1 R IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 24 TH DAY OF JUNE, 2015 PRESENT THE HON'BLE MR. JUSTICE VINEET SARAN AND THE HON BLE MR. JUSTICE ARAVIND KUMAR C.S.T.A.NO.7/2014 BETWEEN: COMMISSIONER OF CUSTOMS & SERVICE TAX, C.R. BUILDING, QUEENS ROAD, P.B.NO.5400, BANGALORE-560 001 KARNATAKA. APPELLANT (BY SRI.G.RAJAGOPALAN, ADDL. SOLICITOR GENERAL OF INDIA A/W SRI. N.R. BHASKAR, CGSC) AND: M/S SDV INTERNATIONAL LOGISTICS LTD., NO.90/1B, KING S CROSS, 2 ND FLOOR, NEXT TO INNOVATIVE MULTIPLEX, MUNNEKOLAU VILLAGE MARATHAHALLI, BANGALORE. RESPONDENT (BY SRI.SHIVADASS G, AND SRI. HARISH R, ADVOCATES)
2 THIS APPEAL IS FILED UNDER SECTION 130 OF CUSTOMS ACT, 1962 PRAYING TO ANSWER THE SUBSTANTIAL QUESTIONS OF LAW FRAMED ABOVE IN FAVOUR OF THE APPLLANT BY ALLOWINT THE APPEAL AND TO SET ASIDE THE FINAL ORDER NO. 20928/2014 DATED 23.05.2014 PASSED BY THE CESTAT, SOUTH ZONAL BENCH, BANGALORE AND RESTORE THE ORDER-IN-ORIGINAL NO.VIII/13/28/99 DATED 28.4.2014 PASSED BY THE APPELLANT. THIS APPEAL COMING ON FOR FINAL HEARING, THIS DAY, VINEET SARAN J, DELIVERED THE FOLLOWING: JUDGMENT The present appeal is with regard to the renewal of the Customs House Agent (now Customs Broker) Licence of the respondent. 2. Brief facts relevant for the purposes of this case are: Respondent was initially granted a Customs House Agent Licence under the provisions of the Customs House Agents Licensing Regulations, 2004 (for short Regulations of 2004 ) which was valid up to 08.04.2014. Regulations of 2004 were substituted by the Customs Brokers Licensing Regulations, 2013
3 (for short Regulations of 2013 ) and it was under the said Regulations that the respondent submitted an application on 14.02.2014 for renewal of its licence as a Customs Broker. In the said application, certain declarations had to be made in terms of Regulations 5 and 9(2) as well as the Public Notice No.2/2014 (CUS) which were duly provided by the respondent along with the application forms. After filing of the application by the respondent, certain information was gathered by the appellant from the Customs Office of the various ports in the Country and on the basis of such information received, a notice dated 08.04.2014 was issued to the respondent to show cause as to why the request for renewal of licence be not rejected. In response to the same, reply dated 16.04.2014 was submitted by the respondent. After considering the documents submitted and hearing the parties, vide order dated 28.04.2014 the Commissioner of Customs, Bengaluru rejected the
4 application for renewal of the licence of respondent. Challenging the said order, respondent filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Bengaluru, which has been allowed by the Tribunal vide its order dated 23.05.2014. Aggrieved by the same, Commissioner of Customs and Service Tax has filed this appeal. 3. Though the appeal was admitted on 12.08.2014 but no question of law was framed at that stage. However, learned counsel for the parties have agreed that questions of law as framed in the appeal are the substantial questions of law required to be answered, which are reproduced below: (i) WHETHER the impugned order passed by the CESTAT by ignoring the relevant evidence with regard to the pending prosecution against the respondent firm and
5 holding that criminal prosecution are pending only against the employee of the firm is justified? (ii) WHETHER, in the facts and circumstances of the case, the impugned order of the CESTAT is sustainable particularly when the CESTAT has agreed with the finding of the Commissioner that the complaint need not be a proven one as contemplated in Regulation 9(2) of the Customs Brokers Licensing Regulations? (iii) WHETHER the CESTAT is right in holding that the Commissioner has to independently examine the gravity of the offence even before the proper authority in the respective proceedings
6 passes an order in the said matter? (iv) WHETHER the CESTAT is right in passing the impugned order particularly in view of the fact that the allegations of misconduct and offences charged directly relate to the proper administration of the Customs Act and Regulations framed thereunder? (v) WHETHER the CESTAT is right in passing the impugned order in the face of specific provisions of Regulation 5(d) of the Customs Broker Licensing Regulations which debar any person, against whom a criminal prosecution is pending, from obtaining a licence?
