2024 (8) TMI 1222 - AT - Customs

Customs broker license revocation overturned after wrongful liability for client's Red Sanders mis-declaration and KYC failures

CESTAT Mumbai-AT allowed appeal against revocation of customs broker license. Appellant CB was wrongly held liable for violations of CBLR Regulations ... Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - violation of Regulations 10(d) and 10(n) of CBLR. Violation of Regulation 10(d) ibid - appellants CB neither in contact with the exporter nor informed the inordinate delay in export consignment from Pune to JNCH, Nhava Sheva - HELD THAT:- In the instant case, mis-declaration of the description of the goods in the S/B as ‘Kraft paper’, for smuggling out of the country the prohibited ‘Red Sanders’, was submitted by the CB M/s Exim Management Services, by filing the same online from their office, as it is evident from the face of the shipping Bill. Thus, there is no possibility for the appellants CB to either know the actual content of the export goods and to bring to the notice of the Deputy Commissioner of Customs (DC) or Assistant Commissioner of Customs (AC) about the mis-declaration of export goods or about the delay in transportation of such export goods. Thus, we are of the considered view that the violation of Regulation 10(d) ibid, as concluded in the impugned order is not sustainable. Violation of Regulation 10(n) ibid - allegation is that appellants had never met the exporter/IEC holder, and they were not careful and diligent in undertaking the KYC verification process about the background of exporter - HELD THAT:- It is found from the records, that the appellants CB had initially obtained the KYC documents from the exporter and once they were not handling the export consignment, they had sent it to other CB or persons concerned with such export at Pune. Thus, the appellants CB has no role to play in respect of export documents handled by one another CB at Pune. The Hon’ble High Court of Delhi has held in the case of KUNAL TRAVELS (CARGO) VERSUS COMMISSIONER OF CUSTOMS (IMPORT & GENERAL) NEW CUSTOMS HOUSE, IGI AIRPORT, NEW DELHI [2017 (3) TMI 1494 - DELHI HIGH COURT], that the appellants CB is not an officer of Customs who would have an expertise to identify mis-declaration of goods. Thus, when the appellants CB was not handling the export consignment, it cannot be said that they had violated Regulation 10(n) ibid. Further, it is not the case that the appellants CB is the customs broker, who had handled the export consignment - It is an undisputed fact that the appellants CB had no role to play in the export transaction and it is only M/s. Exim Management Services, Pune holding CB license No. CHA.PNR – 54 is the CB in the case. Thus, the impugned order holding violation of Regulation 10(d) and 10(n) ibid on the appellants CB is not legally sustainable. There are no merits in the impugned order passed by the learned Principal Commissioner of Customs (General), Mumbai in revocation of the CB license of the appellants; for forfeiture of security deposit and for imposition of penalty, inasmuch as there is no violation of regulations 10(d) and 10(n) ibid, and the findings in the impugned order is contrary to the facts on record. The impugned order is set aside - appeal allowed. Issues Involved:1. Violation of Regulation 10(d) of CBLR, 2018.2. Violation of Regulation 10(n) of CBLR, 2018.3. Revocation of Customs Broker License (CB License).4. Forfeiture of Security Deposit.5. Imposition of Penalty.Issue-wise Detailed Analysis:1. Violation of Regulation 10(d) of CBLR, 2018:The adjudicating authority concluded that the appellants Customs Broker (CB) violated Regulation 10(d) by not advising their client to comply with the Customs Act and failing to report non-compliance to the Customs authorities. The appellants CB did not personally meet the exporter and obtained documents from a former employee, Shri Gopinath Patil. The investigation revealed that the appellants CB did not inform the customs authorities about the delay in the export consignment from Pune to JNCH, Nhava Sheva. However, the Tribunal found that the appellants CB was not directly involved in the export transaction, which was handled by another CB, M/s. Exim Management Services. Therefore, the appellants CB could not have known about the mis-declaration or delay and was not obligated to report it. The Tribunal concluded that the appellants CB did not violate Regulation 10(d).2. Violation of Regulation 10(n) of CBLR, 2018:The Principal Commissioner of Customs found that the appellants CB violated Regulation 10(n) by not verifying the correctness of the Importer Exporter Code (IEC) and other credentials of the exporter. However, the Tribunal noted that the appellants CB had initially obtained the KYC documents and transferred them to another CB, M/s. Exim Management Services, who handled the export consignment. The Tribunal cited the Delhi High Court's judgment in Kunal Travels (Cargo) vs. Principal Commissioner of Customs, which stated that a CB is not expected to verify the genuineness of every transaction. The Tribunal concluded that the appellants CB did not violate Regulation 10(n).3. Revocation of Customs Broker License (CB License):The Principal Commissioner of Customs revoked the appellants CB license based on the alleged violations of Regulations 10(d) and 10(n). However, the Tribunal found that the appellants CB was not responsible for the export transaction and did not violate the said regulations. Therefore, the revocation of the CB license was deemed unjustified and was set aside.4. Forfeiture of Security Deposit:The Principal Commissioner of Customs ordered the forfeiture of the security deposit based on the alleged violations. Since the Tribunal found no violations of Regulations 10(d) and 10(n) by the appellants CB, the forfeiture of the security deposit was also set aside.5. Imposition of Penalty:The penalty imposed on the appellants CB was based on the alleged violations of Regulations 10(d) and 10(n). As the Tribunal concluded that there were no such violations, the imposition of the penalty was deemed unsustainable and was set aside.Conclusion:The Tribunal allowed the appeal in favor of the appellants, setting aside the impugned order dated 12.03.2024, which included the revocation of the CB license, forfeiture of the security deposit, and imposition of penalty. The findings in the impugned order were found to be contrary to the facts on record, and the appellants CB was not held responsible for the alleged violations.