2025 (5) TMI 667 - AT - Customs

Revocation of Customs Broker license of the appellant - levy of penalty in terms of Regulation 18 of CBLR 2018 for violation of Regulation 10 (d) thereof - involvement of the Customs Broker in the fraud perpetuated with regard to alleged paper exports to Bhutan through the said LCS - violation of Regulation 10(d) and 10(e) of the CBLR 2018 - HELD THAT - The appellant has not been able to furnish adequate evidence to justify his innocence. The Hon ble Apex Court in the case of Commissioner of Customs v KM Ganatra and Company 2016 (2) TMI 478 - SUPREME COURT had held that the Customs Broker is supposed to safeguard the interest of both the importers and the customs. A lot of trust is kept in the CHA both by the import- export community as well as by government agencies. To ensure appropriate discharge of such trust the relevant regulations are prescribed which lists out the obligations of the Customs House Agent (now Customs Broker). Any contravention of such obligation even without intent would be sufficient to invite upon the CHA/CB punishment as listed in the Regulations. There is nothing in the defence of the appellant to indicate as to how he ensured compliance of the Regulation said to be contravened. Government evidence furnished through Bhutan agencies as well as failure of any remittance received is good enough for reason to establish delinquency/complacency in the matter on the part of the Customers Broker. The fact that details of export documents tendered do not match with the reports received from Bhutan Customs vis-a-vis with the export documents is a clear pointer to the anomalous situation. The Customs Broker has not been able to prove his innocence. His culpability is evident. Conclusion - While the Customs Broker is culpable for violations of Regulations 10(d) and 10(e) of CBLR 2018 the revocation of license is disproportionate under the circumstances. The license is ordered to be revived with conditions and the penalty is moderated accordingly. Appeal disposed off.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the revocation of the Customs Broker license of the appellant for alleged involvement in fraudulent export declarations and GST evasion was justified under the Customs Broker Licensing Regulations (CBLR) 2018, particularly under Regulation 10(d) and 10(e).

2. Whether the appellant's contention that the revocation action was invalid because the exports in question occurred prior to the enforcement of CBLR 2018 is legally tenable.

3. Whether the procedural requirements, including the timeline for inquiry under Regulation 17(5) of CBLR 2018, were complied with in the revocation process.

4. Whether the evidence on record sufficiently establishes the Customs Broker's complicity or negligence in the fraudulent export and GST evasion scheme.

5. Whether the penalty imposed and the revocation of license are proportionate and justified given the facts and circumstances.

Issue 1: Justification for revocation of Customs Broker license under CBLR 2018 for alleged violation of Regulations 10(d) and 10(e)

The relevant legal framework comprises the Customs Broker Licensing Regulations, 2018, specifically:

- Regulation 10(d): Obligates the Customs Broker to advise clients to comply with the Customs Act and allied Acts, and to report non-compliance to the Deputy or Assistant Commissioner of Customs.

- Regulation 10(e): Requires the Customs Broker to exercise due diligence in ascertaining the correctness of information imparted to clients regarding clearance of cargo or baggage.

- Regulation 18: Provides for imposition of penalties for violations of the Regulations.

The Court examined the enquiry report and supporting evidence, including seized shipping bills and import data from Bhutan Customs, which revealed significant discrepancies in quantity, description, value, and dates between declared exports and actual imports. The enquiry officer's report highlighted that the goods were not physically exported as declared, and that the Customs Broker's representative admitted to no physical exports having occurred. Further, no Bank Realisation Certificates were produced to substantiate receipt of export proceeds.

The department's case was that the Customs Broker prepared fake shipping bills facilitating GST evasion by the exporter, and failed to advise the exporter to comply with legal provisions or report the wrongdoing, thus violating Regulations 10(d) and 10(e).

The appellant's defense, including affidavits and statements by its employee, was found to be inconsistent and partly retracted earlier admissions. The appellant also failed to produce corroborative evidence such as cross-examination of key witnesses or proof of genuine export and remittance.

