2025 (7) TMI 12 - HC - Customs

Revocation of petitioner s registration (courier license)- forefeiture of security deposit - failure to fulfil obligation under Regulation 13(a) 13(c) 13(g) 13(i) and 13(j) of the Courier Imports And Exports (Clearance) Regulations 1998 - principles of disproportionality. Regulation 13(a) - HELD THAT - Regulation 13 (a) provides that the Authorised Courier is obliged to obtain an authorisation from each of the consignees of the import goods for whom such courier has imported such goods and such authorisation should be to the effect that the Authorised Courier acts as an agent of such consignee for clearance of such imported goods. In the courier Bill of Entry an authorised courier must declare that they have obtained authorisation from the importer. One such Bill of Entry is at page 118 of the petition. In the instant case the said declaration given is false because no such authorisation has been obtained. On a reading of the statements of Shri Dhanak and Shri Mohan Naik it is clear that petitioner had no contact with Shri Mansukhlal Dhanak but the work of clearing given by Mansukhlal Dhanak was sub-contracted by Shri Naik to the petitioner. Therefore clearly there is serious violation of Regulation 13(a). The consignment detained pertained to Airway Bill 971733473 and 9717334738 which as per pages 77 78 and 91 of the petition pertains to Chamunda Trading and Regent Engineering whereas page 76 which the petitioner claims to be authorisation is on a letter head of Balaji Engineering. Therefore even on this count petitioner s submission is found to be incorrect. The submission of the petitioner that document complies with Regulation 13(a) is to be rejected. There are no infirmity in the orders of respondent Nos.2 and 3 in concluding that the petitioner has violated its obligation cast under Regulation 13(a). Regulation 13 (i) - HELD THAT - Regulation 13 (i) obliges an Authorized Courier to verify the antecedent correctness of Importer Exporter Code (IEC) Number identity of his client and the functioning of his client in the declared address by using reliable independent authentic documents data or information. In the absence of any material the submission of the petitioner that the obligation cast under Regulation 13(i) has been discharged cannot be accepted . It is also important to note that in a period of six months around 250 consignments were cleared on behalf of the entities owned by Shri Mansukhlal Dhanak. That means on an average more than one consignment a day was cleared. If this is the magnitude of the business obtained by the petitioner it was obligatory on its part to have verified the antecedents identity and functioning of such a person at the declared address. The statements recorded of Shri Dhanak Shri Naik and Shri Menezes clearly evidences that the petitioner did not know anything about the entities of Shri Dhanak which clearly violates Regulation 13(i). The findings arrived by both the authorities cannot be said to be vitiated - the petitioner has not discharged its obligation cast under Regulation 13(i) of the 1998 Regulation. Regulation 13(g) - HELD THAT - Regulation 13(g) requires an Authorized Courier to maintain records and accounts in such form and manner as may be directed from time to time and submit them for inspection whenever required - The order in O-I-O categorically states that the petitioner could not produce any authentic records of the entities controlled by Shri Mansukhlal Dhanak. None of the documents of these entities were produced before us. The said findings in the O-I-O have been confirmed by respondent No.3. Except for making a bald statement we have also not been shown what records the petitioner has maintained with respect to the entities of Shri Mansukhlal Dhanak. Therefore there is violation of Regulation 13(g) by the petitioner. In the absence of any perversity shown in the impugned orders and the failure of the petitioner to produce any records the contention of the petitioner not agreed upon that there has been compliance of Regulation 13(g). Regulation 13(j) - HELD THAT - The petitioner is not agreed upon that it is not the case of the respondents that the petitioner has sub-contracted its functions to any other persons. Rather the case of the respondents appears to be that because Shri Mohan Naik had sub-contracted his work to the petitioner Regulation 13(j) was attracted. Since the petitioner has not subcontracted its functions Regulation 13(j) cannot be said to have been violated. Therefore the findings of both authorities insofar as this regulation is concerned are vulnerable. Both the Authorities are justified in recording adverse findings regarding the petitioner s noncompliance with the obligations under Regulations 13(a) 13(i) and 13(g). Given these serious violations the finding regarding Regulation 13(j) of the 1998 Regulations even if excluded will not affect the impugned orders in the least. Disproportionality - it is contended that revocation of the licence and forfeiture deposit is disproportionate and therefore this Court should interfere in the impugned orders insofar as revocation is concerned - HELD THAT - Keeping Regulation 13 analysed and cited above would certainly show that by a legal fiction the Petitioner steps into the shoes of the importer and has a legal responsibility which crystallises into legal liability to answer any contravention or fraud or for that matter any criminality in conduct. In the instant case it is noticed that two consignments were found which smuggled gold of 4879.9 grams which indicates criminality. The Petitioner if not directly vicariously becomes liable for such act on account of his non-discharge of the obligations cast under the Regulations. The issue also arose before the Hon ble Delhi High Court in the case of M/s. Bombino Express Pvt. Ltd. v. The Chief Commissioner of Customs (Delhi Zone) Anr. 2014 (11) TMI 381 - DELHI HIGH COURT where on very similar regulations and facts the Delhi High Court upheld the revocation of licence under Regulation 14 for violation of Regulations 13(a) and 13(g) of the 1998 Regulations. The authorities appointed under the Act are the best judges based on ground reality to revoke the license and unless it shocks the conscience of the Court or it is so perverse that a reasonable person could not have imposed such a punishment the Court will not exercise its equity jurisdiction. Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

