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M/s. Mars Shipping Services Versus The Commissioner of Customs

2015 (5) TMI 406 - MADRAS HIGH COURT

Suspension of custom clearance license - Misuse of CHA License - failure to obtain any authorization from the actual IEC holders - contravention of the various provisions of the CBLR - Penalty under Sec. 112(a) - Held that:- Show cause notice cannot be read hyper-technically, but it is to be read reasonably and that the Writ Court should be slow and circumspect in interfering at the show cause stage, unless it is successfully proved that the Authority issuing the show cause notice is not compete .....

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sel for the petitioner that from a reading of the impugned show cause notice, an overall impression one gets is that the respondent has predetermined the issue.

Quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating the show cause proceeding. A show cause notice is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the no .....

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ubsequent proceedings become an idle ceremony. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subjected to it.

Impugned show cause notice, wherein, the usage of the words, viz., it was concluded that the Customs Broker failed to as pointed out above, would clearly indicate predetermination by the respondent reg .....

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n or prejudgment by the respondent. In case any such fresh show cause notice is issued by the respondent, the petitioner shall be furnished with the material on the basis of which the show cause notice issued and also a reasonable opportunity to file their objections with supporting material apart from personal hearing and then pass a resoned order in accordance with law. - Decided in favour of appellant. - Writ Petition Nos.27726 & 27727 of 2014 and M.P. Nos. 1 & 1 of 2014 - Dated:- 30-4-2015 - .....

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have been efficiently transacting the business by strict adherence to the rules and regulations and have never come to the adverse notice of the customs authorities. The representative of the petitioner firm is a partner and also an authorized signatory of the company having passed the required examination conducted by the Customs Department as early as in the year 1999 in terms of then Regulation 9 of the Custom House Agent Licensing Regulations, 1984 (presently Regulation no. 7 of CBLR) while .....

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ame of (1) M/s. Kawarlal & Co., and (2) D.K.Enterprises, both Chennai based importers. The petitioner firm has filed 90 Bills for M/s. Kawarlal & Co., and 51 Bills for M/s D.K.Enterprises at the Air cargo complex at Chennai for the period between January 2008 to September 2009 and all the goods imported by the said companies under the respective Bills of Entry have already been assessed to duty and cleared out of customs charge in strict compliance with the provisions contained in the Cu .....

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ds without production of the ADC-NOC and the form 10 license in respect of the imports made by them as required under the Drugs and Cosmetics Act, has passed the impugned order by arriving at the categorical conclusion that they had allowed unauthorized persons to handle customs clearance work by misusing their CHA license and that they had signed the documents without verifying the details and the documents and that their firm had also failed to obtain any authorization from the actual IEC hold .....

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pondent passed the impugned order even while recording that the investigation carried out by the authorities revealed that they had attended to the clearance work concerning 51 Bills in respect of M/s. D.K.Enterprises, concluding that they had contravened the various provisions of the CBLR which is without basis. It is stated that the respondent, without properly considering the statutory requirements of regulation 19 (1) of the CBLR, passed the impugned order of suspension without even recordin .....

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against the broker is pending or contemplated as not when no enquiry is pending or contemplated. Therefore, according to the petitioner, the respondent herein had passed the impugned order in excess of the authority conferred on him thereby, the said order is unsustainable in law. It is also stated that the respondent had erroneously came to the conclusion that the petitioner has committed serious violation under the CBLR, 2013, without considering the fact that the Bills of Entry so presented .....

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e regulation mandated only an immediate necessity for such suspension which is certainly not supported by the reasoning namely detriment to the revenue. 3. According to the petitioner, a show cause notice dated 29.05.2014 concerning the imports made in the name of M/s. Kawarlal & Co., and the show cause notice dated 13.06.2014 concerning the imports made in the name of M/s D.K.Enterprises were issued by the Commissioner of Customs, Airport and Air Cargo Complex to the petitioner under Sectio .....

