By TIOL News Service

CHENNAI, JAN 25, 2019: THE short facts are that the petitioner runs a Container Freight Station and received a container which described the goods stuffed therein as ‘Christmas Decoration lights and horns'. However, upon inspection by the Customs officers, it was found that the container contained ‘white crane needles, sewing machine needes, shirt pins for garments etc. and also some Christmas Decoration lights and horns'. The cargo was seized on 27.10.2018 and kept in storage at the CFS of the petitioner. On 05.12.2018, a truck arrived and produced a gate pass (which was later found to be forged) and took delivery of the said container with the seized cargo. On the next day, the theft came to be noticed, accordingly the petitioner informed the Customs officers and the police and based on the CCTV footage the owner of truck was traced by the Customs officers and also the stolen goods/cargo; some of the perpetrators were detained; the 88 Containers which had arrived at Chennai Port for which Public Note Receipt was already allowed were released for delivery to the respective consignees through the Container Freight Station of the petitioner; from 07.12.2018, no Imported Containers were permitted to be processed for movement to the Container Freight station of the petitioner; on 13.12.2018, the respondent issued the impugned order of suspension.

The petitioner is aggrieved by this order of suspension dated 13.12.2018 issued under Regulation 11(2) of Handling of Cargo in Customs Areas Regulations, 2009.

It is submitted that the bonafides of the petitioner cannot be doubted; that the impugned order was issued without notice to the petitioner and without hearing them; that there was no immediate urgency necessitating applicability of Rule 11(2) of the 2009 Rules; that the fact that the Customs have permitted release of all the 88 containers which were lying at the Port after the said incident, is a clear indication that there is no urgency involved to suspend nor any intentional violation of the Rules by the petitioner; that suspension of licence affects their business drastically.

It is the contention of the respondent Revenue that the petitioner had miserably failed to perform their duties and responsibilities as the custodian of seized goods; that statements were recorded of the persons concerned; that to allow the petitioner to continue for work as Customs Cargo Service Provider with such a method of working will seriously jeopardize the Customs duties and security of cargo; that an inquiry is going on and the matter will be adjudicated on merits after completion of the investigation and, therefore, the writ petition may be dismissed.

Regulation 11(2) of the HCCAR, 2009 reads -

11. Suspension or revocation of approval for appointment of a Customs Cargo Service Provider:

(2) Notwithstanding anything contained in sub-regulation (1), the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the approval granted to a Customs Cargo Service provider where an enquiry against such Customs Cargo Service provider is pending or contemplated.

The Madras High Court considered the submissions and after taking a closer look at the provision extracted above inter alia observed -

+ It is evident that action under Regulation 11(2) can be taken only when the Commissioner of Customs is of the view that immediate action is necessary for suspending the license. Needless to say that such consideration must explicitly available in the order of suspension.

+ Regulation 11(1) empowers the very same Commissioner to suspend or revoke the license and the procedure to be followed for suspension or revocation of the license is contemplated under Regulation 12. Perusal of the Regulation 12 would show that before doing so, the licensee should be put on notice and he must be heard.

+ However, Regulation 11(2) can be invoked for suspending the license only when the Commissioner of Customs feels and comes to a conclusion that immediate action is necessary to suspend the license. Thus, the materials to be relied on for initiating and taking action under Regulation 11(1) cannot be the sole basis for taking action under Regulation 11(2).

+ When an action under Regulation 11(2) is contemplated, there must be other reasons available before the Authority for his consideration to the effect that unless such immediate suspension is ordered, the damage already caused would either continue or likely to continue.

+ In other words, the suspension to be made by invoking Regulation 11(2) must be on the known principle that "prevention is better than cure". Therefore, it is not only necessary to state the intention of the authority to prevent the illegality from its continuance, and also there exist the circumstances of continuance of illegality.

+ Hence, there is a clear distinction between the nature of action taken under Regulation 11(1) & 11(2), while the former is a punitive, the later is a preventive.

+ Perusal of the impugned order … would show that no such consideration was made by the Commissioner of Customs except extracting Regulation 11(2) and stating that an enquiry is contemplated in this case and that allowing the petitioner to continue for work will seriously jeopardize the Customs duties and security of Cargo. The respondent has not stated any other reason anywhere as to why an immediate action is required in this case.

The Writ Petition was allowed by setting aside the impugned order.

It was also made clear that it was open to the respondent to proceed against the petitioner under Regulation 11(1).

(See 2019-TIOL-208-HC-MAD-CUS)