Uncorroborated Statements Insufficient for CHA License Revocation, Says CESTAT

Court Name : CESTAT Chennai

Parties : VNMS Ayyachamy Nadar & Bros Vs Commissioner of Customs

Decision Date : 23 June 2023

Judgement ref : Customs Appeal No. 41241 of 2013

Imagine you're a Customs House Agent (CHA), and your license is revoked based on uncorroborated statements. Sounds unjust, right?

Well, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) thought so too. In a recent ruling, the CESTAT held that uncorroborated statements cannot form the basis for revoking a CHA license.

This case underscores the importance of substantial evidence in such cases. The CESTAT emphasized that a CHA license, which is crucial for the operation of a CHA, cannot be revoked based on mere uncorroborated statements.

So, if you ever find yourself in a similar situation, remember this ruling. It could be the key to defending your case. The CESTAT's decision reaffirms the principle that substantial evidence is required to revoke a CHA license.

This is a crucial reminder for all CHAs and customs professionals. Always ensure that your actions are well-documented and can withstand scrutiny. And remember, uncorroborated statements alone are not enough to revoke your CHA license.

Order : [Per Hon’ble Mr. P. Dinesha]

Brief facts of the case, as could be gathered from

the Show Cause Notice dated 19.06.2012, are that it

appears that there was an investigation by the Directorate

of Revenue Intelligence (DRI), Tuticorin and by their

investigation report dated 05.06.2010, it appears to have

come to light that the Import Export Code (IEC) of various

exporters were being misused by few individuals for

fraudulent exports of low quality shoe uppers, etc., thereby

availing ineligible duty drawback without realization of any

export proceeds.

1.2 Based on the above, it appears that the Revenue

entertained a doubt that the appellant herein had violated

/ failed to fulfil the obligations cast upon them under

Regulations 10, 13(a), 13(b), 13(d), 13(o) and 19(8) of

the CHALR, 2004.

2.1 It appears that on 21.05.2010 i.e., much before the

aforesaid investigation report by the DRI (dated

05.06.2010), statement of one Mr. D. Ananda Raj, Partner

of the appellant-CHA was recorded, who appears to have

stated that their firm has been in the said business for over

sixty years. In respect of the leather shoe uppers, he has

stated that one Mr. B. Mohan, Manager of the company,

who was working with them for a long period of time, was

given their licence to carry on with the CHA work; they

never suspected him nor did they ever ask him about the

CHA work undertaken by him. It also appears from his

statement that their licence was misused by one

Mr. M. Vijay Anand, son of the said Mr. B. Mohan, and that

the appellant did not interact with the exporters and hence,

they had no occasion to verify the credentials of the

exporters.

2.2 From the record, it appears that Mr. M. Vijay Anand

had filed about 225 Shipping Bills by misusing 14 IECs,

which involved about Rs.2 crores of ineligible duty

drawback. Further, it appears that the statement of Mr. M.

Vijay Anand was also recorded on 07.04.2010, wherein he

appears to have inter alia admitted as under: -

(i) His father did not have Rule 9 Licence; he used to

get signature from one Mr. Durai Raj, a Rule 9

Licence Holder of the appellant;

(ii) His father was also the proprietor of M/s. Meenakshi

Agency, wherein he was the Managing Director of

the company;

(iii) He met one Mr. Gibri (Zipreel) of Chennai in

2007, who introduced two exporters by name

Rahman and M. Kalandar Seeni Ahmed of Chennai;

(iv) It was Mr. Gibri who informed him that they

wanted to export leather shoe uppers to Malaysia

and Dubai under drawback scheme.

(v)They did not have the IE Code, for which Mr. M. Vijay

Anand was asked to furnish the same on commission

basis;

(vi) He approached one Mr. T. Joseph John Britto

(alias John), Tuticorin, who, according to him, was

an agent for taking IE Codes and also provided him

with 11 IE Codes;

(vii) He offered a commission of Rs.5,000/- per

IE Code for every consignment and utilized all those

11 IE Codes in the export of leather shoe uppers

during a seven-month period;

It appears that a further statement of Mr. M. Vijay Anand

was also recorded on 10.04.2010 wherein it appears that

he has not denied the role played by him.

3.1 In the above backdrop, in the Show Cause Notice

dated 19.06.2012 issued to the appellant, it is seen that

the Revenue had alleged infringement of various

regulations of the CHALR ibid. and thus, their CHA Licence

came to be suspended in terms of Regulation 20(2) of the

CHALR, 2004 by the Commissioner, Custom House,

Tuticorin vide Order dated 12.06.2010 pending inquiry

against the appellant.