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replies to the said show cause notices vide their reply dated 26.06.2014 and 15.07.2014 respectively stoutly contesting the proposal to impose penalties against them under Section 112 (a) of the Customs Act. 4. According to the petitioner, in the above factual position, the respondent herein had passed an order dated 31.07.2014 for suspension of the licence No. R-591/CHA of the petitioner, viz., M/s Mars Shipping Services with immediate effect in terms or the powers vested with him under Regula .....

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the said Writ Petition, the respondent herein, after hearing the petitioner, passed the present impugned order dated 28.08.2014, in and by which, according to the petitioner, the respondent ordered the continuance of the suspension of their license on a totally different ground that the allegations related to the violation of the Drugs and Cosmetics Act involving the possible jeopardizing of human life as against her earlier order dated 31.07.14 recording the reason for suspension as involving r .....

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hen the said amendment application in M.P.No.2 of 2014 came up for hearing, this Court, while taking note of the fact that the original writ petition had become infructuous consequent to the further order dated 28.08.14 passed by the respondent herein ordering continued suspension, had dismissed the said writ petition with liberty to the petitioner to challenge the order dated 08.10.2014. 5. It is also stated that pursuant to the continued order of suspension dated 28.08.2014, the respondent iss .....

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days from the date of receipt of the said notice. The petitioner had submitted their written statement of defence dated 09.10.2014 to the inquiry officer appointed for this purpose. 6. According to the petitioner, the continued order of suspension had totally crippled their operations and they were put to severe loss of reputation as well as financial loss also and also leading to non-employment and losing of high profiled and other reputed clients, for no fault of the petitioner firm. The respo .....

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present writ petitions are maintainable. 7. In view of the above, the petitioner has come forward with these two writ petitions, challenging the suspension order, dated 28.8.2014 and the show cause notice dated 8.9.2014 respectively. 8. A common counter affidavit has been filed on behalf of the respondent, wherein, it is stated that both the writ petitions filed, challenging the impugned suspension order, dated 28.8.2014 as well as show cause notice dated 8.9.2014 are misconceived and not mainta .....

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from the Appraising Groups to the effect that two companies, viz., M/s.Antoine Becourel Organic Chemical Co., and M/s.Hoewitzer Organic Chemical Co., had cleared drugs/pharmaceuticals, chemicals at Air Cargo Complex, Meenambakkam, Chennai without obtaining the mandatory Form-10 Licence/Assistant Drug Controller (ADC) clearance without proper import licence issued under the provisions of the Drugs and Cosmetics Act, 1940. During the course of investigation, it also came to light that K.Ramlal Jai .....

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he petitioner was represented and written submissions were filed. Upon perusing the objections and hearing the petitioner on 28.8.2014, the order of suspension was continued. The entire order was passed based upon factual adjudication of facts and based upon the statement given by various responsible persons. On 8.9.2014, show cause notice was issued under Regulation 20(1) of CBLR, 2013 appointing an enquiry officer to enquire into the charges without being influenced by the order passed by the .....

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rpose of taking action for the violation of CBLR, 2013 committed by the petitioner after conducting an enquiry and hence, it cannot be construed that it is a preconceived as contended by the petitioner and if at all the petitioner is aggrieved, it is always open to the petitioner to file appeal under Section 21 of the Act. Therefore, with these averments, the respondent sought for dismissal of the writ petitions as devoid of merits. 9. Heard the learned counsel on either side and perused the ent .....

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Agency, which is a statutory requirement in terms of Regulation 20(1) of CBLR, 2013 and except mentioning that if the broker is allowed to operate, it will be detrimental to the interest of revenue, there were no justifiable or compelling reasons mentioned in the impugned order, which warranted the immediate suspension of the license. He contended that no offence report was received as required under regulation 20 (1) of the CBLR, 2013 and therefore the suo-motto initiation of the proceedings .....