7 4. We have heard Sri G Rajagopalan, learned Additional Solicitor General of India along with Sri N.R.Bhaskar, learned counsel appearing on behalf of appellant as well as Sri G.Shivadass, learned counsel appearing for the respondent and perused the record. 5. The Commissioner of Customs has denied renewal of licence primarily on the ground that there was a complaint of misconduct against the respondent and also because the respondent had suppressed material information required to be declared under Regulation 5(d) of the Regulations, 2013 read with Public Notice No.2/2014(CUS), which was to the effect that the applicant was to disclose about any criminal proceedings pending against it in any Court of law and despite a criminal case pending against the respondent applicant under Sections 120B, 420, 468 & 471 of the Indian Penal Code, no such information was provided in the application or
8 declaration or in other words, same had been suppressed. 6. The submission of Sri G Rajagopalan, learned Addl. Solicitor General of India primarily is that, it was the duty of the respondent to have furnished the requisite information with regard to the pendency of the criminal case, which was not relating to any other activity but with regard to the activity as a Customs Broker, and such being the position, it could not be said that the respondent applicant did not have knowledge of the pendency of the criminal case. It has also been submitted that under Regulation 9(2) of the Regulations of 2013, there being a complaint of misconduct against the respondent with regard to the conduct of the operation of his licence, the rejection of the renewal of licence in the case of the respondent was perfectly justified and the Tribunal has wrongly directed for
9 renewal of the same without considering these factual aspects. 7. Per contra, learned counsel for the respondent has submitted that all requisite information was provided by the applicant while submitting the application for renewal of licence and the declaration given by the respondent was absolutely correct as it was provided in the said declaration that there was no judicial/quasi judicial case pending against it at Bengaluru. It is thus submitted that there was no mis-declaration made by the respondent and in the facts of the present case, refusal to renew the licence could not have been ordered 8. Learned counsel for the respondent further submitted that the criminal case which was pending against respondent was in Kolkata and not in Bengaluru and that too, for the incident which
10 took place in the year 2009 for which a charge sheet was submitted in the year 2011 and since then the licence of the respondent has neither been suspended nor revoked nor any penalty had been imposed and respondent has been carrying on the business without any complaint whatsoever and this itself is an indication to the fact that respondent s licence can be renewed and pendency of a case is no impediment to renew the licence. 9. Having heard the learned counsel for the parties and considering the facts and circumstances, we are of the opinion that direction given by the Tribunal for renewal of licence cannot be justified in law as well as on facts of the case for the following reasons. 10. The conditions to be fulfilled by an applicant for grant of licence is provided for in Regulation 5 of the Regulations, 2013. The relevant provisions of renewal of licence are contained in
11 Regulation 9 of the Regulations, 2014. Said Regulations are reproduced below: 5. Conditions to be fulfilled by the applicants:- The applicant for a licence to act as Customs Broker in a Customs Station, shall prove to the satisfaction of the Commissioner of Customs, that:- (a) (b) (c) he is a citizen of India; he is a person of sound mind; he is not adjudicated as insolvent; (d) he has neither been convicted by a competent court for an offence nor any criminal proceeding is pending against him in any Court of law; and (e) (f) (g) (h) xxx xxx xxx xxx provided that for the purpose of his satisfaction, the Commissioner of Customs may make enquiries as may be deemed fit. 9. Period of validity of a licence.- (1) A licence granted under regulation 7 shall be valid for a period of ten years from the date of issue and shall be renewed
12 from time to time in accordance with the procedure specified in sub-regulation(2): Provided that a licence granted to a Customs Broker, authorised under the Authorised Economic Operator Programme referred to in Board s Circular No.28/2012 - Customs dated 16.11.2012, shall not require renewal till such time the said authorization is valid. (2) The Commissioner of Customs may, on an application made by the licencee before the expiry of the validity of the licence under sub-regulation (1), renew the licence for a further period of ten years from the date of expiration, if the performance of the licencee is found to be satisfactory with reference, inter alia, to the obligations specified in this regulation including the absence of instances of any complaint of misconduct. (3) The fee for renewal of a licence shall be five thousand rupees. 11. In pursuance of Regulation 9, a Public Notice No.2/2014 (CUS) dated 20.01.2014 was issued indicating the procedure to be adopted for renewal of Customs Broker Licence. Under the said notice 16
