WHETHER THE TIMELINES PRESCRIBED UNDER REGULATION 17 OF CUSTOMS BROKERS LICENSING REGULATIONS, 2018 ARE MANDATORY OR DIRECTORY?

[DR.MARIAPPAN GOVINDARAJAN]

Revocation of Brokers’ licence

Regulation 17 of the Customs Brokers Licensing Regulations, 2018 (‘Regulations’ for short) provides the procedure for revoking the customs brokers licence or imposing penalty.

Regulation 17(1) provides that the Principal Commissioner or Commissioner of Customs shall issue a notice in writing to the Customs Broker within a period of 90 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 30 days to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by him, a written statement of defence 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.

Regulation 17(2) provides that 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, direct the Deputy Commissioner of Customs or Assistant Commissioner of Customs to inquire into the grounds which are not admitted by the Customs Broker.

Regulation 17(3) and 17(4) provides the procedure for preparation of the inquiry report by the Deputy Commissioner of Customs or Assistant Commissioner of Customs.

Regulation 17(5) provides that 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 90 days from the date of issue of a notice.

Regulation 17(6) provides that 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 30 days, any representation that he may wish to make against the said report.

Regulation 17(7) provides that 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 90 days from the date of submission of the report by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, under sub-regulation (5).

Issue

The issue to be discussed in this article is as to whether the timelines fixed under Regulation 17 are mandatory or directory with reference to decided case laws.  The Madras High Court in SANTON SHIPPING SERVICES VERSUS THE COMMISSIONER OF CUSTOMS, THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL - 2017 (10) TMI 621 - MADRAS HIGH COURT has held that the timelines under Regulation 17 are mandatory and not directory.  The procedure contemplated under these Regulations are strictly followed. 

Case law

In SHRI. SYED KHALID AHMED VERSUS THE PRINCIPAL COMMISSIONER OF CUSTOMS (GENERAL), THE INQUIRY OFFICER / ASSISTANCE COMMISSIONER OF CUSTOMS, CHENNAI - 2025 (4) TMI 529 - MADRAS HIGH COURT, the petitioner is a customs broker.  The Principal Commissioner of Customs issued a show cause notice to the petitioner on 28.03.2022.  The petitioner submitted his reply to the show cause notice.  The inquiry report was submitted by the second respondent to the first respondent on 17.06.2022.  The first respondent forwarded the inquiry report to the petitioner on 18.11.2024.

The petitioner filed a writ petition before the Madras High Court, challenging the show cause notice dated 28.03.2022 and the Inquiry report dated 17.06.2022 forwarded to him on 18.11.2024.  The petitioner submitted the following before the High Court-

• The time lines fixed under the Regulations 17(3), 17(5) and 17(7) have not been adhered to by the respondents.
• The impugned Inquiry Report dated 17.06.2022 as per the regulation 17 (5) will have to be submitted within a period of 90 days from the date of the issuance of the show cause notice.
• The inquiry report was forwarded to the petitioner on 18.11.2024 after a lapse of more than 2 years which is against the provisions contained in Regulation 17(5) of the Act.
• As per regulation 17 (7) final orders, either revoking the suspension of the licence or revoking the licence of the customs broker, will have to be passed within 90 days from the date of submission of the report by the Deputy Commissioner of Customs or Assistant Commissioner Customs under Regulation 17(5).
• Till date, no final orders have been passed and therefore, regulation 17 (7) has also not been adhered to by the respondents.
• The timelines fixed under the regulations are mandatory and necessarily the same will have to be followed by the respondents as held in the following judgments-

• SANTON SHIPPING SERVICES VERSUS THE COMMISSIONER OF CUSTOMS, THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL - 2017 (10) TMI 621 - MADRAS HIGH COURT;
• M/S. KTR LOGISTICS SOLUTIONS PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS, THE INQUIRY OFFICER/DEPUTY COMMISSIONER OF CUSTOMS - 2019 (12) TMI 22 - MADRAS HIGH COURT

• The timelines fixed under Regulation 17 are mandatory. 
• The respondents did not follow the timelines as stated above.  Therefore, the show cause notice and the inquiry report are liable to be quashed.

The Department contended that the timelines fixed in the Regulations 17 are not mandatory but only directory.  The Department cited one judgment rendered by Bombay High Court in which the High Court held that the time lines fixed in Regulation 17 are directory and not mandatory.

The High Court observed that the judgment cited by the Department is of Single Judge.  The High Court held that the judgments relied on by the petitioner are delivered by Division Bench of Madras High Court, the Court is to follow the said judgments.  The Department did not dispute the delay in issuing the report to the petitioner.  The High Court was of the view that the impugned show cause notice as well as the impugned inquiry report have to be quashed on the ground of non-adherence to the timelines fixed under regulation 17 (5) and (7), which are mandatory in nature.  The High Court quashed the show cause notice and the Inquiry report and it allowed the petition.