Customs broker license revocation overturned as exported fermenters didn't fall under SCOMET list regulations

CESTAT NEW DELHI allowed the appeal challenging revocation of customs broker license, forfeiture of security deposit, and penalty. The case involved goods exported without DGFT license allegedly falling under SCOMET list. The Tribunal held that exported fermenters and components did not fall under SCOMET list based on description in export documents versus notification entries. The customs house agent could not be expected to be SCOMET expert, especially given technical amendments introduced shortly before export. Violations of CBLR Regulations 11(d), 11(e), and 11(n) were not established as allegations did not fall within regulatory obligations. The severe punishment of license revocation was disproportionate compared to Rs.20,000 penalty under Customs Act. Order set aside.

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Issues Involved:
1. Whether the goods exported fell under the SCOMET list and required a license from DGFT.
2. Whether the appellant contravened the obligations under Regulation 11(d), 11(e), and 11(n) of CBLR, 2013.

Summary:

Issue 1: Whether the goods exported fell under the SCOMET list and required a license from DGFT.

The appellant, a Custom House Agent (CHA), was penalized for facilitating the export of goods allegedly falling under the SCOMET list without obtaining the necessary license from DGFT. The Tribunal examined the amendment introduced in the SCOMET list by Notification No. 29/2015-20 dated 21.09.2017. It was found that the goods described in the export documents did not match the description in the SCOMET list. The Tribunal noted that neither the appellant nor the Customs Authorities could ascertain that the goods were covered under the SCOMET list at the time of export. Therefore, the Tribunal concluded that the goods in question did not fall under the SCOMET list, and there was no justification to penalize the appellant.

Issue 2: Whether the appellant contravened the obligations under Regulation 11(d), 11(e), and 11(n) of CBLR, 2013.

The Tribunal analyzed the obligations under Regulation 11(d), 11(e), and 11(n) of CBLR, 2013. Regulation 11(d) requires a CHA to advise clients to comply with the provisions of the Act. The Tribunal found that the appellant could not be expected to know the technical particulars of the goods, especially given the recent amendment to the SCOMET list. Therefore, the invocation of Regulation 11(d) was deemed unsustainable.

Regulation 11(e) mandates exercising due diligence to ascertain the correctness of information imparted to clients. The Tribunal observed that the appellant's failure to verify the product or parts manufactured in the factory did not fall within the obligation under Regulation 11(e). The Tribunal cited previous judgments stating that a CHA is not required to inspect the genuineness of the transaction but merely process documents related to cargo clearance.

Regulation 11(n) requires verifying the antecedents, correctness of IEC number, and identity of clients. The Tribunal found no evidence of the appellant failing to verify the IEC code, identity, or functioning of the client. Therefore, the invocation of Regulation 11(n) was also deemed unsustainable.

In conclusion, the Tribunal held that the appellant did not violate the obligations under Regulation 11(d), 11(e), and 11(n) of CBLR, 2013. Consequently, the punishment of revocation of the Customs Broker License, forfeiture of the security deposit, and imposition of a penalty was deemed unsustainable, and the impugned order was set aside.

The appeal was allowed.

[Order pronounced in open court on 23rd April, 2024]

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