2025 (2) TMI 1290 - AT - Customs

Customs broker penalty under s.112(a) Customs Act and Regulation 18 CBLR 2013 quashed for proper due diligence

CESTAT Bangalore allowed the appeal of the customs broker and set aside the penalty imposed under s.112(a) of the Customs Act, 1962 and Regulation 18 of ... Levy of penalty on Customs Broker u/s 112(a) of the Custom Act, 1962 and under Regulation 18 of CBLR, 2013 - misclassification of the imported item - Surgical Microscope for Neurosurgery Model ZEISS PENTERO under Customs Tariff item entry 90189099 instead of under Customs Tariff Item entry 90118000 - HELD THAT:- The issue decided by this Tribunal Vide Final Order No. 20917/2024 dated 26.09.2024 [2024 (10) TMI 63 - CESTAT BANGALORE] wherein the classification of the impugned goods under Customs Tariff Item entry (CTI) 90118000 as held by the adjudicating and appellate authority, confirmation of the differential duty along with interest was upheld, however penalty under section 114A of the Customs Act, 1962 was set aside. It is found that the appellant has contended that; they have classified the impugned goods 'Surgical Microscope for Neurosurgery Model ZEISS PENTERO' as per the advice of the importer; similar goods were allowed classification under Customs Tariff Item entry (CTI) 9018 9099 by the other Custom Houses; the decision as regards classification is the responsibility of the proper officer of customs; further they have not advised the importer about the classification under Customs Tariff Item entry (CTI) 9018 9099 and they have classified only as per the advice of the importer. The penalty imposed under Section 114A of the Customs Act, 1962 on the importer M/s. Narayana Hrudayalaya Pvt. Ltd., has been set aside - further, the Appellant-Customs Broker cannot be held to have not exercised due diligence, hence violation of Regulation 11(e) cannot be sustained. Therefore, the penalty imposed under Regulation 18 of the CBLR, 2013 is unsustainable and is liable to be set aside. Appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether a customs broker is liable to penalty under Section 112(a) of the Customs Act, 1962 for filing a bill of entry with a classification later found to be incorrect, where the description of the goods was correctly declared and the classification was based on the importer's instructions and prevailing practice at various customs stations. 1.2 Whether the customs broker violated Regulation 11(d) and 11(e) of the Customs Broker Licensing Regulations, 2013 (CBLR, 2013) in relation to the impugned import, thereby justifying forfeiture of security deposit, suspension of licence and imposition of penalty under Regulation 18. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Penalty under Section 112(a) of the Customs Act, 1962 for alleged misclassification Legal framework (as discussed) 2.1 The Tribunal noted that, in a connected appeal concerning the importer, it had already upheld the classification of the goods under Customs Tariff Item 9011 8000 and confirmed the differential duty and interest, but set aside the penalty under Section 114A of the Customs Act, 1962, where the goods were fully and correctly described and the dispute concerned only the appropriate tariff heading. Interpretation and reasoning 2.2 The Court recorded that the customs broker filed the bill of entry under Customs Tariff Item 9018 9099 on the specific advice of the importer, and that similar goods had routinely been classified and cleared under the same heading by Bangalore Customs and other Custom Houses. 2.3 It was observed that the description of the goods, 'Surgical Microscope for Neurosurgery - Zeiss OPMI Pentero with accessories,' was correctly disclosed, and the dispute pertained solely to tariff classification, which is the statutory responsibility of the proper officer under Section 17 of the Customs Act, 1962. 2.4 The Court relied on the earlier final order in the importer's appeal, which held that where the description and technical documents are correctly furnished and assessment is done by the department, incorrect classification, by itself, is insufficient to sustain penalty, and cannot be equated to misdeclaration or suppression so as to justify penal consequences. Conclusions 2.5 In view of the setting aside of penalty on the importer under Section 114A in the connected matter, and having regard to the fact that the customs broker acted on the importer's instructions and on a classification then accepted by various customs formations, imposition of penalty on the customs broker under Section 112(a) was held to be unsustainable and liable to be set aside. Issue 2: Alleged violation of Regulation 11(d) and 11(e) of CBLR, 2013 and penalty under Regulation 18 Legal framework (as discussed) 2.6 Regulation 11(d) of CBLR, 2013 requires the customs broker to advise the client to comply with the provisions of the Act and, in case of non-compliance, to bring the matter to the notice of the Deputy/Assistant Commissioner of Customs. 2.7 Regulation 11(e) requires the customs broker to exercise due diligence to ascertain the correctness of any information imparted to a client in relation to clearance of cargo or baggage. 2.8 Regulation 18 provides for revocation/suspension of licence, forfeiture of security deposit, and imposition of penalty for contravention of the regulations. Interpretation and reasoning 2.9 On Regulation 11(d), the Court held that the customs broker could not reasonably be expected to advise the importer to classify the goods under Customs Tariff Item 9011 8000 when similar goods were consistently being cleared under Customs Tariff Item 9018 9099 at Bangalore and other Custom Houses. In such a situation, failure to so advise could not be treated as non-compliance with Regulation 11(d). 2.10 On Regulation 11(e), the Court examined whether the customs broker failed to exercise 'due diligence' in ascertaining the correctness of information imparted. It noted that the broker acted on the importer's specific instructions regarding classification, that the same classification had been accepted by customs authorities elsewhere, and that all particulars necessary for assessment had been correctly declared. 2.11 Given these facts, the Court found no basis to infer lack of due diligence by the customs broker in relation to the impugned consignment. Conclusions 2.12 The alleged violations of Regulation 11(d) and 11(e) of CBLR, 2013 were held not to be established on the facts of the case. 2.13 Consequently, the forfeiture of the entire security deposit, the one-month suspension of the customs broker licence, and the monetary penalty of Rs. 50,000/- imposed under Regulation 18 of CBLR, 2013 were held to be unsustainable and were set aside. 2.14 Both appeals were allowed with consequential relief in accordance with law.