LOGIC TRANSWARE INDIA PVT LTD. v. COMMISSIONER OF CUSTOMS

2. During the course of hearing, learned counsel for the respondent has stated that the card and the licence were required to be surrendered for deletion of the endorsement made on the licence to the effect that the petitioner can transact business under Regulation 9(2) in the jurisdiction of Delhi Commissionerate. Thereafter, licence and card would be returned to the petitioner.

3. The petitioner has challenged the said order on two grounds. Firstly, no hearing or show cause notice was granted/issued to the petitioner and there has been violation of principles of natural justice. Secondly, it is submitted that order of prohibition under Regulation 21 can be only in respect of one or more sections of the Customs House and not the entire Commissionerate. The contention of the respondents, on the other hand, is that Regulation 21 is an independent regulation and the procedure prescribed in Regulation 22 is not applicable to Regulation 21. Regulation 22 is applicable only when proceedings are initiated for suspension and revocation of licence and not when an order of prohibition is passed in Regulation 21.

4. Regulations 20, 21 and 22 of the 2004 Regulations read as under:-

5. Sub-clause (1) to Regulation 20 stipulates that the Commissioner of Customs may subject to provisions of Regulation 22 revoke a licence of Customs House Agent or order for forfeiture of part or whole of the security etc. Sub-clause (2) of the Regulation stipulates that Commissioner of Customs, may in appropriate cases, where immediate action is necessary, within 15 days of receipt of report from investigating authority, suspend a licence.

6. Regulation 22 deals with procedure for suspension or revoking of licence. Sub-clause (1) thereof prescribes the applicable procedure and mandates issue of notice, written statement of defence by the Customs House Agent and hearing. However, proviso to sub-clause (1) states that the procedure in Regulation 22(1) shall not apply to subregulation (2) of Regulation 22, i.e., cases of suspension. Thus, the procedure prescribed in Regulation 22(1) would not apply when the authorities are required to take immediate action to suspend the licence, pending decision whether or not to revoke the licence. The proviso, therefore, puts action under sub-regulation (2) to Regulation 20 in the same position as action contemplated under Regulation 21. In both situations, procedure stipulated in Regulation 22(1) is not applicable and need not be followed. In these circumstances, we do not appreciate and accept the contention of the respondents that Regulation 21 specifically states that the procedure in Regulation 22 will not be applied and, therefore, post-decisional hearing is not required or mandated. The same or identical position exists as far as suspension of licence under Regulation 20(2) is concerned. The aforesaid similarity in the two provisions, i.e., Regulations 21 and 20(2) becomes relevant because a Division Bench of the Delhi High Court in International Cargo Services versus Union of India, 2006 (193) ELT 546 (Delhi) has held:- “7. The principles of natural justice have twin ingredients. Firstly, the person likely to be adversely effected by the action of the authorities should be given notice to show cause or granted reasonable opportunity of being heard in consonance with the maxim audi alteram partem. Secondly, the order so passed by the authorities should give reasons for arriving at any conclusion showing proper application of mind. Violation of either of these principles normally would render an order particularly quasi-judicial in nature invalid. Violation of principles of natural justice is violation of basic rule of law and would invite judicial chasticism. However, this rule is not without exceptions. Of course, the exception to such a rule are rare. Where the legislative scheme of provisions of a statute suggest that intent of the legislature is to take emergent action, in that event and subject to fulfillment of ingredients of the provisions, an order could be passed without affording pre-decisional hearing and an expeditious post-decisional hearing may amount to substantial compliance with the basic rule of law. Regulation 20 (1) empowers the Commissioner of Customs to revoke the license of an agent and even order forfeiture of part or whole security. This action could be taken restricted to the grounds spelled out in the regulation itself. This power can hardly be invoked by the authorities for instantly revoking a license while under 20 (2) of the regulations the same authority may in appropriate cases where immediate action is necessary suspend the license of the agent where enquiry against such agent is pending or contemplated. The emphasis is on the expression 'immediate action is necessary' and 'enquiry against such agent is pending or contemplated'. Furthermore, this regulation opens with non-obstante expression 'notwithstanding anything contained in subregulation (1)'. Thus, provisions of subregulation (2) would take precedence and recourse thereto can be taken despite the pendency of proceedings for revocation of license. In normal course, the procedure prescribed under Regulation 22 has to be followed by the authorities. In a case where immediate or emergent circumstances do not exist, notice should be issued to the agent, before authorities could pass an order in exercise of their powers under Rule 20 (1) or

21. However, this may not be quite true in an emergent situation. Where the authorities are of the considered view that the facts and circumstances disclose sufficient grounds for invoking emergent provisions and it is absolutely essential to suspend the license of the agent, in public interest, there the authorities may do so without serving a notice on the agent, but at the same time ensuring that post-decisional hearing is granted to the agent and the matter is considered with utmost expeditiousness. The rules of natural justice would have to be read into regulation 20 (2) but with the proviso that post-decisional hearing in emergent situation and subject to the satisfaction of the competent authority would be granted at the very first possible opportunity. Wherever a license is suspended without hearing, the authorities would be under obligation to grant post-decisional hearing to the agent immediately thereafter and ensure that the authorities after hearing the concerned party and upon due application of mind consider the matter whether the order of suspension should continue during the period of enquiry or otherwise. Such an approach would be just, fair and would further the object sought to be achieved by these provisions. The expression 'immediate' has to be harmoniously read and construed with other provisions including the provisions of regulations 20 and 22. The period specified in regulation 22 would have the effect of rendering the expression 'immediate' ineffective and meaningless. Therefore, applying the principle of harmonious construction, the provisions will have to be given their true and correct meaning and they should be permitted to operate in the field in which they are intended to operate by the legislature, so as to avoid any conflict between the language of these two provisions. An order of suspension is bound to have serious consequences upon the business of the agent and tantamounts to practically closing the business of the agent. As such to permit an order of suspension, even passed in emergent situations, to continue for indefinite period without hearing the agent would definitely be infringement of the principles of natural justice and basic rule of law as well. The only way in which both these provisions can operate without conflict is to hold that an order of suspension in 'emergent' situation can be passed for recorded reasons without hearing the agent at the first instance but should be granted opportunity of showing cause immediately thereafter and the authorities are expected to apply their mind whether the order of suspension so passed should be permitted to continue or not. This power is an exception to the normal rule of audi alteram partem and therefore recourse to it should be only in the case of immediate action in public interest or to prevent breach of statutory provisions, regulations or conditions of license, failing which serious consequences are bound to flow.

8. The authorities with the above exception are expected to adhere to the principles of natural justice wherever they exercise their powers for revoking and/or suspending a license in consonance with the provisions of Regulation 20 read with 22.”

7. For the purpose of record, we also note that Regulation 21 quoted and reproduced in the said decision and paragraph 7 thereof specifically refers to the Regulation 21. Therefore, in our view, the ratio expressed in paragraph 7 of the judgment in the case of International Cargo Service (supra) will equally apply to the case of prohibition order under Section 21. An order of prohibition is equally penal and entails in similar adverse consequences as in a case of suspension. An order of prohibition can be perceived to be more severe and stringent as it is not a temporary or of interim nature. In International Cargo Service (supra), the Division Bench thereafter referred to the judgments of the Supreme Court in Rattan versus Managing Committee, (1993) 4 SCC 10, Maneka versus Union of India, (1978) 1 SCC 248, State of Punjab versus Gurdayal, AIR 1980 SC 319 and M/s Raj Restaurant and Another versus Municipal Corporation of Delhi, (1982) 3 SCC 338 and has directed as under:-