Customs broker cleared of alleged breach of Regulation 10(e) CBLR 2018; due diligence upheld, Revenue appeal dismissed

CESTAT Kolkata upheld the adjudicating authority's order exonerating the customs broker from the alleged violation of Regulation 10(e) of CBLR, 2018. The Tribunal found that the broker filed the Bill of Entry based on invoice, packing list and related documents emailed and duly authorized by the actual importer. Invoice, Bill of Lading and quantity details matched, and the use of a different email and phone number in the IGM was treated as secondary information, unintentionally overlooked. The alleged lack of due diligence was held untenable, and the Revenue's appeal was dismissed.

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1. ISSUES PRESENTED AND CONSIDERED

(1) Whether, on the facts established in the offence report and inquiry, the conduct of the Customs Broker in filing a Bill of Entry for an entity other than the consignee named in the IGM constituted a violation of Regulation 10(e) of the Customs Broker Licensing Regulations, 2018, relating to exercise of due diligence.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Alleged violation of Regulation 10(e) of CBLR, 2018 for lack of due diligence in filing Bill of Entry

(a) Legal framework (as discussed)

Regulation 10(e) of the Customs Broker Licensing Regulations, 2018 requires a Customs Broker to "exercise due diligence to ascertain the correctness of any information, which he imparts to a client with relation to any work related to clearance of cargo or baggage". The Revenue alleged that filing a Bill of Entry in favour of an importer who was not the consignee named in the IGM, despite the IGM containing particulars such as GSTIN and PAN of the actual importer, constituted breach of this obligation.

(b) Interpretation and reasoning

(i) The Tribunal noted that the adjudicating authority had found, on the basis of the Inquiry Report, that the Bill of Entry was filed by the Customs Broker on the strength of documents (invoice, packing list and other documents) received via e-mail from the importer, which themselves had been redirected from the overseas supplier. The importer had also granted due authorization to the Customs Broker to file the Bill of Entry on the basis of such e-mail documents.

(ii) It was specifically recorded that the invoice number, Bill of Lading number, and quantity of goods tallied in all respects between the documents relied upon by the Customs Broker and the relevant IGM/Bill of Lading particulars. The divergence related only to the e-mail address and phone number appearing in the IGM, which the concerned employee of the Customs Broker treated as secondary information and to which no particular attention was paid.

(iii) The Tribunal took note of the factual finding that, after breach of contract between the original intended importer and the overseas supplier, the overseas supplier unilaterally amended the Bill of Lading by changing the name of the notified beneficiary to another importer, and that such change of consignee by the foreign supplier was not communicated either to the original importer or to the Customs Broker.

(iv) It was also observed that in actual practice the name of the importer is not mentioned at the stage of generation of ICEGATE IGM, and that, since all mandatory particulars (such as invoice number, Bill of Lading number and quantity) tallied, the Customs Broker proceeded to file the Bill of Entry. The discrepancy in contact details (e-mail and mobile number) was found to be peripheral to the core clearance documents relied upon.

(v) The Tribunal endorsed the Inquiry Officer's conclusion that the conduct of the Customs Broker, in the circumstances, was unintentional and without any motive, and that the error arose from non-communication of the subsequent change of consignee by the foreign supplier rather than from any deliberate or negligent failure on the part of the Customs Broker to verify essential particulars.

(vi) On these findings, the Tribunal held that it could not be reasonably inferred that the Customs Broker had failed to exercise the due diligence mandated by Regulation 10(e). The characterisation of the lapse as a "human error" by the Inquiry Officer and adjudicating authority was accepted, and the Tribunal found no legal basis to treat this as a culpable lack of due diligence or as collusion with the original importer.

(c) Conclusions

(i) The charge of violation of Regulation 10(e) of the Customs Broker Licensing Regulations, 2018, on the ground of failure to exercise due diligence in ascertaining correctness of information while filing the Bill of Entry, was held to be untenable.

(ii) The Tribunal upheld the adjudicating authority's order dropping the proceedings against the Customs Broker, finding no infirmity in the reliance placed on the Inquiry Report and no merit in the Revenue's contentions.

(iii) The appeal filed by the Revenue was dismissed.

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