13 conditions have been prescribed. Relevant extract of paragraphs 2 and 3 are reproduced below: 2) The application for the renewal of Customs Broker Licence, which is due for renewal, shall be submitted to this office, at least 90 days prior to the due date of expiry, along with the following documents:- (i) Application in Form A as per CBLR, 2013 duly signed by the Proprietor /all Partners/ all Directors, as the case may be; (ii) xxx (iii) xxx (iv) Xxx (v) Xxx (vi) Xxx (vii) Xxx (viii) Xxx (ix) Xxx (x) Xxx (xi) Xxx (xii) Xxx (xiii) Xxx (xiv) Xxx (xv) xxx (xvi) Declaration (stating that there was no change in constitution/change in address of Customs Broker; that there was no time expired/inoperative cards in Forms G/H etc; pending submissions to the Department; that they
14 maintain accounts as per Regulation 16 of CBLR, 2013; that no judicial /quasi-judicial cases are pending against them; the details and status of each case, if any judicial/quasi judicial case is pending; that no arrears are payable to the Department. (3) On receipt of the above documents, an antecedent verification will be conducted and due procedure will be followed for renewal or otherwise of the Customs Broker Licence. After approval for renewal is accorded by the Commissioner of Customs, the same shall be intimated to the Customs Broker concerned. 12. It is not dispute that application of respondent for renewal of licence came to be considered in terms of Regulations, 2013 as well as Public Notice No.2/2014(CUS), as the same was categorically mentioned in the application of the respondent dated 14.02.2014. At Sl.No.15 of the said application, the respondent had given the declaration as provided by clause (xvi) of para 2 of the Public
15 Notice No.2/2014. The relevant portion of the declaration is reproduced below: We SDV International Logistics Limited, hereby declare that there are no changes in the constitution, there is no change in address, there was no time expired/inoperative cards in Forms G/H etc., there are no pending submissions to the department, we maintain accounts as per Regulation 16 of CBLR, 2013, there are no judicial/quasi judicial cases pending and there are no arrears payable to the department in Bangalore. 13. A perusal of the said declaration would explicitly make it clear that it was a categorical statement made by respondent that there was no judicial/quasi judicial cases pending against it. An attempt has been made to justify the said declaration as the criminal case against respondent was pending in Kolkata and it has been stated, declaration made was with regard to pendency of any criminal case in
16 Bengaluru alone. Such explanation does not deserves to be accepted as the respondent has been in the business of Custom Clearance Agent since the year 1999 and has been operating in atleast 12 ports in the Country and thus, it cannot be said that he was required to give declaration only with regard to pendency of any criminal case against it in Bengaluru and not anywhere else. Even otherwise, if we look at it from the point of view of respondent and accept the submission of learned counsel for the respondent, then, it will have to be necessarily held that it was a very clever way of circumventing the making of a full and proper declaration by stating that there was no judicial or quasi judicial case pending against it in Bengaluru (even though a criminal case relating to offence with regard to its working as Customs Broker was pending at Kolkata) and yet very wisely concealing the information of pendency of a criminal proceeding against it in a Court of law and thereby
17 not furnishing a declaration as required under Regulation 5(d) of the Regulations of 2013. This clearly amounts to suppression of material information required to be furnished by the respondent at the time of making a declaration and filing the application and would be sufficient reason for rejecting the application for renewal. Respondent is clearly guilty of suppresio veri suggestio falsi suppression of truth and suggesting falsehood. 14. Learned counsel for the respondent has relied on a decision of Calcutta High Court in the case of MONTOSH KUMAR SAHA vs UNION OF INDIA AND ORS (2014 TIOL 752) to support his submission that since the charges against the respondent had not been proved, it was not obligatory to furnish such information of pendency of the case as the Calcutta High Court has held that a person who has been carrying on business ought not to be prevented from carrying the business on the
