Revocation of customs broker license without providing relied upon document not justified: CESTAT Delhi

Lohia Travels & Cargo Vs Commissioner of Customs (CESTAT Delhi)

CESTAT Delhi held that revocation of customs broker license without providing relied upon documents and statements by the Inquiry Officer is against the principles of natural justice and hence the order deserves to be set aside.

Facts- The order dated 08.11.2021 passed by the Commissioner of Customs (Airport & General), New Delhi revoking the customs broker license of the appellant and ordering for forfeiture of the whole amount of security deposit and also imposing a penalty of Rs. 50,000/- on the appellant has led to the filing of this appeal.

It transpires from the records that initially the customs broker license of the appellant was suspended by exercising powers under the provisions of the Customs Broker License Regulations, 2018 and subsequently, by an order dated 20.03.2021, the suspension of the license was confirmed.

The records further indicate that thereafter a show cause notice dated 17.05.2021 purporting to be under regulation 17 (1) of the 2018 Regulations was issued to the appellant.

Conclusion- It was incumbent upon the Inquiry Officer to have supplied all the documents to the customs broker. By asking the appellant to approach another section of the department clearly shows that the Inquiry Officer shirked from the duties entrusted upon him under the 2018 Regulations. A customs broker is not supposed to run from one department to the another to obtain the documents on the basis of which the show cause notice was issued and which documents also form the basis for revoking the customs broker license of the appellant. In any case, the documents were not supplied to the appellant. The 2018 Regulations, as noted above, clearly comprehend a fairy inquiry, but the present inquiry shows that principles of natural justice have been violated.

Held that necessary documents and the statement were required to be supplied to the customs broker by the inquiry officer so as to enable him to submit a proper response to the show cause notice. This would also enable to the appellant to cross-examine the persons whose statements were recorded. Thus, the impugned order dated 08.11.2021 revoking the customs broker license of the appellant deserves to be set aside and is set aside.

FULL TEXT OF THE CESTAT DELHI ORDER

The order dated 08.11.2021 passed by the Commissioner of Customs (Airport & General), New Delhi revoking the customs broker license of the appellant and ordering for forfeiture of the whole amount of security deposit and also imposing a penalty of Rs. 50,000/- on the appellant has led to the filing of this appeal.

2. It transpires from the records that initially the customs broker license of the appellant was suspended by exercising powers under the provisions of the Customs Broker License Regulations, 2018¹ and subsequently, by an order dated 20.03.2021, the suspension of the license was confirmed.

3. The records further indicate that thereafter a show cause notice dated 17.05.2021 purporting to be under regulation 17 (1) of the 2018 Regulations was issued to the appellant.

4. It has become necessary to examine this show cause notice in detail for it has mixed up the notices that are issued under regulation 17 (1) of the 2018 Regulations and that issued under regulation 17 (6) of the 2018 Regulations. The relevant portions of the show cause notice dated 17.05.2021 are reproduced below :-

“2. Whereas a letter F. No. VIIV6/ICD/PPG/ SIIB/ 04/Shree Sai/06/2021 dated 19.02.2021 issued by Assistant Commissioner, ICD PPG Commissionerate received in the office on 22.02.2021. It is informed vide above said letter that ICD PPG Commissionerate is investigating a case against illegal import of cigarettes and old & used Photocopier machines by CHA. M/s Lohia travel & Cargo in the guise of Aluminium Scrap.

…

7. Whereas the adjudicating authority while adjudicating the order-in-original No. 16/MK/ Suspension/Policy/2021 dated 23.02.2021, Commissioner of Customs, NCH, New Delhi has observed as under which is reproduced below.

xxxxx

8. Whereas the above CB has found to be contravening the provision of CBLR 2018 for the reasons narrated in preceding paras, therefore, in order to establish the contravention of various Regulations of CBLR 2018, an enquiry/ examination is essential. Therefore, in terms of the Regulation 17 of CBLR 2018 (read with Regulation 20 of erstwhile CBLR 2013), Shri Mahipal Singh, Dy. Commissioner, Airport & General Commissionerate, New Delhi is being appointed as an Inquiry Officer in the above discussed case. M/s Lohia travel & Cargo, the authorized customs broker is required to join the proceedings before the Inquiry officer and to submit his representation, if any, to the inquiry officer within Thirty days of the issuance of the show cause notice. The inquiring authority shall submit a report within three months of the issuance of this show cause notice to the Commissioner of Customs (Airport & General), New Customs House, New Delhi.

