2023 (9) TMI 1202 - HC - Customs

Customs Appellant not liable for reporting post-clearance offence. Punitive measures revoked, Rs. 50,000/- penalty upheld.

D.S. Cargo Agency Versus Commissioner Of Customs

The court held that the Appellant was not liable for reporting an offence committed after goods were cleared from the Customs Station and stored in the ... Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - appellant liable for reporting an offence committed in relation to goods stored in the bonded warehouse, after the same have been imported and the professional role of the Customs Broker in clearance of the goods had ended - HELD THAT:- In the facts of this case, there is no allegation of impersonation in the name of importer firms. The finding of DRI is that these importer firms were not being run and operated by the persons in whose name the importer firms were incorporated. The allegation is not that these firms are fictitious and do not exist. The finding is that these firms are being run and remotely controlled by Mr. Sanjeev Maggu and Mr. Ramesh Wadhera. The Regulation requires the Customs Broker to verify the identity of the client (i.e., importer firms) and in the facts of this case since the clients (i.e., importer firms) exist as is evident from the functionality of the IEC (as discussed above), it is not possible to hold that there has been a blatant violation of this Regulation, which would justify the revocation of CB license. There is an attempt to embellish the allegations against the Appellant. It has been stated that the Appellant had knowledge ‘before hand’ that the importer firms were dummy firms and was aware of this fact even prior to removal of the goods from custom bonded warehouses. This Court finds that there is no such finding against the Appellant in the orders of the Commissioner or the learned Tribunal and the same is also not evident from the statement dated 14.07.2017, which is the sole document relied against the Appellant; and therefore, this submission of the Respondent is not borne out from the record. Proportionality of the punishment handed down to the Petitioner - HELD THAT:- This Court however takes note that the Appellant was unable to provide the KYC records of the importer firms to DRI and Customs authorities despite undertaking to do so in reply to question in its statement dated 14.07.2017 and thereby raising an inference of lapse in collecting the KYC documents. This fact has also been highlighted by the Respondent in the written submissions dated 11.09.2023. In the opinion of this Court in view of the judgment of KUNAL TRAVELS (CARGO) VERSUS COMMISSIONER OF CUSTOMS (IMPORT & GENERAL) NEW CUSTOMS HOUSE, IGI AIRPORT, NEW DELHI [2017 (3) TMI 1494 - DELHI HIGH COURT], the said inaction of the Appellant cannot justify the imposition of the maximum punishment of revocation of the license. There is no finding against the Appellant that he in any manner connived with the importer firms or abetted the said firms in their wrongful actions in diverting the goods to the domestic market without payment of customs duty, which led to the loss to the revenue. There is no finding that the Appellant earned extra commission for the assignment for clearance of imported goods from the Customs Station or has partaken in the illegitimate gains made by the importer firms. In the facts of this case, the revocation of the license came into effect on 04.02.2019 and a period of more than 4 ½ years has already lapsed. The revocation of the license which is in operation since 2019 i.e., almost 4 ½ years is itself a severe punishment and will serve as a reprimand to the Appellant to conduct its affairs with more alacrity. A penalty of revocation of license for failing to collect the KYC forms unjustly restricts the Appellant’s ability to undertake the business CHA for the entire life - keeping in view the proportionality doctrine and keeping in view that the Appellant has already been unable to work for 4½ years, this Court is therefore of the opinion that the impugned order of the learned Tribunal as well as the order-in-original dated 04.02.2019 to the extent that it revokes the Appellant’s license and forfeits the security deposit is liable to be set aside. Since the tenure of the license expired on 09.03.2019, the Appellant will be at liberty to apply for the grant of a new license and if such an application is made, the same will be considered under the extant regulations. Appeal allowed. Issues Involved:1. Whether the Appellant is liable for reporting an offence committed in relation to goods stored in the bonded warehouse after the professional role of the Customs Broker had ended.2. Whether the Appellant violated specific regulations under the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018) and Customs Brokers Licensing Regulations, 2013 (CBLR, 2013).3. Whether the punitive measures imposed on the Appellant were proportionate.Summary:Issue 1: Liability for Reporting Offence Post Professional RoleThe court examined if the Appellant, under CBLR, 2018 read with CBLR, 2013, was liable for reporting an offence committed after the goods had been cleared from the Customs Station and stored in the bonded warehouse. The court concluded that the Appellant's duty ended once the goods were cleared from the Customs Station and reached the bonded warehouse. The Appellant was not responsible for the illegal diversion of goods by the importer firms into the domestic market without paying customs duty. The court held that the Appellant could not be held liable for the personal acts and omissions of the importer firms after the clearance of goods from the Customs Station.Issue 2: Violation of Specific RegulationsThe court analyzed the alleged violations of various regulations:- Regulation 10(b) of CBLR, 2018 read with 11(b) of CBLR, 2013: The court found no material on record to indicate that the Appellant had not carried out the work of filing the Bills of Entry (B/Es) either personally or through his authorized employee. Therefore, there was no violation of this regulation.- Regulation 10(d) of CBLR, 2018 read with 11(d) of CBLR, 2013: The court held that the Appellant was not responsible for advising the importer firms on re-export obligations after the goods were cleared from the Customs Station. The duty to report non-compliance was limited to the documents submitted by the Customs Broker for clearance at the Customs Station.- Regulation 10(e) of CBLR, 2018 read with 11(e) of CBLR, 2013: The court found no evidence that the Appellant had given incorrect information to the importer firms. The illegal actions of the importer firms after the clearance of goods did not attract a violation of this regulation by the Appellant.- Regulation 10(n) of CBLR, 2018 read with 11(n) of CBLR, 2013: The court noted that the Appellant had verified the Importer Exporter Code (IEC) and the physical addresses of the importer firms. The court referenced the judgment in Kunal Travels (Cargo) v. Commissioner of Customs (Import & General), which held that a Customs Broker is not expected to conduct a background check of the importer/client. Therefore, there was no blatant violation of this regulation.Issue 3: Proportionality of Punitive MeasuresThe court considered the proportionality of the punishment imposed on the Appellant. It noted that the Appellant's Customs Broker License had been revoked for over 4.5 years, which was a severe punishment. The court found that the revocation of the license and forfeiture of the security deposit were disproportionate to the Appellant's failure to collect KYC documents. The court set aside the revocation of the license and forfeiture of the security deposit but upheld the penalty of Rs. 50,000/-.Conclusion:The appeal was allowed in favor of the Appellant. The court set aside the revocation of the license and forfeiture of the security deposit, upheld the penalty of Rs. 50,000/-, and allowed the Appellant to apply for a new license.