CESTAT sets aside customs broker licence revocation under section 146 finding no evidence of regulatory violations

CESTAT Mumbai set aside the revocation of customs broker licence and penalties imposed under Customs Brokers Licensing Regulations, 2018. The tribunal held that pre-export transactions fall outside the broker's licensed activities under section 146 of Customs Act, 1962. Regarding alleged violations of regulations 10(d), 10(e), 10(f) and 10(n), the tribunal found no evidence that the broker provided incorrect information leading to statutory breaches. The licensing authority failed to prove that required verifications were not undertaken or that client details were fictitious. Appeal allowed.

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Issues:
Challenge to revocation of customs broker license and imposition of penalty under Customs Brokers Licensing Regulations, 2018.

Analysis:
The appeal challenged the order of revocation of customs broker license and imposition of penalty by the Principal Commissioner of Customs (General), Mumbai. The appellant, M/s Rupali Logistics Clearing & Forwarding Pvt Ltd, was accused of involvement in exporting overvalued goods to claim ineligible drawback using fake documents. The charges included violations of various regulations under the Customs Brokers Licensing Regulations, 2018. The appellant contended that they were not directly involved in the purchase of goods or declaration of value and that the investigation did not prove the non-existence of the exporter. The appellant's counsel argued that their dealings through a third party did not breach the regulations as the third party was also considered an exporter under the Customs Act, 1962.

The tribunal examined the alleged breaches of regulations under the Customs Brokers Licensing Regulations, 2018. The appellant was accused of breaching regulation 10(d) by failing to advise the client to comply with export provisions. However, it was noted that activities before exporting goods did not fall under the licensed activities of a customs broker. There was no evidence of the appellant's involvement in breaching the Customs Act, 1962. Regarding the alleged breach of regulation 10(e) concerning due diligence in information verification, the tribunal found that the customs authorities misinterpreted the obligations of customs brokers. The tribunal emphasized that the license certifies the broker's competency, and any deficiency should be addressed by the licensing authority.

The tribunal addressed the alleged breach of regulation 10(f) related to withholding information. It was noted that there was no evidence of the appellant withholding information from clients. The tribunal clarified that the responsibility for correct declarations lies with the exporter, and attributing incorrect declarations to the customs broker requires substantial evidence. The tribunal also analyzed the alleged breach of regulation 10(n) concerning client verification. The licensing authority's findings lacked concrete evidence that the appellant failed to verify the exporter's credentials. The tribunal emphasized that the burden of proof was on the licensing authority to demonstrate any failure in verification. Due to these findings, the tribunal concluded that there was no merit in the impugned order and set it aside.

In conclusion, the tribunal ruled in favor of the appellant, M/s Rupali Logistics Clearing & Forwarding Pvt Ltd, overturning the order of revocation of the customs broker license and the imposition of penalties under the Customs Brokers Licensing Regulations, 2018. The judgment highlighted the importance of correctly interpreting the obligations of customs brokers and the burden of proof required to establish breaches of regulations.

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