Customs broker license revocation overturned due to natural justice violations and lack of mens rea evidence

CESTAT Chennai set aside the revocation of a customs broker license in a cigarette smuggling case where contraband was concealed behind declared goods. The tribunal found violations of natural justice as the enquiry report was not communicated to the appellant, despite the report absolving the broker of charges. Citing precedents that customs brokers are mere processing agents without obligation to verify transaction genuineness, and that revocation requires aggravating factors showing mens rea or gross violations, the tribunal held revocation was too harsh. Given the four-year suspension period constituted adequate punishment, the license was ordered to be revived. However, a penalty of Rs.50,000 under CBLR 2018 was upheld. Appeal allowed in part.

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Issues Involved:
1. Violation of Customs Broker Licensing Regulations (CBLR), 2018.
2. Revocation of Customs Broker License.
3. Imposition of Penalty and Forfeiture of Security Deposit.
4. Compliance with principles of natural justice.

Summary:

1. Violation of Customs Broker Licensing Regulations (CBLR), 2018:
The appellant, M/s. Souparnika Shipping Services, was found to have violated Regulations 10(b), 10(d), 10(e), and 10(n) of the CBLR, 2018. The Customs Broker failed to exercise due diligence in verifying the correctness of information regarding the importer, deliberately not verifying the antecedents of the GST holder, IEC number, identity of the client, and declared address using reliable, independent, authentic documents, data, or information.

2. Revocation of Customs Broker License:
The Principal Commissioner of Customs, Chennai, revoked the Customs Broker License of the appellant under Regulation 17(7) of the CBLR, 2018, due to the appellant's involvement in multiple fraudulent activities, including the smuggling of cigarettes and overvaluation of export goods to obtain illegal IGST refunds. The Tribunal noted that the revocation of the license was too harsh a punishment, considering the appellant's license was suspended for more than four years, which was deemed sufficient punishment for the lapses on his part.

3. Imposition of Penalty and Forfeiture of Security Deposit:
A penalty of Rs.50,000 was imposed under Regulation 18(1) of CBLR, 2018, and the Security Deposit of Rs.25,000/- was forfeited. The Tribunal upheld the penalty but set aside the forfeiture of the Security Deposit, stating that the forfeiture was not legally correct or valid since the Security Deposit was already forfeited in a previous order.

4. Compliance with principles of natural justice:
The Tribunal emphasized that the appellant was not issued a notice when the enquiry report dated 06.12.2019, which absolved the Customs Broker from all charges, was not accepted by the adjudicating authority. This was deemed a violation of the principles of natural justice. The Tribunal referenced the decision in the case of Accrete Shipping Services, where it was held that the appellant should have been given notice before the revocation of the license, imposition of penalty, or forfeiture of the Security Deposit.

Final Orders:
The Tribunal set aside the impugned Order-in-Original No. 74163/2020 dated 28.02.2020, revoking the Customs Broker License and forfeiting the Security Deposit. In the second appeal No. 40248/2020, the Tribunal modified the order to set aside the revocation and forfeiture of the Security Deposit but upheld the penalty of Rs.50,000/-. Consequently, appeal No. C/40199/2020 was allowed, and appeal No. C/40248/2020 was partly allowed with consequential reliefs as per the law.

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