The revocation of a CHA license must be proportional to the violation, considering the gravity of the infraction and the presence of mens rea.

S. Ravindra Bhat, J.

1. This appeal challenges an order of the Customs, Excise and Service Tax Appellate Tribunal (“CESTAT”), by which the CESTAT upheld the revocation of the license of the appellant under the Custom House Agents Licensing Regulations, 1984.

2. The brief facts are that the appellant had obtained its Custom House Agents (“CHA”) License in terms of the Custom House Agents Licensing Regulations, 1984 – which was subsequently replaced in 2004. Sometime in 2003, at the request of one M/s. V.K. International, G Cards were issued to two employees of this concern, i.e. Sh. Naveen Mishra and Sh. Jawed Kamal (hereafter referred to as “V.K.’s employees”). During the course of investigation, it was discovered that V.K.’s employees were misusing their G Cards and indulging in illegal narcotics export. During the course of investigation, the proprietor of the appellant, in his statement under Section 108 of the Customs Act, 1962, admitted that V.K.’s employees were holding G Cards and misrepresenting themselves to be his employees but were in reality carrying on work on behalf of M/s. V.K. International. He further stated that this presented VK’s employees the opportunity to misuse the G Cards and indulge in the illegal activities. He also admitted to receiving Rs.15,000/- per month from M/s. V.K. International for granting facility of G Cards to its employees. This was in contravention of Sections 13(b) and 13(e) and 19(8) of the Custom House Agents Licensing Regulation, 2004 (hereafter referred to as “the Regulations”). On 24.01.2005, the Commissioner of Customs deemed this to be sufficiently grave to suspend the appellant’s license. Thereafter, enquiry proceedings were initiated, by which the order-in-original of 08.08.2007 revoked the appellant’s license under Regulation 20(1). The order also forfeit Rs.50,000/-. The appellant challenged this order before the CESTAT. Before the Tribunal, there was a difference of opinion – the Member (Judicial), Ms. Archana Wadhwa was of the opinion that the suspension and subsequent revocation of appellant’s license was too harsh a punishment and it had the effect of taking away the proprietor’s (and his dependants’) means of livelihood for the rest of their life. She further stated that:

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8. Keeping in view the contravention committed by the appellant, we find that the suspension and subsequent revocation of his licence is too harsh a punishment to be awarded to him. The revocation of licence has the effect of taking away the means of livelihood of that person for the rest of his livelihood. The same effects not only the person concerned but his family as also the staff, workers of CHA. Keeping in view that the appellant was not directly connected with the illegal export and did not have the knowledge of mis-use of G cards, we think it fit to hold that suspension and revocation of his licence for the last 6 years is sufficient and adequate punishment for the contravention committed by him.

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4. The Technical Member, Sh. Mathew John, further differed from this approach and was of the opinion that a CHA operated on the basis of trust. He acts as an agent of the Customs House as well as of the exporter and importer. Being so placed, the CHA or its employees would have access to sensitive information that can be potentially misused for smuggling. The Technical Member was of the opinion that the appellant virtually rented out the CHA license to V.K.’s employees and facilitated their access to the places which afforded them the opportunity to indulge in illegal behaviour. These facts, in his opinion, did not absolve the appellant and thus, the penalty was proportionate. In view of the plurality of opinion, the appeal was referred to a third Member under Section 129(5) of the Customs Act, 1962. The third Member, Sh. Rakesh Kumar, agreed with the conclusions of the Technical Member and held that the revocation was justified under the circumstances.