No penalty on customs broker for Exim Scrip diesel engine imports; Regulation 18 CBLR 2018 action set aside

CESTAT Kolkata allowed the appeal of the customs broker, setting aside the impugned order imposing penalty under Regulation 18 of CBLR, 2018 and forfeiting security deposit. The Tribunal noted that Customs officials themselves had permitted clearance of imported diesel engines with water pump sets against Exim Scrips and shared the same understanding as the broker regarding eligibility of such payment. Relying on prior SC/HC and Tribunal decisions holding that use of scrips instead of cash, without revenue loss, does not attract interest or penalty, CESTAT held that no case was made out against the broker for penal action or forfeiture.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether penalty under the Customs Brokers Licensing Regulations, 2018 and forfeiture of security deposit could be sustained against a customs broker for advising use of Exim Scrips where the Bills of Entry had been verified and Exim Scrips allowed by Customs officials.

1.2 Whether, in light of earlier appellate orders dropping penalties on the customs broker in relation to the same imports, any independent contravention under the Customs Brokers Licensing Regulations, 2018 could be said to subsist.

1.3 Whether use of Exim Scrips in circumstances where payment was allegedly required to be made in cash results in any revenue loss to the exchequer so as to justify penal action against the customs broker.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Sustainability of penalty and forfeiture of security deposit under the Customs Brokers Licensing Regulations, 2018 in view of Customs verification and prior appellate exoneration

Interpretation and reasoning

2.1 The Tribunal noted from the Bills of Entry, as annexed to the appeal, that Customs officials had verified the imported goods and taken the view that the importer was eligible to pay customs duty through Exim Scrips. The clearance was accordingly allowed on that basis.

2.2 On this factual foundation, the Tribunal held that both the customs broker and the Department had taken the same view at the time of import, namely that payment of duty through Exim Scrips was permissible in the present case.

2.3 The Tribunal took note that, in the related proceedings, the Commissioner (Appeals) had already dropped the penalties imposed on the customs broker by specific Orders-in-Appeal, thereby absolving the customs broker of the alleged contraventions in relation to the same transactions.

2.4 The Tribunal rejected the Revenue's contention that the customs broker failed to give proper advice regarding ineligibility of the impugned goods for Exim Scrip benefit, in view of the fact that the competent Customs officers themselves had verified and allowed such usage at the material time.

2.5 The Tribunal further observed that the Department had not challenged the earlier Orders-in-Appeal, albeit on account of monetary limits under the National Litigation Policy; such orders therefore attained finality in so far as the finding of absence of contravention by the customs broker was concerned.

Conclusions

2.6 The Tribunal concluded that, since the Customs authorities themselves had accepted the use of Exim Scrips upon verification and the appellate authority had already dropped penalties on the customs broker in respect of the same imports, no independent or fresh case of contravention under the Customs Brokers Licensing Regulations, 2018 survived against the appellant.

2.7 Accordingly, the imposition of penalty of Rs. 50,000/- and the order for forfeiture of security deposit under the Regulations were held to be unsustainable and were set aside.

Issue 3: Effect of use of Exim Scrips instead of cash payment and relevance to penal action

Legal framework (as discussed)

3.1 The Tribunal referred to several decisions of Tribunals and High Courts which had held that use of scrips in situations where payment is otherwise required to be made in cash does not cause revenue loss to the exchequer.

Interpretation and reasoning

3.2 The Tribunal observed that, where payment is made through Exim Scrips in place of cash, and it is subsequently held that cash payment was required, the correct course is to reverse the debit in the Exim Scrips and obtain cash payment from the importer.

3.3 The Tribunal recorded that, in such situations, it has been consistently held that no interest liability arises, because the importer's Exim Scrips remained blocked during the relevant period.

3.4 Applying this rationale, the Tribunal held that the use of Exim Scrips in the present case could not be treated as causing any loss of revenue, particularly when the Customs officials had themselves permitted such use upon verification.

Conclusions

3.5 The Tribunal concluded that, in the absence of any demonstrated revenue loss or deliberate misuse, and in view of settled jurisprudence that use of scrips instead of cash is revenue neutral, there was no justification to sustain penal action against the customs broker.

3.6 On the totality of facts and law discussed, the Tribunal allowed the appeal, set aside the impugned order imposing penalty and forfeiting security deposit, and granted consequential relief in accordance with law.

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