting the illegality as alleged from the importer.
7. As regarding the opportunity for extending cross examination as per Regulation 20(4) of the CBLR, 2013, as per the evidence on record, to proceed against the Appellant, statements of different persons were relied by the adjudication authority. As per the judgment of the Hon’ble High Court of Telangana in the matter of M/s Shasta Freight Services Pvt Ltd (supra), Regulation 20(4) of the CBLR is carefully worded. The entitlement of the Customs broker to cross examine is confined only to “person examined in support of the grounds forming a basis of proceedings”. Thus if statements of different persons were recorded during the investigation, Adjudication authority ought to have given an opportunity for cross examination before relying on such statements. Thus, condition precedent under Regulation 20(4) of the CBLR for considering the request of the Customs Broker for cross examination should have been satisfied.
8. In the present case, the entire proceedings are initiated based on the statement of employees and agents of the importer. Facts being so, to find out the geniuses of the statement, the Inquiry officer/Adjudication authority ought to have extended the opportunity for cross examination as sought by the Appellant. Thus the proceedings in impugned order are in violation of Regulation 20(4) of the CBLR, 2013 and are not sustainable.
9. Hence the appeal is allowed with consequential relief, if any in accordance with law.
(Order pronounced in open court on 05.09.2024)
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