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erefore, when such is the view of the respondent, again giving finding to the effect that the order of suspension against the petitioner for non-fulfillment of the obligation cast on them under CBLR is proper, is wholly misconceived and self-contradictory and hence, it is liable to be quashed. 11. As regards the impugned show cause notice, dated 8.9.2014, the learned counsel for the petitioner contended that in para 21, the respondent has categorically pre-concluded and pre-determined the issu .....

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ity. He contended that the Enquiry Officer, being a subordinate to the respondent, cannot be expected to act in diligent manner, except to follow the pre-drawn conclusion already drawn by the respondent. According to the learned counsel, since the respondent is the ultimate authority for deciding the case and once she had already gone on record concluding the matter against the petitioner, it cannot be expected that a considered and judicious order would be passed by the Enquiry officer in accor .....

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sion reported in Whirlpool Corporation versus Registrar of Trade Marks, Mumbai and others reported in (1998) 8 SCC 1, since the impugned order violated the principles of natural justice, though appeal remedy is available, the writ petition is maintainable. 13. It appears that for certain irregularities alleged to have been committed by the petitioner as reported by Air Cargo Intelligence Unit (ACIU), Chennai, while exercising her power under Regulation 19(1) of CBLR, 2013, the respondent herei .....

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rges levelled against the petitioner for alleged failure to fulfill the obligations cast upon the petitioner under Regulations 10, 11(a), 11(e), 11(n) and 11(d) of CLR, 2013 and alleged professional mis-conduct while acting as a Customs Broker. 14. It is not in dispute that the impugned order, dated 28.8.2014 ordering continuation of suspension of license was passed by the respondent after affording an opportunity of personal hearing to the petitioner and on consideration of the objections filed .....

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ulation 20(1) of CBLR, 2013. It is appropriate to extract Regulations 19 and 20(1) of CBLR, 2013, which read as under: Regulation 19. Suspension of licence:- (1) Notwithstanding anything contained in regulation 18, the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the licence of a Customs Broker where an enquiry against such agent is pending or contemplated; (2) Where a licence is suspended undere sub-regulation (1), the Commissioner of Customs sh .....

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n 20(1). "20.Suspension or revocation of licence. (1) The Commissioner of Customs may, subject to the provisions of regulation 22, revoke the licence of a Customs House Agent and order for forfeiture of part or whole of security, or only order forfeiture of part or whole of security, on any of the following grounds, namely : (a) failure of the Customs House Agent to comply with any of the conditions of the bond executed by him under regulation 10; (b) failure of the Customs House Agent to c .....

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ii) failure to comply with the regulations and (iii) a misconduct. In the present case, admittedly, there was no offence report from Investigating Agency so as to make it as basis for suspending the license in terms of Regulation 20(1) of CBLR, 2013. It is also not in dispute that the alleged occurrence was taken place as early as between January 2008 and September 2009 and the goods were assessed and cleared by the customs authorities by accepting the documents submitted by the importer and the .....

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only in appropriate cases where immediate action is necessary against the customs broker, the licence of the broker has to be suspended. It is pertinent to note that except the irregularities alleged to have been committed by the petitioner in the year 2008, there were no adverse report against the petitioner that the petitioner has repeatedly involved in such irregularities between 2009 to 2014. On a careful scrutiny of the entire facts and in view of the fact that even the respondent herself .....

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est of revenue. This reason, in my opinion, is not justifiable since as already stated above, there were no adverse remarks against the petitioner in between 2009 and 2014 and except the present one, no antecedents where loss of revenue were reported against the petitioner. Therefore, in such view of the matter, the impugned order, dated 28.8.2014 cannot be sustained. However, as the allegations were made against the petitioner since the obligations cast upon the petitioner have allegedly not b .....