9. Therefore, M/s Lohia Travel & Cargo, (PAN No. AAAFL1193K), B-3, M.R. Complex, (Krishna Guest House) Near Radisson Hotel, Rangpuri, New Delhi – 110 037, Authorized customs broker license No., R-27/92 valid upto 31.08.2024 (PAN NO. AAAFL1193K), in terms of Regulation 17 of CBLR 2018 are hereby called upon to show cause to the Commissioner of Customs (Airport & General), New Customs House, New Delhi within thirty days of the receipt of the Inquiry Report, that in terms of the above paras and the Inquiry Report Why ;

(a) They should not be held responsible for contravention of provisions of Regulation 10 (a), 10(d), 10 (e) and 10 (n) of customs broker Licensing Regulation, 2018;

(b) Their customs broker license No. R-27/92 valid upto 31.08.2024 (PAN NO. AAAFL1193K) should not be revoked and part or whole of the security submitted at the time of issue of their Registration, should not be forfeited in terms of Regulation 17 of CBLR, 2018;

(c) Penalty should not be imposed on them under the provisions of Regulation 18 of CBLR, 2018.

10. The CB should tender all the evidences on which they intend to rely upon along with reply to this show cause notice and the Inquiry Report. They should also mention in their reply as to whether they would like to be heard in person before the case is finally adjudicated.

11. The CB is further informed that in case of their failure to submit their reply within 30 days of the communication of Inquiry Report and/or not appearing for a personal hearing on the date and time fixed for the same, or not complying with the directions as above, the case shall be decided by the Adjudicating authority ex-parte, on the basis of evidences already on record, without any further reference to them.

12. This notice is being issued without prejudice to any other action that may be taken against the Authorized CB or any other person (s)/firm (s) etc. under the provisions of the Customs Act, 1962 and Rules/Regulations framed there under or any other law for the time being in force for the present or any other past violations committed by them.

13. The CB should tender all the evidences on which they intend to rely upon along with a reply to this show cause notice. They should also mention in their reply as to whether they should like to be heard in person before the case is finally adjudicated”.

5. As would be seen from the aforesaid portions of the show cause notice that have been reproduced, a reference has been made to a letter dated 19.02.2021 issued by the Assistant Commissioner, ICD, PPG Commissionerate which informs that investigation in a case of illegal import of cigarettes and old and used photocopier machines by the appellant in the guise of aluminium scrap was being undertaken. The show cause notice then refers to the order dated 20.03.2021 confirming the suspension of the customs broker license of the appellant. The next paragraph 8 then mentions that the appellant, who is the customs broker license holder has been found to be contravening the provisions of the 2018 Regulations for the reason narrated in the previous paragraphs. The said paragraph further proceeds to mention that in order to establish the contravention of various regulations of the 2018 Regulations an inquiry/examination was essential. The said paragraph also mentions that an Inquiry Officer has been appointed and the appellant has been asked to submit his representation, if any, to the Officer within 30 days of the issuance of the show cause notice, where after the Inquiry Officer would submit a report within three months. The next paragraph 9 of the show cause notice calls upon the appellant, in terms of regulation 17 of the 2018 Regulations, to show cause to the Commissioner of Customs (Airport & General), New Delhi within 30 days of the receipt of the Inquiry report why the appellant should not be held responsible for contravention of the provisions of regulations 10 (a), 10 (d), 10 (e) and 10 (n) of the 2018 Regulations and why the customs broker license of the appellant should not be revoked and penalty be imposed. Paragraph 10 of the show cause notice then calls upon the customs broker to tender all evidences on which it intends to rely upon along with a reply to the show cause notice and the Inquiry report.

6. It would be appropriate to reproduce the relevant portions of regulation 17 of the 2018 Regulations and they are ;

REGULATION 17. Procedure for revoking license or imposing penalty – (1) the Principal Commissioner or Commissioner of Customs shall issue a notice in writing to the Customs Broker within a period of ninety days from the date of receipt of an offence report, stating the grounds on which it is proposed to revoke the license or impose penalty requiring the said Customs Broker to submit within thirty days to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by him, a written statement of defense and also to specify in the said statement whether the Customs Broker desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs.

