2025 (11) TMI 1123 - HC - Customs

Revocation of customs broker licences upheld; misuse and de facto sub-letting blamed; 7.5% pre-deposit for CESTAT appeals under CBLR 2018

Manoj Kumar Nagar Versus The Principal Commissioner of Customs & Ors.

HC dismissed the writ petitions challenging revocation of customs broker licences and refused waiver or reduction of the pre-deposit for CESTAT appeals. ... Seeking waiver of the pre-deposit for filing of the appeal before CESTAT - huge undervaluation and mis-declaration in imports of various electronic goods and accessories - import of several prohibited and restricted items including refurbished laptop, old and used CPUs, mobile phones, hard disc, wallets, etc. - HELD THAT:- The clear position is that the Customs Brokers have a significant responsibility under the Customs Act as also the Customs Brokers Licensing Regulations, 2018. The CHA ought to perform the same with diligence and commitment. Moreover, this Court in the decision in Commissioner of Customs (Airport and General) v. M/S Jaiswal Import Cargo Services Ltd., [2025 (9) TMI 147 - DELHI HIGH COURT], has observed that 'The appeal filed by the Department now seeks to reinstate the revocation against the Customs broker which this Court is not inclined to do. There is no doubt that Customs Brokers do have significant responsibility under the CBLR 2018 which ought to be performed with diligence and commitment. The fact that the Respondent did not oversee the clearance and the warehousing of the goods leading to diversion of the goods in the domestic market is a clear infraction.' In the present case, permitting misuse of the CHA licence, that too after receiving monthly remuneration for the same shows that the license itself has been sub-let without any control over the same. The main kingpin i.e., Mr. Zakir Khan, who has been involved in the fraudulent transactions, has used it indiscriminately without any accountability, to which the Petitioners are also to be blamed. The Court is not inclined to entertain these writ petitions. Insofar as the pre-deposit is concerned, in these facts, the Court is not inclined to grant any waiver or reduction of the pre-deposit. However, the Petitioners are free to challenge the impugned order dated 01st August, 2025 in accordance with law before CESTAT along with the requisite pre-deposit of 7.5%. If the appeals are filed by 10th December, 2025, the same shall not be dismissed on the ground of limitations and shall be adjudicated on merits. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the Court should exercise its discretionary jurisdiction under Article 226 to waive or reduce the statutory pre-deposit required for filing appeals before CESTAT against orders imposing penalties under the Customs Act, 1962 (including Sections 112(a)(i), 112(b)(i) and 114AA), particularly where substantial allegations of misuse of CHA licences and large-scale evasion are involved. 2. Whether the conduct of Customs House Agents (CHA) in permitting their licences to be used by a third party, with resultant mis-declaration, undervaluation and imports of prohibited/restricted goods, warrants denial of equitable relief (waiver/reduction of pre-deposit) notwithstanding submissions of lack of application of mind in penalty imposition and financial hardship. 3. Whether prior judicial observations regarding the duties and responsibilities of Customs Brokers under the Customs Brokers Licensing Regulations, 2018 and the Customs Act are applicable and determinative in assessing entitlement to pre-deposit relief in the present facts. ISSUE-WISE DETAILED ANALYSIS Issue 1: Discretion under Article 226 to waive or reduce statutory pre-deposit for appeals to CESTAT Legal framework: Section 129E (as invoked in submissions) prescribes the quantum of pre-deposit for entertaining statutory appeals before CESTAT; Article 226 confers broad discretionary writ jurisdiction on the High Court to issue reliefs in appropriate cases. Precedent Treatment: The Court considered prior decisions emphasizing limited interference with statutory appeal mechanisms where statutory pre-deposit provisions exist; a recent decision was relied upon emphasizing the regulatory responsibilities of Customs Brokers under CBLR 2018 (referenced decision). That precedent was followed for the proposition that CHA duties are stringent and require oversight. Interpretation and reasoning: The Court recognized its powers under Article 226 but held that such discretion must be exercised in light of statutory mandates and the facts of the case. Given the scale of alleged fraud (evaded duty claimed to be large, and consignments of very high value) and the nature of statutory prescription of pre-deposit, the Court found no compelling equitable ground to displace the statutory requirement. The risk of undermining the statutory