Madras High Court Sets Aside Customs Broker Suspensions, Says 'Immediate Action' Must Be Timely

The Madras High Court has set aside the suspension of licenses of 11 Customs Brokers, holding that the power to order “immediate suspension” cannot be exercised after an unexplained or substantial delay.

Justice Hemant Chandangoudar held that while “immediate” does not mean that the suspension must be ordered instantaneously, the Customs authorities must act with reasonable promptness once the material necessary for taking action is available.

The Court was hearing a batch of writ petitions filed by Customs Brokers challenging orders suspending or continuing the suspension of their licences under Regulation 16 of the Customs Brokers Licensing Regulations (CBLR), 2018.

The Customs Brokers argued that Regulation 16 permits suspension only where immediate action is necessary and that the power cannot be used as a routine disciplinary measure. They pointed out that in several cases, the alleged violations had occurred months or even years before the suspension orders were passed.

The Customs authorities, on the other hand, submitted that the word “immediate” does not mean “instantaneous”. They argued that investigations may require searches, recording of statements, examination of documents and verification of multiple consignments before an offence report can be prepared.

According to the authorities, the relevant period for examining delay should therefore be considered from the date on which the offence report was received by the licensing authority.

The Court agreed that the time taken by an investigating authority to complete an investigation and prepare an offence report cannot, by itself, invalidate a subsequent suspension.

However, it held that the period between the receipt of the offence report by the licensing authority and the passing of the suspension order is directly relevant.

The bench observed that Regulation 16(1) contains three essential requirements: there must be an appropriate case, immediate action must be necessary, and an enquiry must be pending or contemplated. The mere existence of an enquiry, however, does not automatically justify immediate suspension.

"The expression “immediate” does not necessarily mean “instantaneous”. However, it requires the licensing authority to act with reasonable promptness once sufficient material is available to form the requisite satisfaction.", the Court said.

The Court said that immediate suspension is an exceptional and preventive measure. Therefore, where the licensing authority receives the relevant material but remains inactive for a substantial period without explaining the delay, such delay may indicate that there was no genuine necessity for immediate suspension.

The bench also referred to Customs Circular No. 9/2010 dated April 8, 2010, which provides that where immediate suspension is warranted, the investigating authority should furnish the offence report within 30 days of detection of the offence and the licensing authority should take necessary action within 15 days of receiving the report.

It held that the circular continues to bind the Department unless it has been withdrawn, superseded or is inconsistent with the statutory regulations. While reasonable deviation from the prescribed timelines may be possible in appropriate circumstances, a substantial delay must be satisfactorily explained.

The Court also referred to Instruction No. 24/2023 dated July 18, 2023, which requires the Commissioner to record reasons explaining why immediate action is necessary before suspending a Customs Broker's licence.

"Thus, the requirement of recording reasons assumes significance because Regulation 16(1) does not permit suspension merely because an enquiry is pending or contemplated. The competent authority must apply its mind to the material available and record its satisfaction that the particular case warrants immediate preventive action.", the Court said.

The bench held that where the authorities had sufficient material to initiate action but failed to explain the delay in ordering suspension, the requirement of “immediate action” under Regulation 16(1) could not be said to have been satisfied.

It clarified that it was not examining the merits of the allegations against the Customs Brokers or deciding whether their licences could ultimately be revoked. 

"...this Court is of the considered view that, in all these cases, the considerable delay in completing the investigation and the subsequent delay in passing orders under Regulation 16(1), after receipt of the offence report, have not been satisfactorily explained so as to justify the need for immediate action.", the Court said.

Allowing the writ petitions, the Court set aside the suspension orders passed under Regulation 16(1) as well as the consequential orders continuing the suspension under Regulation 16(2).

The Court said the Customs Brokers would be entitled to carry on their business, subject to the CBLR and other applicable laws.

It also clarified that the competent authority would remain free to proceed against them in accordance with law, including taking steps for revocation of their licences where warranted.

For Petitioner: Advocates S. Baskaran and Mr. Hari Radhakrishnan

For Respondent: Advocates K.S. Ramaswamy, Mr. H. Sidharth, Mr. J. Vasu, Mr. Rajendran Raghavan, Mr. M. Santhanaraman, Mr. J. Harikrishna and Ms. Pooja Jain