Customs broker license revocation overturned after tribunal finds fraud occurred beyond broker's regulatory responsibilities

CESTAT NEW DELHI set aside the revocation of customs broker license and forfeiture of security deposit but upheld the penalty. The appellant was accused of conniving in customs duty evasion by diverting warehoused goods to domestic market without payment and using forged documents. The tribunal found the fraud occurred after the appellant's role ended when goods reached the bonded warehouse. The appellant had fulfilled regulatory obligations by verifying IEC numbers and obtaining KYC documents through speed post correspondence. Citing precedent that physical verification of business premises is not legally required, the tribunal determined the punishment was disproportionate given over five years had elapsed since license revocation, constituting sufficient punishment.

---

---

Issues Involved:
1. Barred by Limitation
2. Violation of Regulation 10(b) of CBLR, 2018
3. Violation of Regulation 10(d) of CBLR, 2018
4. Violation of Regulation 10(e) of CBLR, 2018
5. Violation of Regulation 10(n) of CBLR, 2018
6. Proportionality of Punishment

Summary:

Barred by Limitation:
The appellant argued that the show cause notice was barred by limitation, a contention previously upheld by the Tribunal but overturned by the Delhi High Court. The High Court ruled that the Commissioner was only required to issue notice within 90 days, not serve it within that period.

Violation of Regulation 10(b) of CBLR, 2018:
The Tribunal found no violation of Regulation 10(b) as Sanjeev Maggu never acted on behalf of the appellant (Customs Broker) but on behalf of the importer. The appellant or his employees transacted with Customs authorities, fulfilling the regulation's requirement.

Violation of Regulation 10(d) of CBLR, 2018:
The Tribunal held that the appellant's duty ended once the goods reached the customs bonded warehouse. The fraud of diverting goods occurred after this point, thus the appellant could not be linked to the fraud. The appellant had no role in the illegal diversion of goods, and therefore, there was no violation of Regulation 10(d).

Violation of Regulation 10(e) of CBLR, 2018:
The Tribunal found no evidence that the appellant provided incorrect information to the importer firms or abetted the diversion of goods. The illegal actions of the importer firms did not attract a violation of Regulation 10(e) by the appellant.

Violation of Regulation 10(n) of CBLR, 2018:
The Tribunal noted that the appellant had verified the IEC number from the DGFT website and sent letters to verify the premises of the importers. The appellant met the proprietors and received KYC documents, fulfilling the regulation's requirements. The High Court in Kunal Travels held that the grant of IEC Code presupposes verification of facts, supporting the appellant's actions.

Proportionality of Punishment:
The Tribunal found the punishment of revocation of license and forfeiture of security deposit too harsh, considering the appellant had been out of work for over five years. The Tribunal upheld the penalty but set aside the revocation and forfeiture, modifying the impugned order accordingly.

Conclusion:
The appeal was partly allowed, setting aside the revocation of the license and forfeiture of the security deposit, but upholding the penalty imposed.

---