2025 (6) TMI 1368 - AT - Customs

Revocation of the Customs Broker License - forfeiture of the security deposit - the allegations against the appellant are relating to blame worthy conduct under the CBLR - burden to prove - HELD THAT - The proceedings under CBLR are in essence disciplinary proceedings to ensure compliance with the statutory provisions. In such case the role of the Tribunal while examining an appeal is to examine the manner in which the decision was made. It is not expected re-appreciate the evidence or function as an appellate authority in disciplinary proceedings or interfere with the original authority s decision unless the findings are not based on any evidence illogical or suffers from procedural impropriety or was shocking to the conscience in the sense that it was in defiance of logic or moral standards. The investigation in the impugned case points to acts being done covertly and the importer of the container not presenting himself to the officers for an enquiry with facts relating to the alleged violations of the Customs Act and CBLR being in the special or peculiar knowledge of the persons involved. It is also trite law that the belief knowledge and intention of the parties are evidence and these can be gathered from the actions of individuals and from documents including statements of individuals related to the appellant. However the burden of producing some evidence in respect of the fact in issue remains on the department. The standard of holding an issue proved is by the test of a prudent man who upon weighing the various probabilities finds that the preponderance is in favour of the existence of the particular fact. Evidence in this case is mainly in the form of statements. The statements made against the appellant are not corroborated by independent evidence and hence when they are refuted by the appellant in their own statements the evidence would fail the test of a prudent man and are to be held as not proved . The original authority has reached a conclusion without adducing proper proof. In an issue having penal consequences the benefit of doubt must go to the appellant. The appeal hence succeeds. As per the erstwhile Section 3 of The Indian Evidence Act 1872 as it stood during the relevant time a fact is said not to be proved when it is neither proved nor disproved. Though it is true that an advocate prepares the pleadings and make their submissions before the quasi-authorities / court on instructions given by their clients however they should as an officer of the court use their legal acumen to assist the authorities in the administration of justice fairly and in a cordial manner by maintaining decorum of language while conducting legal proceedings on their clients behalf. While they are free to point out portions of the order under challenge which are felt to be not legal or proper they should desist from casting aspersions on the decision of quasi-judicial/ judicial authorities. The impugned order is set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal include:

- Whether the revocation of the Customs Broker License and forfeiture of the security deposit under the Customs Brokers Licensing Regulations (CBLR), 2013, was justified on the facts and evidence presented.

- Whether the appellant company can be held liable for alleged irregularities committed by its directors or associated individuals in their individual capacities, distinct from the corporate entity.

- Whether the invocation of disciplinary proceedings under the CBLR was proper and within jurisdiction, given the nature of the alleged acts and the capacity in which they were committed.

- The adequacy and sufficiency of evidence supporting the allegations of misuse of Importer Exporter Codes (IECs), misdeclaration, and improper payment of customs duties through various shell companies linked to the appellant.

- The standard of proof applicable in disciplinary proceedings under the CBLR and whether the findings of the original authority met this standard.

- The propriety of the conduct and language used by the appellant in the appeal memorandum, particularly regarding respect for judicial and quasi-judicial authorities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for Revocation of License and Forfeiture of Security Deposit under CBLR

The legal framework governing this issue is the Customs Brokers Licensing Regulations, 2013, which impose disciplinary obligations on licensed customs brokers to comply with statutory provisions and maintain due diligence in customs clearance activities. The revocation of license and forfeiture of security deposit are disciplinary measures for breach of these regulations.

The Tribunal noted that the original authority relied on intelligence reports and investigations revealing that importers were using multiple IECs and shell companies to evade customs laws, with payments for customs duties routed through entities linked to the appellant. The original authority found that the appellant was involved in these irregularities, warranting revocation and penalty under Regulation 18 of the CBLR.

However, the Tribunal emphasized that disciplinary proceedings under CBLR are quasi-judicial in nature and require that findings be based on evidence meeting the standard of a prudent man's belief on the preponderance of probabilities. The Tribunal cited authoritative precedents establishing that appellate bodies should not reappreciate evidence but may interfere if findings are without evidence, illogical, or procedurally flawed.

Upon review, the Tribunal found that the evidence primarily consisted of statements and uncorroborated inferences, with key persons not presenting themselves for inquiry, hampering investigation. The statements against the appellant were not supported by independent or documentary evidence and were refuted by the appellant's own statements. Consequently, the Tribunal held that the original authority's conclusion lacked proper proof and did not meet the requisite standard of proof in disciplinary proceedings.