- Whether the petitioner, an authorised courier under the Courier Imports and Exports (Clearance) Regulations, 1998 ("1998 Regulations"), violated its obligations under Regulations 13(a), 13(c), 13(g), 13(i), and 13(j) of the 1998 Regulations in relation to clearance of consignments containing contraband gold jewellery.

- Whether the petitioner obtained proper authorisation from consignees as required under Regulation 13(a).

- Whether the petitioner exercised due diligence in verifying the antecedents, correctness of Importer Exporter Code (IEC), identity, and functioning of its clients under Regulation 13(i).

- Whether the petitioner maintained proper records and accounts as mandated by Regulation 13(g).

- Whether the petitioner subcontracted or outsourced its functions without permission in violation of Regulation 13(j).

- Whether the revocation of the petitioner's registration and forfeiture of the security deposit under Regulation 14 of the 1998 Regulations was justified and proportionate.

- Whether mens rea (intent) is a necessary element for revocation of licence under the 1998 Regulations.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Compliance with Regulation 13(a) - Obtaining Authorisation from Consignees

Legal framework and precedents: Regulation 13(a) mandates that an authorised courier must obtain authorisation from each consignee to act as their agent for clearance of import goods. The authorisation must be valid and specific to the consignments cleared.

Court's interpretation and reasoning: The petitioner relied on a document dated 11 April 2012 purportedly authorising it to clear consignments. The Court found this document insufficient for multiple reasons: it was addressed to a different entity ("Sky Com Courier" rather than the petitioner), it predated the relevant consignments of November 2012, it did not constitute a standing authorisation for all imports, and it was admitted to be fabricated by an intermediary.

Key evidence and findings: Statements of Shri Mohan Naik and Shri Mansukhlal Dhanak revealed that the petitioner had no direct authorisation from the actual importers and that consignments were cleared without proper authorisation. The Bill of Entry declarations by the petitioner falsely claimed authorisation.

Application of law to facts: The Court concluded that the petitioner violated Regulation 13(a) as it failed to obtain proper authorisation for the consignments under consideration.

Treatment of competing arguments: The petitioner's argument that statements admitted authorisation was rejected because post-facto statements cannot substitute for compliance with the regulation. The respondents' contention that the document was fabricated and invalid was accepted.

Conclusion: The petitioner did not comply with Regulation 13(a).

Issue 2: Compliance with Regulation 13(i) - Verification of Antecedents, IEC, Identity, and Functioning of Clients

Legal framework: Regulation 13(i) requires authorised couriers to verify the antecedents, correctness of IEC, identity, and functioning of clients at declared addresses using reliable, independent, and authentic sources.

Court's reasoning: The petitioner claimed it verified IEC numbers through the respondents' portal. However, the Court held that mere portal verification was insufficient. The petitioner failed to verify the antecedents or functioning of the entities, which had bogus addresses and no valid IECs as admitted by the importers themselves.

Key evidence: Statements by Shri Mansukhlal Dhanak admitted non-existence of IECs and fake addresses. The petitioner received business through an intermediary, Shri Mohan Naik, without direct verification of clients.

Application of law: The petitioner's failure to verify the identity and authenticity of clients violated Regulation 13(i).

Competing arguments: The petitioner's reliance on portal verification was rejected as inadequate. Respondents' evidence of fake addresses and lack of IEC supported adverse findings.

Conclusion: The petitioner failed to discharge its obligations under Regulation 13(i).