18 basis of a Court of law holding him guilty of a criminal offence. The case before Calcutta High Court was with regard to revocation of customs licence and not with regard to renewal of licence where a declaration was required to be given that no criminal case was pending and the applicant had deliberately suppressed such material information of pendency of criminal case as is in the present case. 15. The facts obtained in MONTOSH KUMAR SAHA s case referred to herein supra would clearly indicate that petitioner therein had applied for grant of fresh Customs House Agents Licence and same was rejected on the ground of charge sheet under Section 419/468/471 IPC having been lodged before Baranagar Police Station. It has been noticed by the High Court of Calcutta that there were disputes and differences between the writ petitioner and his brother Mr.Debtosh Saha. On account of such disputes, brother of writ petitioner had filed a
19 complaint before the jurisdictional police which had resulted in filing of the charge sheet. The dispute was relating to the partnership firm between the two brothers and undisputedly, the firm M/s.Saha Shipping Agency was possessing the Customs House Agents Licence and said licence came to be cancelled on account of interse dispute between the partners (brothers), which was challenged before the High Court in the earlier round i.e., in W.P.No.16945/2010 which came to be disposed of on 25.01.2011 by observing as under: When one of the two partners of a partnership firm has sought suspension of the licence granted to the partnership, the licence cannot be allowed to operate. The licence would necessarily have to be cancelled. The partnership firm cannot continue with a licence under the Customs House Agents Licensing Regulations, when there is no agreement between the partners. The private respondent being the other partners, might apply for independent licence. The writ application is disposed of by directing the concerned respondents to cancel the licence of the partnership
20 firm. The cancellation of the licence will not, however, prevent the other partner from applying for fresh licence, if he is otherwise eligible. This order was carried in appeal before the Division Bench which came to be disposed of by holding as under: We, thus, find that in the facts of the present case, the ultimate conclusion arrived at by the learned Single Judge was correct. We, therefore, dispose of the appeal by maintaining the order passed by the learned Judge. We make it clear that we have, otherwise, not gone into the dispute and only because, one of the partners of the licensee is not willing to act as such licensee along with the other partner, we direct the Customs Authority to terminate the licence only on that ground. Both the parties are at liberty to apply for fresh licence either in their own names or as a partner of other firm, if they constitute any such firm. The appeal is, thus, disposed of to the extent indicated above. Since both the partners were granted liberty to apply for fresh licence, writ petitioner Sri Montosh Kumar Saha had applied, which came to be rejected by
21 communication dated 7/10.10.2011 which was assailed before the High Court once again. It is in this background, High Court of Calcutta has held that a person who has been carrying on business ought not be prevented from carrying the business on the basis of allegations not proved in Court of law. 16. The said judgment would not come to the rescue of writ petitioner herein inasmuch as, the writ petitioner who was required to disclose all material particulars has wantonly suppressed the criminal proceedings initiated by Calcutta Customs authorities in which proceedings it has been held that petitioner had indulged in smuggling activity. In that view of the matter, authorities who are entitled to consider an application for renewal are empowered to call upon such applicants to furnish all relevant material before them so as to arrive at a rational conclusion to the effect that the applicant is either entitled for renewal of the licence or not.
22 When undisputedly criminal case was pending and same having been not disclosed (which was not the situation in MONTOSH KUMAR SAHA s case), petitioner herein cannot be heard to contend, principles enunciated in MONTOSH KUMAR SAHA s case would be applicable to the facts on hand. Thus, the irresistible conclusion which we arrive at is that facts obtained in MONTOSH KUMAR SAHA s case are inapplicable to the facts on hand. 15. In view of the aforesaid discussion, appeal is hereby allowed. Substantial questions of law are answered in favour of the revenue appellant and against the respondent. Sd/- JUDGE *sp Sd/- JUDGE