(2) The Commissioner of Customs may, on receipt of the written statement from the Customs Broker, or where no such statement has been received within the time-limit specified in the notice referred to in sub-regulation (1), direct the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, to inquire into the grounds which are not admitted by the Customs Broker.

(3) The Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall, in the course of 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 question to any person tendering evidence for or against the Customs Broker, for the purpose of ascertaining the correct position.

(4) The Customs Broker shall be entitled to cross-examine the persons examined in support of the grounds forming the basis of the proceedings, and where the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines permission to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing.

(5) At the conclusion of the inquiry, the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall prepare a report of the inquiry and after recording his findings thereon submit the report within a period of ninety days form the date of issue of a notice under sub-regulation (1).

(6) The Principal Commissioner or Commissioner of Customs shall furnish to the Customs Broker a copy of the report of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, and shall require the Customs Broker to submit, within the specified period not being less than thirty days, any representation that he may wish to make against the said report.

(7) The Principal Commissioner or Commissioner of Customs shall, after considering the report of the inquiry and the representation thereon, if any, made by the Customs Broker, pass such orders as he deems fit either revoking the suspension of the license or revoking the license of the Customs Broker within ninety days from the date of submission of the report by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, under sub-regulation (5) :

Provided that no order for revoking the license shall be passed unless an opportunity is given to the Customs Broker to be heard in person by the Principal Commissioner of Customs or Commissioner of Customs, as the case may be”.

7. In the first instance, the show cause notice records as a fact that the appellant has been found to be contravening the provisions of the 2018 Regulations for the reasons stated in the order confirming the suspension order. The show cause notice cannot proceed on a finding that the customs broker has been found to be contravening the provisions of 2018 Regulations. The show cause notice, in terms of regulation 17 (1) of the 2018 Regulations can only call upon the customs broker, after stating the grounds on which it is proposed to revoke the license or impose penalty, to submit a written statement of defence within 30 days to the Inquiry Officer and also to specify in the said statement whether the customs broker desires to be heard in person. It is only when the customs broker does not admit the charges that an enquiry has to be conducted by the Inquiry Officer under regulation 17 (2). Regulation 17 (3) provides that the Inquiry Officer, in the course of enquiry, shall consider such documentary evidence and take such oral evidence as may be relevant or material to the enquiry in regard to the grounds forming the basis of the proceedings. Regulation 17 (4) provides that the customs broker shall be entitled to cross-examine the persons examined in support of the ground forming the basis of the charges.

8. It is also seen that the show cause notice does not specifically state the grounds on which the license of the customs broker is proposed to be revoked. It only refers to the order that was passed confirming the suspension order. It is also seen that the customs broker has been asked to file a reply to the Inquiry Report, whereas the Inquiry Report has to be submitted only after following the procedure prescribed in regulations 17 (1) to regulation 17 (4) of the 2018 Regulations.

9. On receipt of the aforesaid show cause notice, the appellant sent a mail dated 21.07.2021 which was the date fixed for personal hearing by the Inquiry Officer seeking documents referred to in the show cause notice but had not been provided to the appellant. The appellant requested that these documents may be supplied so that a reply could be filed to the show cause notice.

10. On record is also a letter dated 21.07.2021 sent by the appellant which was received on 22.07.2021. The said letter is reproduced below :-

“This letter is in reference to the above mentioned Inquiry arising out of the said SCN and personal hearing (“PH”) held today i.e. on 21.07.2021.

2. At the outset, we thank you for affording us an opportunity for PH granted to the Noticee vide letter supra on 21.07.2021 before your good self in the above referred subject matter. We have already submitted our Vakalatnama during PH.

3. During PH, we submitted that the impugned SCN has references to several documents as detailed below but, were not provided to the Noticee :-

i. Letter bearing F. No. VII/6/ICD/PPG/SIIB/04/Shree Sai/06/2021 dated 19.02.2021 issued by Assistant Commissioner, ICD PPG Commissionerate (Para 2 of the Impugned SCN),

ii. Statement of Shri Dinesh Kumar Sharma, G card holder (Para 3 of the Impugned SCN),

iii. Statement of Shri Karan Singh Lohia, dated 06.02.2021, F card holder (Para 4 of the Impugned SCN),

(iv) The offence report as mentioned in Para 5 of the Impugned SCN.

4. Since these documents are being relied upon by the department, the same are quintessential for us to provide effective defence. It is pertinent to mention here that the SCN provided only limited aspects of the documents in the narrative form. Hence, we require the documents in total to understand the allegations and for filing appropriate defence.

