Customs broker license revocation overturned for disproportionate penalty despite technical violation under regulations 10(d) and 10(e)

CESTAT Mumbai-AT allowed appeal against customs broker license revocation. Principal Commissioner of Customs Mumbai had revoked license and forfeited security deposit under regulation 14, plus imposed Rs. 50,000 penalty under regulation 18 of Customs Brokers Licensing Regulations, 2018. Appellant allegedly breached regulations 10(d) and 10(e) by obtaining clearance after examining only three containers instead of entire consignment. Tribunal found no evidence of deliberate concealment or collusion, noting customs officials were aware of examination requirements. While technical violation occurred, revocation and forfeiture were set aside as disproportionate. Penalty of Rs. 50,000 was sustained.

---

---

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment were:

• Whether the customs broker, M/s Sky Shipping, breached regulation 10(d) of the Customs Brokers Licensing Regulations, 2018, by failing to advise their client to comply with customs examination requirements and failing to report non-compliance to the Deputy Commissioner or Assistant Commissioner of Customs.
• Whether the customs broker breached regulation 10(e) by failing to exercise due diligence in ascertaining the correctness of information provided to their client regarding the customs clearance process.
• The relevance of the customs broker's employee's actions in the alleged breaches of regulations 10(d) and 10(e).

ISSUE-WISE DETAILED ANALYSIS

1. Breach of Regulation 10(d)

The relevant legal framework under regulation 10(d) requires customs brokers to advise their clients to comply with customs laws and to report any non-compliance to the authorities. The court examined whether M/s Sky Shipping failed to fulfill this obligation by not ensuring a 100% examination of the consignment as required by the Risk Management System (RMS).

The court noted that the customs broker was accused of not advising the importer to comply with the RMS instruction for a full examination and failing to report this non-compliance. The evidence included the fact that only three containers were examined, contrary to the RMS directive for a 100% examination. However, the court found no evidence that the customs broker actively participated in persuading customs officials to overlook the examination requirement. The court also considered the role of the customs officials, who granted 'out of charge' despite being aware of the examination instructions, and found no evidence of collusion between the customs broker and customs officials.

The court concluded that there was no breach of regulation 10(d) as there was no evidence that the customs broker failed to advise the client on compliance or participated in evading examination requirements.

2. Breach of Regulation 10(e)

Regulation 10(e) requires customs brokers to exercise due diligence in verifying the accuracy of information provided to clients. The court analyzed whether M/s Sky Shipping failed in this duty by not ensuring the full examination of the consignment.

The court observed that the requirement for a full examination was noted on the bill of entry, and the customs officials were aware of this. The customs broker could not enforce compliance by customs officials, and there was no evidence that the broker misled the importer regarding the examination requirements. The court found that the licensing authority's reliance on the same facts for both regulation 10(d) and 10(e) breaches was inappropriate, as the broker's actions did not constitute a failure of due diligence under regulation 10(e).

The court concluded that there was no breach of regulation 10(e) as there was no evidence of misconduct or misleading information provided to the client.

3. Employee Actions

The court considered the involvement of the customs broker's employee, who held a 'H' card instead of a 'G' card, in presenting documents to customs officials. The court found no evidence that the employee's actions contributed to any breach of regulations. The responsibility for ensuring compliance with customs access rules lay more with the customs access system than with the customs broker.

SIGNIFICANT HOLDINGS

The court held that there was no evidence to support the allegations of breaches under regulations 10(d) and 10(e) of the Customs Brokers Licensing Regulations, 2018. The court found that:

• There was no breach of regulation 10(d) as there was no evidence of the customs broker failing to advise the client on compliance or colluding with customs officials to evade examination requirements.
• There was no breach of regulation 10(e) as there was no evidence of the customs broker failing to exercise due diligence or misleading the client regarding examination requirements.
• The actions of the customs broker's employee did not contribute to any breach of regulations.

The court set aside the revocation of the customs broker's license and the forfeiture of the security deposit but upheld the imposition of a penalty of Rs. 50,000.

---