By TIOL News Service

MUMBAI, JUNE 03, 2013: BY an order dated 12 September 2012, the Commissioner of Customs (General), Mumbai under Regulation 21 of the CHALR, 2004 prohibited the Petitioner from transacting CHA business in Zones I, II and III of the Mumbai Commissionerate on the ground that its continuance was considered prejudicial to the interest of the Revenue warranting immediate action.

The allegation relates to the export of cheap material such as soap stone powder in the names of exporting firms by mis-declaring it as high value bulk drugs and their intermediates. A person by the name of Manoj Gore is alleged to have attended to the clearance of the export consignments on the strength of a CHA licence of the Petitioner. It is alleged that an employee of the Petitioner allowed the said Manoj Gore to attend to the clearance of export consignments on behalf of the CHA firm.

The petitioner has challenged this order before the Bombay High Court and their grievance is that there was no compliance with the principles of natural justice before the prohibitory order was passed.

The Petitioner relies upon a report of the Committee on Subordinate Legislation dated 8 March 2007 in the Rajya Sabha. The relevant extract from the report of the Committee is as follows:

“Point referred

Regulation 21 provides that the Commissioner of Customs may prohibit any agent for working in one or more section of the Customs stations if he is satisfied that the agent has not fulfilled his obligation under regulation 13.

Can the regulation not be modified so as to prescribe that such order of prohibition should carry the reasons recorded in writing in order to avoid arbitrariness in such decisions?

Ministry's reply

Through it is not specially mentioned in regulation 21, the general principles of natural justice have to be observed and any curtailment or suspension of rights of any person can be done only after offering the person to present his case and after passing a reasoned order. If the Committee recommend these provisions could be made more explicit in the Regulation itself.

Committee's observations (25/10/2004)

The Committee noted that the Ministry were agreeable to make the provisions of the regulation more explicit in order to allay any apprehension of arbitrary action.

Committee's Observations (9/11/2005)

The Committee noted the position as explained by the representatives of Bangalore Commissionerate.”

The High Court noted that the Regulation 21 has not been amended thereafter.

The High Court further observed-

“…The reply furnished by the Ministry to the Committee on Subordinate Legislation can, at the highest, be an interpretative guide in construing the provisions of Regulation 21. As a matter of first principle, where as in the present case, the subordinate legislation is silent in regard to compliance with the principles of natural justice the requirement of compliance with those principles has to be read into the provision. However, in a situation where urgent or immediate action is necessary, and waiting for the outcome of a pre-decisional hearing will defeat the public interest and obstruct or impede the proper functioning of a Customs Station, it would be open to the Commissioner under Regulation 21 to pass an immediate prohibitory order for a limited period and to afford to the CHA, in the meantime, an opportunity of being heard. Pursuant to that opportunity, it is open to the CHA to place facts on record in support of the plea that the prohibitory order ought not to have been passed. This would balance both the need to observe the principles of natural justice on the one hand and the necessity of protecting the public interest in appropriate cases where immediate action is warranted and where delay would be prejudicial to the public interest.”

In fine, after noting that the petitioner had submitted a representation for lifting of the prohibition, the High Court directed the Commissioner to pass orders on the same within four weeks.

The Petition was accordingly disposed of.

(See 2013-TIOL-455-HC-MUM-CUS)