5. Hence, it is requested to provide the above said documents in the interest of justice and equity.

6. We also submit that, we wish to be heard again after submission of our written submissions after receipt of the said documents

Assuring you best of our cooperative always”.

11. On record is also a reply dated 26.07.2021 sent by the Office of the Inquiry Officer to the appellant. It is reproduced below :-

“Please refer to your above email and letter regarding supply of documents with reference to SCN issued to M/s Lohia Travel and Cargo, New Delhi. In this regard, it is informed that the office of Inquiry Officer cannot provide the documents sought by you, since these pertain to the case file of Policy Section, NCH, New Delhi. Therefore, you are advised to kindly contact Policy Section, NCH for the requisite documents sought by you”.

12. A reminder dated 06.08.2021 was also sent by the appellant to the Inquiry Officer for supply of the relevant documents and the same is reproduced below :-

“This letter is in reference to the above mentioned Inquiry arising out of the said SCN and personal hearing (“PH”) held on 21.07.2021.

2. At the outset, we thank you for affording us an opportunity for PH granted to the Noticee vide letter supra on 21.07.2021 before your good self in the above referred subject matter. We have already submitted our Vakalatnama during PH.

3. During PH, we submitted that the impugned SCN has references to several documents as detailed below but, were not provided to the Noticee :-

i. Letter bearing F. No. VII/6/ICD/PPG/SIIB/04/Shree Sai/06/2021 dated 19.02.2021 issued by Assistant Commissioner, ICD PPG Commissionerate (para 2 of the Impugned SCN),

ii. Statement of Shri Dinesh Kumar Sharma, G card holder (Para 3 of the Impugned SCN),

iii. Statement of Shri Karan Singh Lohia, dated 06.02.2021, F card holder. (Para 4 of the Impugned SCN),

iv. The offence report as mentioned in Para 5 of the Impugned SCN.

4. Since these documents are being relied upon by the department, the same are quintessential for us to provide effective defense. It is pertinent to mentioned here that the SCN provided only limited aspects of the documents in the narrative form. Hence, we require the documents in total to understand the allegations and for filing appropriate defense.

5. We vide letter dated 21.07.2021 as referred above, requested your good office to provide us the documents mentioned supra at the earliest as they are essential for our submissions.

6. Hence, it is requested to provide the above said documents in the interest of justice and equity.

7. We also submit that, we wish to be heard again after submission of our written submissions after receipt of the said documents.

Assuring you best of our cooperation always”.

13. As would be seen from the reply sent by the Inquiry Officer, the appellant was advised to contact the Policy Section of the department for obtaining the documents sought for by the appellant.

14. On record is also a letter dated 09/11.08.2021 sent by the Assistant Commissioner, Customs (Policy) to the appellant stating therein that all the facts of the offense report are incorporated in the show cause notice and as regards the statement of the persons sought by the appellant, the same may be asked from the office where the statements were recorded. The relevant portion of the reply sent to the appellant is reproduced below :-

“Please refer to your endorsement letter dated 21.07.,2021 on the above-cited subject.

In this regard, this is to say that all the facts of the offence report have been incorporated in the subject show cause notice. As regards statement of Shri Dinesh Kumar Sharma, G Card holder, and statement of Shri Karan Singh Lohia, dated 06.02.2021, F Card holder, the same may please be asked directly from the office where the statement was recorded.

This is for your information please”.

15. On record is also a letter dated 16.08.2021 sent by the appellant to the Inquiry Officer pointing out that the Inquiry Officer has asked him to contact the Policy Section, though it is the Inquiry officer who has to supply all the documents.

16. It further transpires that since the time for submission of written submissions was expiring, the appellant submitted written submissions on 10.08.2021 specifically pointing out that the appellant is not in a position to submit a reply in defence but as it was left with no option, it was submitting the interim submission and the final submissions would be submitted after receipt of the documents.

17. A learned counsel for the appellant also appeared before the Inquiry Officer on 10.08.2021.

18. The Inquiry Officer thereafter submitted a report dated 13.08.2021 holding that since the appellant had failed to comply with the provisions of regulations 10(a), 10 (d), 10 (e), 10 (n) of the 2018 Regulations, it would be liable for action under the 2018 Regulations, including revocation of the license, forfeiture of all or part of security and imposition of penalty.

