2025 (1) TMI 320 - AT - Customs

Customs Broker License Revocation Overturned - Broker Not Liable for Post-Clearance Importer Fraud

CESTAT New Delhi allowed the appeal against revocation of Customs Broker license. The tribunal held that the appellant did not violate Regulations 10(b), ... Revocation of Customs Broker license - forfeiture of security deposit - levy of penalty - violation of Regulations 10 (b), 10 (d), and 10 (n) of the Customs Brokers Licensing Regulations, 2018. Partial violation of Rule 10 (b) - allowing Sh Babu Ithape to approach the Docks officer for examination of goods - HELD THAT:- A plain reading of the said Regulation, it is apparent that the Customs Broker is required to transact the business at the Customs Station either personally or through his authorized employer. That requirement stands fulfilled as Sh Dilip Shelar, who handled the documents was an employer of the appellant. Further, it has been submitted that his responsibility ended with filing of documents which stands corroborated by the statement of Imran Sheikh. Hence, the conclusion arrived at by the adjudicating authority that the appellant has unintentionally or intentionally violated 10 (b) is not correct. Consequently, there is no violation of Regulation 10 (b). Violation of Regulation 10 (n) - HELD THAT:- The impugned order has concluded that the appellant was not clear whether the B/E had been filed under Section 69 or Section 59 of the Customs Act. This cannot be the reason for revoking the CB license. The appellant filed the B/E as per procedure and same has been subsequently cleared by the Customs Department. It is noted that as per section 146 of the Customs Act, the role of a Customs Broker is related to the business of import or export of the goods. The obligation of the appellant was only to facilitate clearance of goods for warehousing at the Customs port. Admittedly, the appellant was not responsible for the deposition of the goods to the warehouse. It is also noted that the persons controlling the importer firm had acted on their own accord to defraud the revenue, and there is no allegation or evidence that the appellant had advised or aided their nefarious activity. In this context, support taken from the Supreme Court’s judgment in Collector of Customs, Cochin vs Trivandrum Rubber Works Ltd., [1998 (11) TMI 127 - SUPREME COURT] wherein the Hon’ble Court held that the Customs Broker is an agent for only limited purpose of arranging release of goods and once the goods are cleared, he has no further function and he is not liable for any action of the importer. Accordingly, there was no violation of Regulation 10 (n) of CBLR, 2018. In the instant case, the KYC documents submitted by the appellant are all valid documents. There is no other requirement under Regulation 10 (n) which remains to be fulfilled by the appellant. Conclusion - The role of a Customs Broker is limited to facilitating the clearance of goods, and they are not responsible for subsequent actions by the importer. Verification of documents through official sources fulfills the regulatory requirements. The appellant did not violate Regulations 10 (b), 10 (d), or 10 (n) of the CBLR, 2018. Consequently, the revocation of the Customs Broker's license was not justified. The impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the appellant, a Customs Broker, violated Regulation 10 (b), 10 (d), and 10 (n) of the Customs Brokers Licensing Regulations (CBLR), 2018.Whether the revocation of the Customs Broker's license was justified based on the alleged violations.Whether the Customs Broker fulfilled their obligations under the CBLR, 2018, in advising the client and verifying the necessary documents.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Violation of Regulation 10 (b)Relevant legal framework and precedents: Regulation 10 (b) requires that customs transactions be conducted either personally by the Customs Broker or through an authorized employee.Court's interpretation and reasoning: The court found that the Customs Broker's responsibility ended with filing the necessary documents, and this was corroborated by statements from involved parties. The court concluded that the requirement was fulfilled as the documents were handled by an employee of the appellant.Key evidence and findings: Statements from Imran Ibrahim Shaikh and the appellant indicated that the Customs Broker did not attend further customs clearance formalities, which was consistent with the appellant's submissions.Application of law to facts: The court held that the Customs Broker had not violated Regulation 10 (b) as the employee handling the documents was authorized.Treatment of competing arguments: The department argued that the involvement of unauthorized individuals constituted a violation, but the court found no evidence of such unauthorized involvement.Conclusions: The court concluded there was no violation of Regulation 10 (b).Issue 2: Violation of Regulation 10 (d)Relevant legal framework and precedents: Regulation 10 (d) requires the Customs Broker to advise clients on compliance with relevant laws and report non-compliance.Court's interpretation and reasoning: The court noted that the appellant had advised the importer regarding the requirement of a No Objection Certificate (NoC) from the Drug Controller, which was subsequently obtained.Key evidence and findings: The appellant had filed a Bill of Entry for re-export, indicating awareness of the NoC requirement. The goods were eventually cleared based on the obtained NoC.Application of law to facts: The court found that the appellant had complied with the advisory obligations under Regulation 10 (d).Treatment of competing arguments: The department's claim of non-compliance was countered by evidence of subsequent compliance and the appellant's advisory role.Conclusions: The court held there was no violation of Regulation 10 (d).Issue 3: Violation of Regulation 10 (n)Relevant legal framework and precedents: Regulation 10 (n) requires verification of the client's identity and documents using reliable sources.Court's interpretation and reasoning: The court found that the appellant had verified the necessary documents from official websites, fulfilling the requirements of Regulation 10 (n).Key evidence and findings: The appellant submitted valid KYC documents, including IEC, GSTIN, and other identification documents.Application of law to facts: The court concluded that there was no requirement for physical verification beyond what was done by the appellant.Treatment of competing arguments: The department's argument of non-compliance was dismissed as the appellant had adhered to the required verification process.Conclusions: The court found no violation of Regulation 10 (n).3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The Customs Broker is an agent for only limited purpose of arranging release of goods and once the goods are cleared, he has no further function and he is not liable for any action of the importer.'Core principles established: The role of a Customs Broker is limited to facilitating the clearance of goods, and they are not responsible for subsequent actions by the importer. Verification of documents through official sources fulfills the regulatory requirements.Final determinations on each issue: The court determined that the appellant did not violate Regulations 10 (b), 10 (d), or 10 (n) of the CBLR, 2018. Consequently, the revocation of the Customs Broker's license was not justified.In conclusion, the appeal was allowed, and the revocation of the Customs Broker's license was set aside, with the court emphasizing the limited role and responsibilities of a Customs Broker in the import-export process.