2026 (2) TMI 1288 - AT - Customs

Duty to Report Misdeclaration: broker found liable; monetary penalty reduced while license cancellation denied on mitigation.

A customs broker was found to have knowingly participated in or acquiesced to a misdeclaration and failed to advise the client or notify authorities, ... Customs Broker - Violation of Regulation 13(d) - duty to advise client and intimate non compliance - vicarious liability under Regulation 19(8) - no proof of violation of Regulation 13(o) - penalty to be commensurate with proven violations - cancellation of customs broker licence not warranted in absence of proved violations - HELD THAT:- Admittedly, there is a misstatement insofar as the description of the goods imported is concerned, the Revenue has in fact brought out in the SCN itself the description as declared before the Customs authorities at the exporting point and the declaration given before the Customs authority at the importing point and admittedly there is clear substitution. There is factum of misdeclaration established which was known to both the parties. When the employee of the Appellant-firm came to know about the mismatch insofar as the description in the export and import documents are concerned, Regulation 13 (d) casts the responsibility on the concerned Customs Broker not only to advise his client, but also to intimate the same to concerned Customs Authority if there is non-compliance of Regulation, which is not done. This is a serious lapse since the duty assessments are different when the same are required to be assessed on R.S.P basis and, in any case, it is suffice to conclude that there is violation of Regulation 13 (d) ibid. Violation of Regulation 19 (8) - when the Manager of the Customs Broker came to know about the discrepancy, then it is the duty of the Manager of Appellant-firm at least to inform the Customs License Holder, who, in turn is duty bound to intimate the same to the concerned Customs Authority. Hence, there is a vicarious liability on the Customs Broker which would survive in terms of Regulation 19 (8). That having also remaining unfulfilled, we find that Appellant is also liable for violation of Regulation 19 (8). Thus, we are of the view that violation of Customs Broker license insofar as Regulation 13 (d) and 19 (8) ibid are concerned stands upheld and violation as regards Regulation 13 (o) ibid is not proved and hence, the penalty should commensurate with the above violations which are proved. In the result, the Appeal of the Appellant-Customs Broker is partly allowed as indicated above. Issues: (i) Whether the Customs Broker violated the Customs Broker Licensing Regulations, 2013 (CBLR 2013) warranting imposition of penalty; (ii) Whether the penalty imposed was insufficient and whether cancellation of the Customs Broker license was warranted.Issue (i): Whether there was violation by the Customs Broker of CBLR 2013, specifically Regulations 13(d) and 19(8), in relation to misstatement/misdeclaration in import documentation.Analysis: The record shows a substitution in description between export and import documents and unretracted voluntary statements attributing the misstatement to the importer's representative. Regulation 13(d) requires a customs broker to advise a client to comply with the Act and to notify the Deputy/Assistant Commissioner in case of non-compliance. Regulation 19(8) establishes vicarious responsibility where managerial or supervisory lapses permit non-compliance to occur. There is no evidence of rebuttal or retraction of the voluntary statements and no history shown to suggest that Regulation 13(o) was breached. The facts therefore establish a prima facie misdeclaration known to the parties and a failure to fulfill the advising and notifying obligations under Regulation 13(d) and supervisory obligations under Regulation 19(8).Conclusion: Violation of Regulation 13(d) of the Customs Broker Licensing Regulations, 2013 and Regulation 19(8) of the Customs Broker Licensing Regulations, 2013 is upheld; violation of Regulation 13(o) of the Customs Broker Licensing Regulations, 2013 is not proved.Issue (ii): Whether the penalty imposed (Rs.50,000) was insufficient and whether revocation/cancellation of the Customs Broker license was required.Analysis: The matter was assessed on the gravity of the proven violations and the absence of prior violations. Precedent and earlier decisions considered by the Tribunal indicate that cancellation of license and forfeiture of entire security deposit is not appropriate in comparable circumstances where the broker acted in a manner that, while blameworthy, does not justify revocation. Given the singular nature of the incident and no prior record, mitigation of penalty is appropriate while maintaining a deterrent effect.Conclusion: The penalty is modified and reduced from Rs.50,000 to Rs.25,000; cancellation of the Customs Broker license is not warranted and the Revenue's request for remand for license revocation is dismissed.Final Conclusion: The appeal of the Customs Broker is partly allowed by reducing the penalty; the Revenue's appeal seeking license cancellation is dismissed. The proven regulatory violations are limited to Regulations 13(d) and 19(8) of the Customs Broker Licensing Regulations, 2013 and the appropriate remedial measure is imposition of a reduced monetary penalty in the facts of this case.Ratio Decidendi: A customs broker who becomes aware of misdeclaration has a regulatory duty under Regulation 13(d) of the Customs Broker Licensing Regulations, 2013 to advise the client and, if non-compliance persists, to notify the competent customs authority, and supervisory lapses attract vicarious liability under Regulation 19(8); absent prior violations and on the facts of a single incident, revocation of license is disproportionate and a reduced penalty is appropriate.