2019 (4) TMI 399 - HC - Customs

CESTAT decision affirmed by High Court, upholding penalty on CB holder.

COMMISSIONER OF CUSTOMS (GENERAL) Versus KVS CARGO

The High Court upheld the CESTAT's decision to impose a penalty of forfeiture of security and Rs. 50,000 on the CB holder, dismissing the appeal by the ... Revocation of CHA License - Forfeiture of security deposit against CHA - Imposition of penalty - the inquiry revealed discrepancies in the residential address of the partner of the importer M/s. Unisys Enterprises and that the CB holder did not properly discharge his functions - Held that:- This Court is not persuaded to exercise jurisdiction to set aside the order entirely because the role ascribed to the CB holder was one of carelessness and negligence. In this regard the Court notices that both the authorities, the Commissioner as well as the CESTAT appeared to have imposed almost impossibly high standards upon the CB holder who is expected to not only verify the correctness of the documents with reference to the publically available material but also carry out independent investigations. No doubt, the CB holder acts as an interface between the Customs Authorities and facilitates the task of a consignee/importer, yet to expect such an independent agent - who is not a public servant or in any way connected with the Customs Department to act as a public trustee (an expression used by the Commissioner), is beyond what is contemplated. Appeal dismissed - decided against Revenue. Issues:Challenge to CESTAT order granting partial relief to CB holder, Penalty of forfeiture as appropriate, Violation of Customs Brokers Licensing Regulations, 2013, Exoneration by Inquiry Officer, Disagreement by Commissioner, Revocation of license and forfeiture of security, Penalty imposed by CESTAT, Authority of penalty under Regulation 18, Imposition of penalty along with forfeiture, High standards imposed on CB holder, Expectations from CB holder as an independent agent, Dismissal of appeal.Analysis:The High Court judgment dealt with an appeal by the Customs Authorities against a CESTAT order that granted partial relief to the respondent CB holder. The Revenue argued that the penalty of forfeiture was appropriate considering the circumstances. The inquiry against the CB holder was initiated based on allegations of failure to perform due diligence and violations of Customs Brokers Licensing Regulations, 2013. The CB holder facilitated the importation of goods for a firm with dubious credentials, leading to discrepancies in the residential address of the importer's partner. Despite exoneration by the Inquiry Officer, the Commissioner proposed penalizing the CB holder, resulting in revocation of the license and forfeiture of the security amount. The CESTAT found violations of Regulations 11(a) and 11(d) but imposed a penalty of forfeiture of security and Rs. 50,000 instead of revocation. The Revenue contended that the CESTAT's decision was inadequate as Regulation 18 authorized revocation coupled with forfeiture or penalty.The Court noted that the CESTAT had exceeded the Regulations by not allowing the option of imposing a penalty along with forfeiture. However, the Court declined to set aside the order entirely due to the perceived carelessness and negligence of the CB holder. Both the Commissioner and CESTAT were criticized for setting high standards for the CB holder, expecting verification of documents and independent investigations beyond the norm for a non-public servant acting as an interface between Customs Authorities and importers. The Court highlighted that the CB holder cannot be expected to act as a public trustee and dismissed the appeal based on these considerations. The judgment emphasized the impracticality of expecting such high standards from a non-public servant in the role of a Customs broker.In conclusion, the High Court upheld the CESTAT's decision to impose a penalty of forfeiture of security and Rs. 50,000 on the CB holder, dismissing the appeal by the Customs Authorities. The judgment highlighted the limitations of imposing unrealistic expectations on CB holders and the need to consider their role as independent agents facilitating customs processes without being public servants.