The Tribunal applied the principle that in penal or disciplinary matters, the benefit of doubt must go to the appellant. It invoked the Indian Evidence Act's definition of 'proved' and 'not proved' facts, concluding that the allegations were 'not proved' and thus the disciplinary action was unsustainable.

Issue 2: Liability of the Corporate Entity for Acts of Directors or Associated Individuals

The appellant contended that the acts of commission or omission, if any, were by the directors in their individual capacities and not in the course of the company's activities as a customs broker. They argued that as a separate legal entity, the company cannot be held liable for individual acts of directors outside the scope of their official role.

The Tribunal acknowledged this submission and noted the fundamental corporate law principle of separate legal personality. The appellant's argument was that the proceedings under CBLR were without jurisdiction as they were based on acts not attributable to the company as customs broker license holder.

The original authority's findings did not sufficiently establish that the appellant company itself, through its authorized officers or employees, committed the alleged violations. The Tribunal found that the evidence failed to differentiate between individual acts and corporate liability, weakening the case against the appellant company.

Issue 3: Jurisdiction and Validity of Proceedings under CBLR

The appellant challenged the initiation of proceedings after an earlier revocation of their license and argued that the proceedings were without jurisdiction and void ab initio. They also submitted that the invocation of CBLR provisions was improper as they had not acted as customs broker in the implicated imports.

The Tribunal observed that CBLR proceedings are disciplinary and regulatory in nature, aimed at ensuring compliance with customs laws by licensed brokers. The initiation of proceedings must be based on credible evidence of breach of regulatory obligations.

Given the lack of clear evidence that the appellant acted as customs broker in the specific imports cited, and the absence of details of bills of entry or direct involvement, the Tribunal found the proceedings questionable. The Tribunal did not find merit in the contention that proceedings could be initiated without jurisdiction but emphasized that the lack of evidence rendered the proceedings unsustainable.

Issue 4: Sufficiency and Nature of Evidence Supporting Allegations

The evidence presented by the department mainly consisted of intelligence reports, statements of various individuals, and financial transaction records linking the appellant to payments for customs duties through associated entities. The department also relied on the inability to trace importers and the use of shell companies as indicia of wrongdoing.

The Tribunal reiterated the legal standard for proof in civil and disciplinary matters, distinguishing it from criminal standards. It cited Supreme Court and English authorities emphasizing that a fact is 'proved' when it is believed to exist or is so probable that a prudent man would act on the supposition of its existence.

However, the Tribunal held that strong suspicion, coincidences, or grave doubts cannot substitute for legal proof. The statements against the appellant were not corroborated by independent evidence and were denied by the appellant, failing the test of a prudent man. The Tribunal found the original authority's reliance on such evidence insufficient to sustain the penalty.

Issue 5: Conduct and Language Used in Appeal Proceedings

The Tribunal expressed concern over the use of invective, disrespectful, and intemperate language by the appellant in the appeal memorandum against the Commissioner and earlier proceedings. It cited Supreme Court dicta emphasizing the importance of mutual respect and decorum between counsel and judicial/quasi-judicial authorities.

The Tribunal underscored that while advocates have the right to zealously represent clients, they must maintain propriety and refrain from casting aspersions or using extravagant language that undermines the administration of justice. The Tribunal admonished the appellant for the language used and reminded that professional norms require restraint and respect.

3. SIGNIFICANT HOLDINGS

- "The proceedings under CBLR are in essence disciplinary proceedings to ensure compliance with the statutory provisions."

- "The role of the Tribunal while examining an appeal is to examine the manner in which the decision was made. It is not expected to re-appreciate the evidence or function as an appellate authority in disciplinary proceedings or interfere with the original authority's decision unless the findings are not based on any evidence, illogical or suffers from procedural impropriety or was shocking to the conscience."

- "Strong suspicion, strange coincidences and grave doubts cannot take the place of legal proof."

- "The statements made against the appellant are not corroborated by independent evidence and hence when they are refuted by the appellant in their own statements, the evidence would fail the test of a prudent man and are to be held as 'not proved'."

- "In an issue having penal consequences, the benefit of doubt must go to the appellant."

- "An advocate, while discharging duty to his client, has a right to do everything fearlessly and boldly that would advance the cause of his client. Yet, a counsel, in his zeal to earn success for a client, need not step over the well-defined limits of propriety, repute and justness."

- The Tribunal set aside the impugned order of revocation and penalty, allowing the appeal and granting consequential relief as per law.