appeal framework and the public interest in preventing delay in recovery of large revenue amounts were relevant considerations. Ratio vs. Obiter: Ratio - Article 226 discretion will not ordinarily be exercised to waive statutorily prescribed pre-deposit where facts disclose culpable conduct and serious evasion affecting large revenue; Obiter - general observations on the interplay between Article 226 and Section 129E in contexts not involving comparable large-scale fraud. Conclusion: The Court refused to waive or reduce the pre-deposit; petitioners must comply with the statutory pre-deposit to prosecute appeals before CESTAT. Issue 2: Responsibility of CHAs for misuse/sub-letting of CHA licences and its bearing on equitable relief Legal framework: Duties of Customs Brokers/CHAs under the Customs Act and Customs Brokers Licensing Regulations, 2018 oblige diligence, oversight and accountability for clearances undertaken in their name/under their licence; penalties under Sections 112 and 114AA penalize acts of contravention and facilitating evasion. Precedent Treatment: The Court expressly relied on and followed prior authority holding that Customs Brokers bear significant responsibility and that failure to oversee clearance/warehousing leading to diversion or misuse constitutes clear infraction meriting regulatory action. Interpretation and reasoning: Factual findings in the impugned order and investigative statements showed that CHA licences were lent/borrowed and used repeatedly by the kingpin in a sustained scheme of mis-declaration and undervaluation. Receipt of remuneration for permitting licence use, absence of control or oversight, and long-standing facilitation (several years) indicated culpability rather than isolated negligence. Given these facts, the equities did not favour granting relief despite assertions of non-application of mind in penalty computation and claimed financial hardship. Ratio vs. Obiter: Ratio - Where a CHA permits misuse/sub-letting of its licence in a sustained fraud and receives remuneration, such conduct disentitles the CHA to equitable relief from statutory pre-deposit; Obiter - remarks on gradations of culpability where minimal or inadvertent lapses may attract different treatment (not decided here). Conclusion: Petitioners' conduct in permitting misuse of CHA licences and failing to exercise control justified denial of pre-deposit waiver; the Court was not persuaded by claims of disparate number of bills of entry or financial precariousness to reduce the pre-deposit. Issue 3: Application of precedent concerning CHA obligations under CBLR 2018 and its effect on relief Legal framework: Customs Brokers Licensing Regulations, 2018 impose standards of conduct on CHAs; judicial pronouncements interpreting those obligations inform reasonableness of relief applications. Precedent Treatment: The Court followed the prior decision that emphasized Customs Brokers' duty to oversee clearances and the consequences of failing to do so. That precedent was applied to the present facts to support the conclusion that CHA liability is not a technicality but grounded in regulatory expectations. Interpretation and reasoning: The Court found the precedent directly analogous: systemic lapses or deliberate sub-letting amount to regulatory infractions foreclosing discretionary equitable relief. The prior observation that licences must be exercised with diligence was held to be directly relevant and persuasive in evaluating whether waiver/reduction of pre-deposit should be granted. Ratio vs. Obiter: Ratio - Established regulatory principle that CHAs must maintain control over licences and that failure to do so undermines claims for discretionary relief; Obiter - notings on proportionality of penalties vis-à-vis number of bills of entry, which could be argued on merits before the appellate forum (CESTAT). Conclusion: The precedent was followed; the regulatory obligations under CBLR 2018 weighed against granting relief and supported direction to proceed with statutory pre-deposit to CESTAT. Procedural/Remedial Directions (integral to conclusions) 1. The petitions seeking waiver or reduction of the pre-deposit were dismissed; no waiver or reduction of the 7.5% pre-deposit was afforded. 2. Petitioners were permitted to challenge the impugned order before CESTAT by filing appeals with the requisite pre-deposit of 7.5%; appeals filed by 10th December, 2025 shall not be dismissed on limitation grounds and shall be adjudicated on merits. 3. Observations as to alleged non-application of mind in imposition of penalties and disparity in number of bills of entry are matters left open for adjudication by CESTAT in appeal; denial of pre-deposit relief rests on the factual findings of misuse and regulatory responsibility rather than final evaluation of proportionality of penalty amounts.