3.2 It was thus proposed in the said Show Cause Notice

as to the revocation of the CHA Licence along with

forfeiture of security deposit in terms of Regulation 20(1)

ibid.

4.1 The appellant was given an opportunity to file its

reply with the Assistant Commissioner of Customs,

Tuticorin, who was appointed as the Inquiry Officer as per

Regulation 22(1) ibid. It appears that the appellant filed a

detailed reply dated 18.07.2012 by countering each of the

allegations levelled against it, thereby requesting for nonrevocation of its CHA Licence as otherwise, they would be

deprived of their livelihood.

4.2 It appears that the Assistant Commissioner, after

considering the above reply of the appellant, issued an

inquiry report dated 15.11.2012 wherein, after observing

that the appellant-CHA had failed to discharge their

obligations under Regulations 10, 13(a), 13(b), 13(d),

13(o) and 19(8) ibid. and that the charges levelled against

the appellant were proved, he had recommended for

revocation of CHA Licence under Regulation 20(1) ibid.,

apart from forfeiture of security deposit.

4.3 It appears that the appellant filed a rebuttal to the

above inquiry report with the Commissioner of Customs,

Custom House, Tuticorin vide reply dated 18.12.2012

wherein they appear to have pleaded that they had an

unblemished record for the last over sixty years and their

firm is one of the oldest firms in Tuticorin Port; though

reliance has been placed on the statements of various

persons, but however, the fact remains that the appellantCHA was not directly involved in any of the activities

resulting in the alleged infringement. They also appear to

have pleaded, in view of the specific admission by Mr. M.

Vijay Anand, that the revocation of their CHA Licence could

be highly disproportionate and hence, they requested for a

lenient view.

5. The Commissioner of Customs, Tuticorin, however,

vide impugned Order-in-Original C.No.VIII/13/01/1984-

CHAL dated 06.03.2013 having considered the plea of the

appellant as well as the inquiry report filed by the Assistant

Commissioner, has ordered revocation of CHA Licence of

the appellant and also ordered forfeiture of security deposit

of Rs.75,000/-.

6. It is against this order that the present appeal has

been filed before this forum.

7. Heard Shri N. Manickam, learned Advocate for the

appellant and Shri S. Balakumar, learned Assistant

Commissioner.

8.1 Learned Advocate would submit at the outset that

the investigation report of the DRI dated 05.06.2010 is

required to be considered as an offence report consequent

to which the appellant’s licence was suspended on

12.06.2010 and much later, i.e., on 06.03.2013, vide the

impugned Order-in-Original, the licence of the appellantCHA was revoked, which itself shows that there has been

serious violation of the time-limit prescribed under

Regulation 22(7) ibid.

8.2 He also drew our attention to the Board’s

instructions vide Circular No. 09/2010-Cus. dated

08.04.2010 wherein adhering to the time-limit prescribed

for completion of proceedings after the receipt of offence

report has been reiterated.

8.3 Without prejudice to the above, he would also

submit that even going by the inquiry report dated

15.11.2012 filed by the Assistant Commissioner, the

revocation order dated 06.03.2013 passed by the

Commissioner of Customs is also after the lapse of the

period of limitation prescribed under Regulation 22(7) ibid.

of ninety days, which is a serious irregularity which makes

the impugned Order-in-Original non est in the eye of law.

For this reason also, he would submit that the order of

revocation in the impugned order is liable to be set aside.

8.4 Without prejudice to the above, he would also

submit that the appellant has been holding CHA Licence for

more than sixty years and had no antecedents of

infringements or violations of any regulations and

therefore, the suspension order would deprive the

appellant of their livelihood and also of their employees.

9. Per contra, the learned Assistant Commissioner

supported the findings of the lower authorities. He would

also submit that there has been loss to the exchequer

because of the fraudulent exports, which had resulted in

claiming of ineligible duty drawbacks and that in the case

on hand, the fake/impersonated IECs have been used for

carrying out the exports; the action of the appellant in

lending its CHA licence is a serious infringement of various

regulations.

10. We have considered the rival contentions and we

have perused the documents placed on record as also the

orders of the lower authorities, including the inquiry report

which is part of the appeal memorandum.

