CHALR - Time lines laid down in Regulation 22 are meant to quicken probe and deliver justice - they are to be considered 'directory' in nature since if they are considered 'mandatory' and matter is closed on this basis, purpose of Regulations would get defeated: CESTAT
By TIOL News Service
MUMBAI, JUNE 26, 2015: THE case booked by DRI Mumbai concerns undervaluation of artificial leather cloth.
Pursuant to investigations by DRI, the Licence of CHA was suspended by Commissioner on 15.11.2012. After post decisional hearing, the suspension was continued vide Order dated 7.12.2012, under Regulation 20(3). In appeal, CESTAT revoked the suspension on 29.1.2013. Subsequently, a notice dated 17.05.2013 was issued to the appellant under Regulation 22(1) and the inquiry conducted under Regulation 22 resulted in revocation of the CHA Licence with forfeiture of security deposit vide order of Commissioner of Customs (General), Mumbai dt. 17.3.2015.
This was the result of confirmation of violation of Regulations 12 (transfer of license), 13(b) - (transacting business through unauthorized persons), 13(d), 13(e), 13(n) and 19(8).
The appellant CHA is before the CESTAT.
The appellant inter alia submitted that if the time limits prescribed in Regulation 22 are exceeded, the same cannot be condoned in the matter of enquiry. Reliance is place on the decision in A.M. Ahmed &Company - 2014-TIOL-1503-HC-MAD-CUS.
The AR submitted that the delay in enquiry proceedings is also on account of the appellant inasmuch as after issue of disagreement memo on 26.11.2014, the appellant avoided attending the personal hearing for almost three months. Hence, it is a case of contributory negligence. Reliance is also placed on the decisions in Smile Shipping Services - 2014-TIOL-1503-HC-MAD-CUS and PML Industries Ltd. - 2013-TIOL-201-HC-P&H-CX for taking the view that the word "shall" or "may" may not be determinative of treating a provision of law as directory or mandatory. It is, therefore, submitted that the Regulations are procedural or directory in nature as far as time limits are concerned.
The Bench inter alia observed that the question to be answered is whether the time line periods laid down in Regulation 22 are directory or mandatory in nature and that the issue has been dealt with extensively by the High Court of P&H in the case of PML Industries Ltd. - 2013-TIOL-201-HC-P&H-CX.
After extracting paragraphs 28 to 31 of the said decision, the Bench while concluding that the time lines are 'directory' in nature observed -
"The essence of the above judgment is that the Courts, while deciding whether a time period is a directory or mandatory, have to see whether the purpose of law would be defeated by terming it as mandatory. And secondly, the absence of provisions for consequence in case of non-compliance with the requirements would indicate that the provisions are directory in nature despite the use of word "shall". We note from the record that both sides have contributed to the delay. Therefore Advocate's plea that time lines cannot be diluted is not acceptable. We find that the time lines laid down in Regulation 22 are meant to quicken the enquiry proceedings and deliver speedy justice. At the same time, the purpose of the inquiry is to examine the role of the CHA in the fraud committed. Therefore, if the time lines not adhered to are considered mandatory and the matter is closed on this basis, the purpose of the Regulations would get defeated and so would the intent of the Legislature. It would render the entire proceedings invalid. Further, since there is no consequence stated in the Regulations for non-adherence to the time periods for conducting the inquiry, the time lines cannot be fatal to the outcome of the inquiry."
On the issue of admissibility of statements recorded u/s 108 of CA, 1962, the Bench noted that the retraction of the statement on the basis of the mention made in the Writ Petition before the High Court 'can be considered provided there is sufficient corroborative evidence to disprove the charges of violation of the CHALR Regulations.'
In the matter of subletting of the license,the Bench referred to Regulation 12 and observed -
"We find no evidence to show that there has been sale or transfer of the license. No consideration is shown for such transfer nor any transfer agreement. The only evidence is that the appellant was receiving fixed amounts per container from Shri Pandey. We find no provision in the Regulations that the CHA should receive payments directly from the importers/exporters for the services rendered. We also find that Section 147 of the Customs Act allows for an agent to work on behalf of the principal. Therefore, if the importers/exporters have contracted an intermediary person for Customs clearance work, no contravention of the CHALR is proved if the CHA is satisfied about the credentials of the importer for whom he is doing the Customs clearance work... In the circumstances we are of the view that the charge of subletting of license is not proved and it cannot be said that the license was transferred."
On the question of violation of Regulation 13, the Bench observed -
+ We also do not find any definite violation of Regulation 13(b), which requires that the CHA must transact business in the Customs station either personally or through any employee duty approved by the Assistant Commissioner/Deputy Commissioner. It has not been established that persons other than the CHA pass holders of the appellant were working in the Custom House on behalf of the appellant.
+ Further, in the absence of any charge of violation of Regulation 13 (a) which requires the Custom House Agent to obtain an authorization from each of the companies for whom he is employed as a CHA, we do not find any reason to sustain the violation of Regulations 13(d) and 13(e) which require imparting correct information and rendering proper advice to the clients. The charge that the CHA advised the importer to stack thinner material in the front of the container is not supported by the physical examination of the containers nor by any other corroborative evidence. Reliance on the statement of Shri Vishal Madan is also put in question because he had stated in Writ Petition NO. 3951/2012 before the Bombay High Court that his statement was recorded under coercion. Therefore the retraction of statements appear to carry weight due to lack of supporting evidence for the violation of the Regulation. Similarly the charge of violation of Regulation 22(n) which requires the CHA to be efficient is not on a strong footing and cannot be sustained. Except for a statement regarding under valuation no concrete evidence is forthcoming against the CHA.
In fine, the CESTAT held that Revenue had not been able to establish with any reasonable degree of certainty the violation of the Regulations for which they have charged the appellant.
Concluding that the circumstances do not call for revocation of the Licence which will deprive the CHA and his employees of the source of their livelihood, the revocation of the licence as well as the forfeiture of the security deposit was set aside.
The Appeal was allowed.
(See 2015-TIOL-1253-CESTAT-MUM)
