CESTAT Mumbai Holds CCSP Suspension Must Be Preventive Not Punitive, Restores ICTPL Licence

On 10 August, the Mumbai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the power to immediately suspend a Customs Cargo Service Provider (CCSP) approval under Regulation 11(2) of the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR) is preventive and not punitive, and can be exercised only where a demonstrable and continuing threat requires immediate action.

A Bench comprising Judicial Member Ajay Sharma and Technical Member A K Jyotishi set aside the continued suspension of International Cargo Terminal Pvt. Ltd.'s (ICTPL) approval to operate its Container Freight Station (CFS) at Nhava Sheva and directed the jurisdictional Commissioner to restore its licence. It observed:

"Regulation 11(2) can be invoked only where the Commissioner concludes, on an application of mind, that immediate action is necessary. Material that would justify initiating and sustaining action under Regulation 11(1) cannot, without more, constitute the sole basis for action under Regulation 11(2)."

The case arose after the Department suspended ICTPL's CCSP approval on 13 April 2026 following the seizure of two consignments of fireworks at its CFS and an incident involving the alleged unauthorised removal of goods from another container. It continued the suspension through an order dated 5 May 2026 without prescribing any outer time limit.

ICTPL challenged the suspension before the CESTAT. The Bombay High Court subsequently set aside the Tribunal's order and remanded the matter for fresh consideration after ICTPL argued that Regulation 11(2) permitted suspension only as a preventive measure and not as a punitive measure. The High Court directed that the matter be heard by a different CESTAT Bench.

Before the Tribunal, the Revenue relied on allegations of unauthorised removal of imported goods, unauthorised access to the CFS, alleged bypassing of scanning procedures, unauthorised breaking of container seals and other security lapses. It contended that the suspension was necessary to protect revenue, cargo security and national security while the Directorate of Revenue Intelligence (DRI) investigation remained pending.

The Bench, however, noted that Customs authorities had inspected the CFS in January and December 2025 and that the inspection reports did not record deficiencies in its security or access-control mechanisms. It held that the investigative material relied upon by the Revenue, including CCTV footage, photographs and entry-exit records, could not by itself amount to an objective assessment by the licensing authority demonstrating an immediate risk warranting suspension.

It also noted that more than 3,000 containers were cleared during the suspension period without additional Customs officers, special monitoring or other protective measures. It held that this was difficult to reconcile with the Department's contention that immediate suspension was necessary to address an ongoing threat.

Further, the Tribunal noted that an ICTPL employee had alerted the DRI about the unauthorised removal of goods, enabling the authorities to intervene and secure the container. It also recorded that statements of around 18 employees investigated by the DRI had not, as of the date of the order, implicated the company's management in the alleged illegal activity. It observed:

"An order of suspension under Regulation 11(2), left unaddressed and unreviewed for as long as the present one, loses its character as a preventive measure and assumes the character of a punitive one — a consequence that Regulation 11(2), by its very terms and rationale, was never intended to permit."

It also considered the corrective measures introduced by ICTPL, including digital gate entry and exit, strengthened gate controls, enhanced CCTV surveillance, revised scanning and cargo-handling standard operating procedures and strengthened authorisation protocols. An independent review report placed before the Bench found the revised security controls adequate to address the identified concerns.

The Bench noted that the Department had not issued a show cause notice under Regulation 12 even after more than 100 days of suspension. It held that any residual concerns relating to the investigation could be addressed through less restrictive measures, including undertakings for preservation and production of records, access protocols and enhanced supervision.

It also clarified that its interference was confined to the legality of the continued suspension under Regulation 11(2). It held that the Department remained free to initiate proceedings under Regulation 11(1), which provides for action against a CCSP after following the prescribed procedure.

Accordingly, the CESTAT set aside the suspension order and directed the jurisdictional Commissioner to restore ICTPL's licence, while permitting him to impose necessary conditions on the movement of imported and export goods to safeguard revenue. It also directed ICTPL to continue implementing its corrective and preventive measures, while leaving it open to the Department to initiate proceedings under Regulation 11(1) after conducting a proper inquiry in accordance with law.

Counsel for Appellant: Dr. Sujay Kantawala, Ms. Aishwarya Kantawala, Advocates, along with Shri Manoj Das, Consultant.

Counsel for Revenue: Shri P.R.V. Ramanan, Special Counsel