2026 (2) TMI 1347 - AT - Customs

Duty to Notify and Employer Liability: failure to advise justified a monetary penalty, but licence revocation was set aside.

The note examines alleged breaches of customs broker obligations concerning client authorization, advising authorities, due diligence, identity ... Revocation of Customs Broker licence - Forfeiture of security deposit - Imposition and confirmation of penalty under Customs Brokers Licensing Regulations, 2018 - Violation of Regulation 10(d) of CBLR, 2018 - duty to advise client and report non-compliance - Inapplicability of Regulations 10(a), 10(e) and 10(n) to unaccompanied baggage clearance where passenger is personally present - Liability for acts of employees - principal-agent (fraud by employee outside authority) - Admissibility and evidential weight of electronic communication in adjudicatory proceedings - Proportionality of penal consequences under CBLR, 2018 - Standard of proof in civil/adjudicatory customs proceedings - preponderance of probabilities - HELD THAT:- In the present case, admittedly there is a violation of the provisions of Baggage Rules. Further, as per the evidence on record, an email communication was recovered from the email of the appellant and from said document, it is evident that the consignment brought by the passenger as bona fide baggage consists of baggage belonging to some other passengers also. Once such an email communication recovered and when not rebutted it amounts to failure of the appellant to inform the same to concerned passenger not to proceed with such clearance. Thus, there is an admitted violation of the Regulation 10(d) of the CBLR, 2018. As regarding violation of Regulation 10(e) of the CBLR, 2018, appellant has to exercise due diligence while ascertaining the correction of the information. Though the illegality was committed by one of the employees of the appellant in connivance with the overseas cargo movers, the appellant being a Customs Broker having unblemished record over a period of time, cannot be held personally liable for the said violation to proceed against him under the Provisions of CBLR, 2018. Further, as held by this Tribunal in the matter of M/s. MNS Export Private Limited. [2007 (4) TMI 524 - CESTAT, BANGALORE], fraud committed by an agent which does not fall within the authority, does not affect the principle. Fraud committed by employee, which was not within the knowledge and consent of the company, company is not liable for acts and omissions of his employees in terms of provisions of 13(12) or 10(e) of the CBLR, 2018. Further, as regarding violation of Regulation 10(n) of the CBLR, 2018, we find that the said provision is also not applicable in such a case where personal presence of the passenger is mandatory before the Customs Officer while clearing the goods. Thus, identification, Import and Export (IE) code, etc., is not relevant in such a situation and it is for the Customs Officer to verify the background of the passenger directly and no failure can be alleged against custom broker in such situation. In the present case, though it is an admitted fact that there was under valuation, we find that on perusal of the method of valuation adapted by the Investigating Officer, it is not a usual practice and even as per the initial examination, the value was found normal by the proper officer of the customs. In the absence of any authority vested on the customs broker regarding valuation of goods and in the absence of any knowledge regarding such under valuation till it was brought to the notice of the customs broker while conducting examination by SIIB, the appellant cannot be held liable for such under evaluation. Further, it is an admitted fact that there is no contraband or prohibited or restricted goods imported under the guise of baggage rules, and such a harsh penal proceeding can be imposed only when such illegalities are committed with the direct knowledge of the customs broker. In the present case, the only evidence available on record is the email communication, which was received by the appellant through the official email of the appellant and in the absence of any other satisfactory explanation, it is has to be presumed that the appellant had knowledge regarding presence of baggage of other passengers in the said consignment. Accordingly, revocation of the custom broker license and forfeiture of security deposit as per the impugned order are set aside. However, considering the violation of the provisions of 10(d), penalty of Rs.50,000/- imposed by Adjudication Authority is confirmed. Issues: (i) Whether the Customs Broker violated Regulations 10(a), 10(d), 10(e), 10(n) and 13(12) of the Customs Brokers Licensing Regulations, 2018 in relation to the alleged consolidation and mis-declaration under Rule 6 of the Baggage Rules, 2016; (ii) Whether revocation of the customs broker licence and forfeiture of security deposit and penalty imposed by the Adjudicating Authority were justified.Issue (i): Whether the Customs Broker breached Regulation 10(a), 10(d), 10(e), 10(n) and 13(12) of the Customs Brokers Licensing Regulations, 2018 in the facts of this case.Analysis: Regulation 10(a) requires obtaining authorization from the client; where passenger was personally present and proper officer cleared the baggage on production of passport, authorization requirement is not the relevant safeguard. Regulation 10(d) requires advising the client and notifying authorities of non-compliance; recovery of an email showing consolidated baggage that was not rebutted establishes a failure to inform or advise, satisfying the ingredient of prior knowledge or notice in the facts. Regulation 10(e) requires exercising due diligence; where an employee acted in connivance and there is no evidence of broker's knowledge or benefit, liability of the broker for lack of due diligence is not made out. Regulation 10(n) (verification of IEC/GST/identity) is directed to normal import/export transactions and is not applicable where personal presence of passenger before customs officer is mandatory. Regulation 13(12) makes brokers responsible for acts or omissions of employees, but established liability requires knowledge, consent or acts within authority; fraud by an employee beyond authority and without company knowledge does not automatically fix the broker with personal liability.Conclusion: Regulation 10(a) not violated; Regulation 10(d) violated; Regulation 10(e) not established against the broker; Regulation 10(n) not applicable; Regulation 13(12) liability not established on the facts.Issue (ii): Whether revocation of licence, forfeiture of security deposit and the penalty imposed were justified as disciplinary consequences.Analysis: The regulatory regime permits severe sanctions where the broker is implicated in deliberate or knowing fraud or where illegalities are committed with the broker's direct knowledge. Here, the valuation methodology adopted by investigators was not shown to be standard and initial customs assessment did not indicate contraband or prohibited goods. The only incriminating material against the broker was an email recovered on the broker's official account; on the available record, that supports imposition of monetary penalty for the admitted violation of Regulation 10(d) but does not establish the degree of culpability warranting revocation of licence or forfeiture of security deposit.Conclusion: Revocation of the customs broker licence and forfeiture of security deposit are set aside; monetary penalty of Rs.50,000 is confirmed.Final Conclusion: The appeal is partly allowed: findings of violations under certain Regulations are upheld only to the extent necessary to sustain a monetary penalty, while extreme sanctions of licence revocation and security forfeiture are disproportionate and therefore set aside.Ratio Decidendi: A customs broker cannot be held to the harsh sanctions of licence revocation or forfeiture for venial violations arising from an employee's unauthorised misconduct or from contested valuation methodologies absent satisfactory proof of the broker's knowledge or direct involvement; however, proven failure to advise or notify authorities of known non-compliance justifies imposition of a proportionate monetary penalty.