2021 (9) TMI 193 - AT - Customs

Customs Broker Penalty Overturned: Middleman Authorization Not a Breach, Lack of Communication Cited

The Tribunal overturned the penalty imposed on a Customs Broker for alleged violations of Regulation 11(a) and 11(n) of the CBLR, 2013. It held that ... Levy of penalty on Customs Broker u/r 18 of the CBLR, 2013 - violation of provisions of Regulation 11(a), 11(d) and 11(n) of CBLR, 2013 - allegation is on the ground that authorization / KYC documents was obtained from middleman instead of importer directly - conclusion of allegation without informing the Customs Broker - fair opportunity of hearing not provided - principles of natural justice - HELD THAT:- These Regulations are in the nature of disciplinary rules for a Customs Broker. Revocation of license is a major punishment which affects the livelihood of not only the Customs Broker but also those persons who are employed under him. The punishment being of such major nature, Regulation provides for the conduct of inquiry before adjudication of the Show Cause Notice issued to the Customs Broker. The inquiry proceedings is a measure to be cautious and to give sufficient opportunity to the person whose conduct is the subject matter of the Show Cause Notice. The purpose of such inquiry is to help the adjudicating authority to derive at proper conclusion based on all materials and facts that have been collected during the inquiry. The first stage of such inquiry as laid down in the Regulation is to collect material / statements so as to give opportunity to those persons who are required or relevant to be heard. In the second stage, the Regulation provides for giving opportunity to the Customs Broker to cross-examine those persons whose statements have been recorded. The Inquiry Officer should support his conclusion with reason. The principles of natural justice requires that a copy thereof recording the reasons of disagreement has to be supplied to the Customs Broker so that he is able to reply to the charges levelled against him as against the conclusions arrived by the Inquiry Officer. Thus, the adjudicating authority is bound to put to notice the Customs Broker, setting out tentative conclusions or the points on which he differs from the Inquiry Officer. This would facilitate and ensure the right of Customs Broker to defend his case - In the instant case, though the Inquiry Officer has reported that there is no violation under Regulation 11(a), (d) and (n) of the CBLR, 2013 the adjudicating authority has proceeded to conclude that there is violation of 11(a) and 11(n), without informing the Customs Broker on the ground of disagreement with the inquiry report. The finding rendered by the adjudicating authority that the appellant has violated Regulation 11(a) and 11(n) are without any factual or legal basis and requires to be set aside - penalty set aside - appeal allowed - decided in favor of appellant. Issues Involved:1. Violation of Regulation 11(a) of CBLR, 2013.2. Violation of Regulation 11(n) of CBLR, 2013.3. Adherence to principles of natural justice in adjudication proceedings.Detailed Analysis:1. Violation of Regulation 11(a) of CBLR, 2013:The appellant, a Customs Broker, was penalized for allegedly violating Regulation 11(a), which mandates obtaining authorization from the importer. The appellant obtained the authorization from a middleman rather than directly from the importer. The adjudicating authority held that this constituted a violation. However, the Tribunal noted that the required documents were proper and signed by the importer, and it is not always practical to obtain documents directly from the importer. Citing precedents from K.S. Sawant & Co. and other cases, the Tribunal concluded that obtaining authorization through a middleman does not violate Regulation 11(a). Thus, the penalty imposed on this ground was deemed unjustified.2. Violation of Regulation 11(n) of CBLR, 2013:Regulation 11(n) requires the Customs Broker to verify the antecedents and identity of the importer. The adjudicating authority found a violation based on the non-appearance of the importer's representative before customs authorities. The Tribunal emphasized that the department has the means to enforce attendance and that the appellant cannot be held liable for the importer's failure to appear. Furthermore, the Tribunal noted that the inquiry report had found no violation of Regulation 11(n). Therefore, the finding of violation by the adjudicating authority was without basis.3. Adherence to Principles of Natural Justice:The Tribunal highlighted the procedural safeguards under Regulation 20 of CBLR, 2013, which include conducting an inquiry and allowing the Customs Broker to cross-examine witnesses. The adjudicating authority failed to communicate its disagreement with the inquiry report's findings to the appellant, violating principles of natural justice. The Tribunal stressed that any deviation from the inquiry report's conclusions must be communicated to the Customs Broker to ensure a fair defense. The failure to do so rendered the adjudication process flawed.Conclusion:The Tribunal found that the adjudicating authority's conclusions regarding violations of Regulation 11(a) and 11(n) lacked factual and legal basis. The penalty of Rs. 50,000 imposed on the appellant was set aside, and the appeal was allowed with consequential relief.