19. A copy of the Inquiry Report was also sent to the appellant by a letter dated 25.08.2021 and the appellant was asked to submit his representation to the Inquiry Report within 30 days.

20. The order dated 08.11.2021 that has been assailed in this appeal revokes the customs broker license of the appellant and forfeits the security deposit furnished by the appellant and also imposes a penalty of Rs. 50,000/-.

21. Shri T. Chakrapani, learned consultant for the appellant submitted that the inquiry proceedings violated the well established principles of natural justice. Elaborating the submissions, learned consultant pointed out that in the first instance, the show cause notice was vague and secondly the appellant was even denied the documents and statements on which reliance was placed in the show cause notice and the order, despite the appellant repeatedly asking for them. Learned consultant pointed out that in the absence of such documents and statements, the appellant was constrained to submit an interim submission since time for filing the same was expiring.

22. Shri Rakesh Kumar, learned authorized representative appearing for the department, however, supported the impugned order. Learned authorized representative pointed out that since the charges against the appellant are very serious in nature as he is said to have sublet the customs broker license, no leniency should be shown. Learned authorized representative pointed out that though there have been procedural lapses, but it cannot be urged that the principles of natural justice have been violated. Learned authorized representative also pointed out that offence report and the statements have now been supplied to the appellant and, therefore, this Tribunal may itself examine the same and decide the matter.

23. We have considered the submissions advanced by the learned consultant appearing for the appellant and the learned authorized representative appearing for the department.

24. There is substance in the submission advanced by the learned consultant appearing for the appellant that the principles of natural justice have been violated and, therefore, the order that has been impugned should be set aside only for this reason.

25. In the first instance, as noted above, the show cause notice is very vague. It mentions that the appellant has been found to have contravened the provisions of the 2018 Regulations for the reasons stated in the order passed by the Commissioner confirming the suspension order and thereafter without even stating as to what are the charges against the appellant in connection with the various contraventions of the 2018 Regulations, it calls upon the appellant to submit a reply as to why he should not be held responsible for contravention of regulations 10 (a), 10 (d), 10 (e) and 10 (n) of the 2018 Regulations. As noticed above, the show cause notice fails to differentiate between regulations 17 (1) and 17 (6) of the 2018 Regulations because it calls upon the appellant to submit a reply to the Inquiry Report which could have been submitted by the Inquiry Officer only after an inquiry was undertaken by him. The show cause notice issued under regulation 17 (1) cannot under any circumstances require a customs broker to submit a reply to the Inquiry Report. More important is the fact that despite repeated letters having been submitted by the appellant to the Inquiry Officer to provide the documents referred to in the show cause notice, the Inquiry Officer did not submit the documents which may even mean that the Inquiry Officer himself was not possessed of those documents. What needs to be noted is that the Inquiry Officer directed the appellant to approach the Policy Section of the department to obtain those documents and the Policy Section of the department informed the appellant that the document that he was seeking have been referred in the show cause notice and the statements could be obtained by him from the Officers who recorded the statement.

26. It was incumbent upon the Inquiry Officer to have supplied all the documents to the customs broker. By asking the appellant to approach another section of the department clearly shows that the Inquiry Officer shirked from the duties entrusted upon him under the 2018 Regulations. A customs broker is not supposed to run from one department to the another to obtain the documents on the basis of which the show cause notice was issued and which documents also form the basis for revoking the customs broker license of the appellant. In any case, the documents were not supplied to the appellant. The 2018 Regulations, as noted above, clearly comprehend a fairy inquiry, but the present inquiry shows that principles of natural justice have been violated.

27. It is not possible to accept the contention advanced by the learned authorized representative appearing for the department that as all the documents have now been supplied to the learned consultant for the appellant, the Tribunal itself should examine these documents and pass an appropriate order. These documents and the statement were required to be supplied to the customs broker by the inquiry officer so as to enable him to submit a proper response to the show cause notice. This would also enable to the appellant to cross-examine the persons whose statements were recorded.

28. In any view of the matter, it is not for the Tribunal to now carry out the exercise that was required to be undertaken by the Inquiry Officer or the Commissioner dealing with the matter.

29. Thus, for the all reasons stated above, the impugned order dated 08.11.2021 revoking the customs broker license of the appellant deserves to be set aside and is set aside.

30. The appeal is, accordingly, allowed.

(Dictated and pronounced in open court.)

Notes:

1 the 2018 Regulations