11.1 The Regulations in question specifically provide the

guidelines for a Customs House Agent / Broker, which are

mandatory in nature and in case of violations thereto, the

same prescribes consequences, visiting them with penalty

or revocation of licence or both, depending upon the

gravity of the violation/s. It is the settled position of law

that revocation of licence of a Customs House Agent /

Broker is an extreme step. No doubt, such revocation

results in throwing the CHA, their dependants and their

employees and their dependents out of their livelihood.

Therefore, it is the duty of the proper officer to very

carefully examine the gravity of infringement/s of the CHA

vis-à-vis their role, either directly or indirectly, in the

alleged infringement/s, either intentionally or unintentionally.

11.2 The above Regulations also prescribe guidelines for

authorities in the form of time-limit at various stages,

which are also to be adhered to strictly by the officers,

which are again mandatory in nature. It is also the settled

position of law that courts have clearly held that not

following or not adhering to the time-frame prescribed

under the Regulations is detrimental to the Revenue, which

means no action, including revocation, could be ordered.

11.3.1 Admittedly, there are two inquiry / investigation

reports on record - one as early as in 2010 by the DRI

authorities, based on which the licence of the appellant was

kept under suspension. If this is considered as the inquiry

report, then, the order of revocation vide impugned Orderin-Original which was passed in 2013 is clearly beyond the time-limit prescribed under the statute.

11.3.2 If the second / other inquiry report by the Assistant

Commissioner is considered, which is in November 2012,

then, again, the revocation order vide impugned Order-inOriginal in March 2013 is also beyond the prescribed ninety-day time limit, which is against the principles underlying the statute.

12.1 Be that as it may, when we consider the issue on

merits, the sole basis for the revocation is stemming out of

the second inquiry report wherein, apparently, only

statements are relied upon, which are no doubt

uncorroborated. No other incriminating documentary

evidence is made available on record nor has the outcome

of investigation been placed on record by the Revenue to

implicate or even suggest the active role of the appellant.

Further, the Assistant Commissioner-Inquiry Officer has

applied the Regulations and alleged violation of the same

based on the statements per se. He has not apparently

looked at the action or inaction on the part of the appellantCHA and whether such action or inaction alone resulted in

the violation or infringement of the CHAL Regulations. This

is because the authorities cannot apply the Regulations

before analysing the action or inaction, but they have to go

by the action or inaction and then check if such action or

inaction has resulted in any violation of the Regulations.

12.2 But in any case, we are satisfied that the impugned

order has been passed beyond the time period allowed

under the Regulations and therefore, the order as well as

the consequential revocation is held to be not in

accordance with law, for which reason the impugned order

insofar as it relates to the revocation stands set aside.

12.3 The decisions relied upon by the learned Advocate

support our view.

13.1 For the very same reasons, we are of the view that

the forfeiture of entire security deposit is disproportionate,

also since there is no specific allegation as to the

involvement of the appellant; rather, the culprits have

clearly been identified as Mr. M. Vijay Anand and

Mr. B. Mohan, who, admittedly, having misused the

fake IECs, it is they who are actually liable for any penalty.

13.2 In view of the above, we deem it proper that a

nominal amount of Rs.10,000/- (Rupees Ten Thousand

only) could be forfeited out of the security deposit, but not

the entire amount of Rs.75,000/-. Accordingly, the

impugned order to the extent of forfeiture of security

deposit is modified to the above extent.

14. In the result, the appeal is: -

(i) Allowed insofar as the revocation of CHA licence is

concerned.

(ii) Partly allowed insofar as forfeiture of security

deposit is concerned.

(Order pronounced in the open court on 23.06.2023)

(VASA SESHAGIRI RAO) (P. DINESHA)

MEMBER (TECHNICAL) MEMBER (JUDICIAL)

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IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

CHENNAI

REGIONAL BENCH – COURT NO. I

Customs Appeal No. 41241 of 2013

(Arising out of Order-in-Original C.No.VIII/13/01/1984-CHAL dated 06.03.2013

passed by the Commissioner of Customs, Custom House, New Harbour Estate,

Tuticorin – 628 004)

APPEARANCE:

Shri N. Manickam, Advocate for the Appellant

Shri S. Balakumar, Assistant Commissioner for the Respondent

CORAM:

HON’BLE MR. P. DINESHA, MEMBER (JUDICIAL)

HON’BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)

FINAL ORDER NO. 40472 / 2023

DATE OF HEARING: 07.06.2023

DATE OF DECISION: 23.06.2023