The Tribunal noted that the Customs Broker had acknowledged the fraud as a GST evasion matter but contended it was not a Customs Act violation. The Tribunal rejected this, holding that violations of allied Acts are covered under CBLR 2018 and that the Customs Broker's failure to ensure compliance and report non-compliance constituted a breach of Regulations 10(d) and 10(e).

The Court applied the principles established by the Apex Court in precedent, emphasizing the high degree of trust and responsibility placed on Customs Brokers to safeguard the interests of both the government and the trade community. Any contravention of obligations, even absent intent, attracts punishment under the Regulations.

Issue 2: Validity of revocation action given the timing of exports vis-`a-vis enforcement of CBLR 2018

The appellant argued that the exports occurred in April 2018, prior to the enforcement of CBLR 2018 on 14 May 2018, and therefore the revocation under these Regulations was impermissible.

The Tribunal observed that the violations pertained not only to the act of export but also to the ongoing failure of the Customs Broker to comply with regulatory obligations and report non-compliance, which extended beyond the date of export. The investigation and inquiry occurred after the Regulations came into force, and the Customs Broker's license was suspended and revoked pursuant to these Regulations.

The Tribunal implicitly held that the continuous obligations of the Customs Broker under the Regulations and the timing of inquiry and enforcement justified application of CBLR 2018 notwithstanding the date of the underlying exports.

Issue 3: Compliance with procedural requirements, including inquiry timeline under Regulation 17(5)

The appellant contended that the enquiry officer exceeded the stipulated 90-day period for completion of inquiry, taking six months instead.

The Tribunal noted that this plea was addressed in the impugned order, which recorded that the delay was due to repeated adjournments sought by the appellant or his employee. Thus, the procedural delay was attributable to the appellant's conduct, negating any procedural impropriety by the authorities.

Issue 4: Sufficiency of evidence to establish Customs Broker's complicity or negligence

The Tribunal undertook a detailed comparison of export declarations (Table A) and Bhutan import data (Table B), finding material mismatches in quantity, description, value, and dates. The absence of Bank Realisation Certificates further undermined the claim of genuine exports.

The statements of the Customs Broker's employee initially admitted involvement but were later retracted under apparent pressure, which the Tribunal found not to be voluntary or credible. Statements by other key persons admitted to commission payments linked to the fraudulent scheme and did not deny GST evasion.

The Customs Broker failed to produce evidence to rebut these findings or to cross-examine key witnesses. The Tribunal found the cumulative evidence sufficient to establish the Customs Broker's culpability, either by direct involvement or failure to exercise due diligence and report non-compliance.

Issue 5: Proportionality and justification of penalty and revocation of license

The Tribunal acknowledged that revocation of a Customs Broker license is a grave penalty, depriving the individual of livelihood and employment opportunities. It cited precedent emphasizing that such punishment should be reserved for extremely grave and serious matters.

Given that the license had been revoked for over two years and the appellant was deprived of business, the Tribunal exercised discretion to mitigate the penalty. It ordered revival of the Customs Broker license forthwith, subject to the appellant furnishing fresh security deposit, and reduced the penalty from Rs. 50,000 to Rs. 10,000.

Significant holdings and core principles established:

"The Customs Broker is supposed to safeguard the interest of both the importers and the customs. A lot of trust is kept in the CHA both by the import-export community as well as by government agencies. To ensure appropriate discharge of such trust, the relevant regulations are prescribed... Any contravention of such obligation, even without intent would be sufficient to invite upon the CHA/CB punishment as listed in the Regulations."

"The Customs Broker has not been able to prove his innocence. His culpability is evident."

"Revocation of a license is a grave punishment as it deprives the person concerned of his means of a living and therefore, such revocation can only be justified in extremely grave and serious matters."

"In the circumstances of the present case... we feel it would not be in the fitness of things to continue any further with the revocation of the license."

The Tribunal ultimately concluded that while the Customs Broker was culpable for violations of Regulations 10(d) and 10(e) of CBLR 2018, the revocation of license was disproportionate under the circumstances. The license was ordered to be revived with conditions, and the penalty was moderated accordingly.