Customs broker license revocation set aside, penalty imposed for inadequate due diligence under Regulation 10(n)

CESTAT Mumbai partly allowed the appeal against revocation of customs broker license and forfeiture of security deposit. The broker was charged with violating Regulations 10(d) and 10(n) of CBLR 2018 regarding duty-free imports diverted to local market under Advance Authorisation scheme. CESTAT held that Regulation 10(d) violation was unsustainable as the broker was unaware of goods diversion discovered later through DRI intelligence. However, the broker failed to exercise due diligence under Regulation 10(n) when obtaining documents through intermediary. CESTAT set aside license revocation and security deposit forfeiture, imposing penalty of Rs.10,000 for inadequate proactive compliance with KYC verification requirements.

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Issues Involved:
1. Whether the appellant Customs Broker fulfilled obligations under CBLR, 2018.
2. Whether the revocation of the Customs Broker license and forfeiture of the security deposit was justified.
3. Whether the imposition of penalty was appropriate.

Summary:

1. Fulfillment of Obligations under CBLR, 2018:
The Tribunal examined whether the appellant Customs Broker (CB) complied with Regulations 10(d) and 10(n) of CBLR, 2018. The Principal Commissioner concluded that the CB had violated these regulations by not verifying the authenticity of the KYC documents and aiding proxy importers. However, the Tribunal found that the CB had obtained and submitted the necessary KYC documents and authorization letters from the importer, M/s Bruno Exports, Delhi. It was noted that the CB had no knowledge of the subsequent diversion of goods by the importer, which occurred after customs clearance. The Tribunal referenced previous decisions, including HIM Logistics Pvt. Ltd. Vs. Commissioner of Customs, New Delhi, to support the view that the CB had fulfilled their obligations under Regulation 10(d) and 10(n).

2. Justification for Revocation and Forfeiture:
The Tribunal found no merit in the Principal Commissioner's decision to revoke the CB license and forfeit the entire security deposit. The CB had acted based on the documents provided by the importer and was unaware of any illegal activities post-clearance. The Tribunal emphasized that the CB cannot be held responsible for actions taken by the importer after customs clearance. The Tribunal also highlighted that the CB had performed due diligence in verifying the importer's details, albeit through an intermediary.

3. Imposition of Penalty:
While the Tribunal did not uphold the revocation of the license and forfeiture of the security deposit, it recognized a lapse in the CB's proactive verification of documents obtained through an intermediary. Citing the Supreme Court's decision in K.M. Ganatra & Co., the Tribunal imposed a reduced penalty of Rs.10,000/- on the CB for not fully complying with Regulation 10(n) of CBLR, 2018.

Conclusion:
The Tribunal modified the impugned order, revoking the CB license and forfeiture of the security deposit, but imposed a penalty of Rs.10,000/- for partial non-compliance with Regulation 10(n). The appeal was allowed in favor of the appellants.

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