Issue 3: Compliance with Regulation 13(g) - Maintenance of Records and Accounts

Legal framework: Regulation 13(g) requires maintenance of records and accounts in prescribed form and their submission for inspection.

Court's reasoning: The petitioner did not produce any records or documents evidencing compliance. The O-I-O found that no authentic records relating to the entities controlled by Shri Mansukhlal Dhanak were maintained or produced.

Key evidence: Absence of records, failure to produce any documentation before the Court or authorities.

Application of law: Non-maintenance or non-production of records constituted violation of Regulation 13(g).

Competing arguments: The petitioner's bald assertion of compliance was not substantiated by any evidence.

Conclusion: The petitioner violated Regulation 13(g).

Issue 4: Compliance with Regulation 13(j) - Subcontracting or Outsourcing

Legal framework: Regulation 13(j) prohibits subcontracting or outsourcing of functions without written permission from the Principal Commissioner or Commissioner of Customs.

Court's reasoning: The respondents did not allege that the petitioner subcontracted its functions; rather, that an intermediary subcontracted to the petitioner. The petitioner itself did not subcontract further.

Conclusion: No violation of Regulation 13(j) was established against the petitioner.

Issue 5: Justification and Proportionality of Revocation and Forfeiture under Regulation 14

Legal framework: Regulation 14 permits revocation of registration and forfeiture of security deposit if the authorised courier fails to comply with bond conditions or any provisions of the 1998 Regulations.

Court's reasoning: The petitioner's failure to comply with Regulations 13(a), 13(g), and 13(i) constituted sufficient grounds for revocation and forfeiture under Regulation 14(1)(b). The petitioner's negligence led to smuggling of contraband gold worth Rs. 1.21 crore, resulting in significant revenue loss to the State.

The Court emphasized the fiduciary nature of the authorised courier's role, the high degree of responsibility imposed by the Regulations, and the need for strict enforcement to prevent misuse of courier services for illegal imports and exports.

Application of law to facts: Given the petitioner's serious violations and the economic and legal consequences, the revocation and forfeiture were not disproportionate.

Treatment of competing arguments: The petitioner argued absence of mens rea and urged leniency relying on several precedents. The Court distinguished these precedents, holding that mens rea is not relevant for revocation under the Regulations, as supported by Supreme Court authority. Leniency was rejected given the gravity of violations and potential encouragement of illegal activity.

Conclusion: The revocation of licence and forfeiture of security deposit were justified and proportionate.

Issue 6: Relevance of Mens Rea for Revocation of Licence

Legal framework and precedents: The Court relied on a Supreme Court decision affirming that mens rea is not a necessary element for revocation of licence under customs regulations. Even without intent, non-compliance with obligations suffices to attract revocation.

Court's reasoning: The petitioner's negligence and failure to discharge obligations warranted revocation regardless of intent. The Court approved prior observations emphasizing the fiduciary role of authorised couriers and the need for strict compliance.

Conclusion: Mens rea is not essential for revocation under the 1998 Regulations.

3. SIGNIFICANT HOLDINGS

"The petitioner has not carried out its obligation under Regulation 13(a), 13(g) and 13(i) of the 1998 Regulations and, therefore, the courier license issued was deregistered under Regulation 14 along with forfeiture of the security deposit."

"The document dated 11 April, 2012 relied upon by the petitioner to submit that they have complied with Regulation 13(a) cannot be accepted as an authorization contemplated under the said Regulation for various reasons."

"Merely verifying the IEC from the portal of the respondents would not relieve the obligation cast under Regulation 13(i) for verifying the antecedent, identity and functioning of the importer on the declared address."

"The petitioner did not exercise due diligence in discharging its obligations under the Regulations. By violating the Regulations, it had given scope for massive misuse of the facility given in addition to loss of Revenue."

"For revocation of license mens rea is not relevant if there is non-compliance of obligations cast under the Regulations."

"The petitioner steps into the shoes of the importer and has a legal responsibility which crystallises into legal liability to answer any contravention or fraud or for that matter any criminality in conduct."

"We do not find any infirmity in the decision-making process of both the Authorities nor is it the case of the petitioner. The findings of both the Authorities are based on facts and on examination independently by us, we also agree with the concurrent findings of facts arrived at by both authorities."

"Any such exercise of discretion of leniency will only encourage persons to commit the offence by taking recourse to the services of the courier agencies."

"The revocation is because the petitioner failed to carry out its obligations under the 1998 Regulations which if carried out would have detected the bogus importers and saved the nation of the outflow of foreign exchange by illegal means."