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customs broker and order for forfeiture of part or whole security or impose penalty not exceeding fifty thousand rupees. In order to probe into the charges levelled against the petitioner, a show cause notice dated 8.9.2014 has been issued to the petitioner, by appointing an Enquiry Officer, calling upon the petitioner to file written statement of defence and objections. 16. It is relevant to extract para 21 of the impugned show cause notice, dated 8.9.2014 on which, the learned counsel for the .....

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ion order dated 31.7.2014 was continued vide O-in-O No.29163/2014 dated 28.8.2014 issued under Regulation 19(2) of CBLR, 2013. 17. A perusal of the above emphasized portion, it is clear that the respondent has categorically come to the conclusion that the Customs Broker failed to fulfill the obligation cast upon them under the regulations mentioned to therein and committed professional misconduct, while acting as custom broker. Therefore, relying upon the above emphasized portion in the show ca .....

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position that the show cause notice cannot be read hyper-technically, but it is to be read reasonably and that the Writ Court should be slow and circumspect in interfering at the show cause stage, unless it is successfully proved that the Authority issuing the show cause notice is not competent or the show cause notice is outcome of malice and de hors the provisions of law, but in the present case, the emphasized portion contained (cited supra) in the impugned show cause notice, would clearly in .....

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fer the decision of the Honble Supreme Court reported in Oryx Fisheries (P) Ltd., versus Union of India reported in (2010) 13 SCC 427 = 2011 (266) ELT 422 (SC), wherein, the Honble Supreme Court has held as under in para 31: 31. It is of course true that the show-cause notice cannot be read hypertechnically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a show-cause notice the person who is subject to it must get an impression that he will .....

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regulation which promises to give the person proceeded against a reasonable opportunity of defence. 32. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and specially when he has the power to take a punitive step against the person after giving him a show-cause notice. 33. The principle that justice must not only be done but it must eminently .....

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cause unless the same inter alia appears to have been without jurisdiction as has been held by this Court in some decisions including State of U.P. v. Brahm Datt Sharma1, Special Director v. Mohd. Ghulam Ghouse2and Union of India v. Kunisetty Satyanarayana3, but the question herein has to be considered from a different angle viz. when a notice is issued with premeditation, a writ petition would be maintainable. In such an event, even if the court directs the statutory authority to hear the matte .....

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punishment of dismissal on the respondent herein. A post-decisional hearing given by the High Court was illusory in this case. 49. In K.I. Shephard v. Union of India4this Court held: (SCC p. 449, para 16) It is common experience that once a decision has been taken, there is a tendency to uphold it and a representation may not really yield any fruitful purpose. (See also Shekhar Ghosh v. Union of India6and Rajesh Kumar v. D.C.I.T.7) 11. A bare perusal of the order impugned before the High Court a .....

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on, in our opinion, was maintainable. 20. In very similar circumstances, this Court, by its order, dated 15.9.2014 in W.P.No.21941 of 2014, has set aside the show cause notice impugned therein, with the following observation. 3. The main ground on which the impugned notice is challenged is that the contents of the show cause notice disclose a pre-conceived and closed mind. A careful look at the show cause notice would show that upto paragraph 7, the show cause notice contains the narration of t .....

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o continue to operate, it would be detrimental to the interest of revenue. 6. In the light of the categorical assertions and findings, I do not think that any useful purpose would be served in asking the petitioner to submit a reply to the show cause notice. At the stage of show cause notice, the first respondent should only have an open mind. If his mind is closed with predetermined conclusions, the requirement of giving an opportunity to show cause becomes nugatory. 7. In SBQ Steels Ltd., Vs. .....

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in mind. Consequently, the connected miscellaneous petition is closed. No costs. 21. Further, it is settled principle of law that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating the show cause proceeding. A show cause notice is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice. At the stage of show cause notice .....

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remony. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subjected to it. 22. Having followed the above cited judgments of the Honble Supreme Court as well as this Court and in view of the above discussion, this Court is of the view that the impugned show cause notice, wherein, the usage of the words, viz., it was conclud .....

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