F Card revocation and Rs. 50,000 penalty set aside due to unsubstantiated charges under CBLR 2018

CESTAT Kolkata set aside the revocation of appellant's F Card and penalty of Rs. 50,000/- under CBLR 2018. The appellant's F Card became non-operational when his associated CHA firm's license was suspended. His subsequent activities were performed individually, not as F Card holder. The tribunal found allegations of violating Regulations 10(a), 10(b), 10(d), 10(m) and 10(q) were based solely on importer's statement without concrete evidence. Since charges were unsubstantiated, both F Card revocation and penalty were legally unsustainable and were set aside.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

• Whether the appellant, whose F-Category Identity Card (F-Card) was issued and tagged with the Customs House Agent (CHA) Firm M/s. S.K. Acharya, could be held liable for violations of Customs Brokers Licensing Regulations (CBLR), 2018, after the CHA Firm's license was suspended and the appellant's F-Card became inoperative;
• Whether the appellant's activities as a freelancer, post suspension of the CHA Firm's license, could be construed as functioning in his capacity as an F-Card holder;
• Whether the revocation of the appellant's F-Card and imposition of penalty under Regulations 10(a), 10(b), 10(d), 10(m), 10(q), and Regulation 18 of the CBLR, 2018 were legally sustainable given the facts and evidence;
• Whether the procedural safeguards under Regulation 17(9) of CBLR, 2018 were complied with, particularly regarding the linkage of charges against the F-Card holder and the Customs Broker Firm;
• Whether the evidence on record was sufficient to establish the appellant's violation of the cited regulations.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Status and Liability of the Appellant Post Suspension of CHA Firm's License

Relevant Legal Framework and Precedents: The appellant's F-Card was issued under the CBLR, 2018, which governs licensing and conduct of Customs Brokers and their employees. The linkage between an F-Card holder and the CHA Firm is crucial, as the F-Card's validity depends on the operational status of the associated CHA Firm. Regulation 17(9) of CBLR, 2018 prescribes procedural safeguards when charges are framed against both the Customs Broker and the F-Card holder.

Court's Interpretation and Reasoning: The Tribunal observed that the appellant's F-Card was issued and tagged with M/s. S.K. Acharya, whose CHA License was suspended on 17.06.2022. The suspension of the CHA Firm's license naturally rendered the appellant's F-Card inoperative from that date. The appellant's subsequent activities as a freelancer were found to be independent of his F-Card status.

Key Evidence and Findings: The appellant was not tagged with any other CHA Firm after the suspension of M/s. S.K. Acharya's license. The appellant acted as an intermediary with M/s. P.R. Logistics, a different Customs Broker, in a limited capacity involving liaison and communication of duty liabilities, without utilizing his F-Card.

Application of Law to Facts: Since the F-Card was inoperative post suspension of the CHA Firm's license, the appellant's freelance activities could not be construed as actions undertaken in his capacity as an F-Card holder. Therefore, liability under the CBLR, 2018 for violations committed in connection with those activities could not be imposed on the appellant as an F-Card holder.

Treatment of Competing Arguments: The Revenue contended that the appellant's role was integral to the alleged violations, relying on the offence report. However, the Tribunal found that the appellant's involvement was limited and did not amount to functioning as an F-Card holder.

Conclusion: The appellant's F-Card was non-operational from 17.06.2022, and his freelance activities were outside the scope of his F-Card status, negating liability as an F-Card holder.

Issue 2: Compliance with Procedural Requirements under Regulation 17(9) of CBLR, 2018

Relevant Legal Framework: Regulation 17(9) of CBLR, 2018 states that charges against an F-Card holder can only be pursued following the procedure prescribed under Regulations 16 and 17 if charges have also been framed against the associated Customs Broker Firm.

Court's Interpretation and Reasoning: The Tribunal noted that the charges against the appellant were not linked to the CHA Firm M/s. S.K. Acharya, as proceedings against the firm had been dropped by an order dated 20.09.2023. Therefore, the procedural requirements under Regulation 17(9) could not be invoked against the appellant.

Application of Law to Facts: Since the CHA Firm was not charged, the appellant could not be proceeded against as an F-Card holder under the said regulation. The revocation of the F-Card on this basis was thus procedurally flawed.

Conclusion: The procedural safeguards under Regulation 17(9) were not complied with, rendering the revocation order legally unsustainable.

Issue 3: Sufficiency of Evidence to Establish Violations of Regulations 10(a), 10(b), 10(d), 10(m), and 10(q) of CBLR, 2018

Relevant Legal Framework: Regulations 10(a), 10(b), 10(d), 10(m), and 10(q) of CBLR, 2018 prescribe duties and prohibitions for Customs Brokers and their employees, including adherence to correct documentation, truthful declarations, and compliance with customs laws.

Court's Interpretation and Reasoning: The Tribunal found that the entire allegation against the appellant was primarily based on the statement of an importer, Shri Ashok Banka. No concrete or corroborative evidence was produced by the Department to establish the appellant's direct involvement in the alleged irregularities.

Key Evidence and Findings: The offence report highlighted discrepancies in the quantity of imported goods but linked the clearance to M/s. P.R. Logistics. The appellant's role was limited to liaison activities, and no documentary or testimonial evidence implicated him in violations of the cited regulations.

Application of Law to Facts: Mere allegations or unsubstantiated statements are insufficient to establish contravention of the CBLR, 2018. The Department failed to discharge the burden of proof against the appellant.

Conclusion: The allegations of violation of Regulations 10(a), 10(b), 10(d), 10(m), and 10(q) against the appellant were not substantiated.

Issue 4: Validity of Revocation of F-Card and Imposition of Penalty under Regulation 18 of CBLR, 2018

Relevant Legal Framework: Regulation 18 of CBLR, 2018 empowers the Commissioner of Customs to impose penalties for violations of the regulations.

Court's Interpretation and Reasoning: Since the Tribunal found the charges against the appellant to be unsubstantiated and the procedural requirements not complied with, the revocation of the F-Card and the penalty imposed were not legally sustainable.

Application of Law to Facts: The penalty is contingent upon proven violations. With no evidence supporting the charges, the penalty lacked a valid foundation.

Conclusion: The penalty of Rs. 50,000/- imposed on the appellant was set aside.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Where in an offence report, charges have been framed against an F card holder in addition to the Customs Broker who has been issued a license under regulation 7, then procedure prescribed in regulations 16 and 17 shall be followed mutatis mutandis in so far as the prescribed procedure is relevant to the F card holder."

This principle was pivotal in determining that the appellant could not be proceeded against independently without charges framed against the associated Customs Broker Firm.

The Tribunal concluded:

• The appellant's F-Card was non-operational following the suspension of the CHA Firm's license, and his freelance activities were outside the scope of his F-Card status;
• The procedural safeguards under Regulation 17(9) were not complied with, as no charges were framed against the CHA Firm;
• The Department failed to produce concrete evidence against the appellant to establish violations of Regulations 10(a), 10(b), 10(d), 10(m), and 10(q) of the CBLR, 2018;
• The revocation of the appellant's F-Card and imposition of penalty were legally unsustainable and were set aside.

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