2025 (5) TMI 1289 - AT - Customs

Suspension of the Customs Broker licence - mis-declaration of description and values of the goods - exporter found to be non-existent - Show Cause Notice SCN issued - HELD THAT - Nothing in the Customs Act or the CBLR authorizes the Customs Broker to examine the goods. The Customs Broker has to file Shipping Bills as per the documents and the goods are then brought into the Customs area such as the ICD (this process is called carting) and handed over to the custodian of the ICD. The custodian has to present the goods to the Customs officers if they wish to examine them. The Customs broker often assists in the process but neither the Customs Broker has any authority nor responsibility to examine the goods or verify them. Therefore if the goods are found to be different than what is declared in the shipping bill the Customs Broker cannot be held responsible. The goods were declared to be of a certain FOB value in the Shipping Bills and other documents but when the customs officers conducted market enquiries the goods were found to be of a fraction of the value in the market. We find that the Customs Broker has no authority or responsibility to verify the FOB value of the goods (which is the transaction value decided between the buyer and seller) or check the market value of the goods (i.e. the value at which such goods are sold in Indian market). Therefore suspension of the appellant s Custom Broker licence on this ground is also not correct. The case of the department is that Customs officers went to the registered premises of the exporter and found the exporter firm to be non-existent. Evidently either the officer who verified the premises is not correct or all the other authorities who issued Aadhar PAN IEC and GST registration are not correct. Either way it cannot be said that the appellant had not verified the existence of the exporter. We therefore find that confirmation of suspension on this count is also not correct. On 1.2.2024 the GST Commissionerate replied that the exporter was found to be non-existent and that its registration was concealed suo moto with effect from 7.2.2023. It is only after verification by the GST officers pursuant to the letter dated 3.1.2024 it appears that the GST Registration was cancelled with effect from 7.2.2023. The impugned order does not say when the GST Registration was cancelled (although it was cancelled effective from 7.2.2023). Until the cancellation not only the appellant but even the department was operating under the assumption that the appellant existed. Thus we find that confirmation of suspension of the Customs Broker licence of the appellant in the impugned order cannot be sustained and needs to be set aside. Nothing in this order would affect the proceedings under the SCN for revocation of licence. It shall be decided by the inquiry officer and the Commissioner un-influenced by any observation made in this Order. The appeal is allowed and the impugned order is set aside. The suspension of the Custom Broker licence of the appellant is set aside with immediate effect. The original licence and all the F/G/H cards if already surrendered to the Customs shall be returned to the appellant.

Summary

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

1. Whether the confirmation of suspension of the Customs Broker licence under Regulation 16(2) of the Customs Broker Licensing Regulations, 2018 (CBLR, 2018) was justified on the facts and law.

2. Whether the suspension order adequately stated reasons for immediate suspension as required under the regulatory framework.

3. Whether the appellant Customs Broker failed in its duties regarding verification of the description, value, existence, and credentials of the exporter as alleged by the Commissioner of Customs.

4. Whether the Customs Broker can be held responsible for mis-declaration, overvaluation, or non-existence of the exporter in the context of the Customs Act and CBLR, 2018.

5. Whether the suspension of the Customs Broker licence should be revoked pending the inquiry and final decision on revocation of licence.

Issue-wise Detailed Analysis

Issue 1: Justification for Confirmation of Suspension under Regulation 16(2) of CBLR, 2018

Legal Framework and Precedents: Regulation 16(1) of CBLR, 2018 authorizes suspension of a Customs Broker licence where immediate action is necessary to prevent misuse or prejudice to revenue. Regulation 16(2) provides for confirmation of such suspension. The suspension is a preventive measure and not a final adjudication on licence revocation.

Court's Interpretation and Reasoning: The Tribunal noted that the impugned order confirmed the suspension but did not itself initiate suspension; the initial suspension order dated 9.1.2025 contained reasons. The Tribunal held that Regulation 16(2) is limited to confirmation and does not require fresh determination of necessity for immediate action at confirmation stage.

Key Evidence and Findings: The Commissioner's suspension order cited contravention of various provisions of CBLR, 2018, breach of trust, and potential prejudice to revenue as grounds for immediate suspension.

Application of Law to Facts: The Tribunal accepted the procedural correctness of confirming suspension but proceeded to examine whether the grounds cited justified suspension.

Treatment of Competing Arguments: The appellant argued absence of reasons and evidence; the Tribunal found reasons were provided in the initial order.

Conclusion: The confirmation of suspension was procedurally valid but required factual scrutiny.

Issue 2: Verification of Description and Value of Goods by Customs Broker

Legal Framework: Under the Customs Act and CBLR, 2018, Customs Brokers file Shipping Bills based on documents provided by exporters. Customs officers have authority to examine goods and verify declarations. Customs Brokers assist in documentation but have no statutory authority or responsibility to physically verify goods or their market value.

Court's Reasoning: The Tribunal clarified that Customs Brokers cannot be held liable for discrepancies found by Customs officers during examination of goods. The broker's role is limited to filing Shipping Bills as per exporter's declarations and documents.

Key Findings: The goods were found to be mis-declared in description and value by Customs officers at ICD Tughlakabad, but the Customs Broker did not have authority or responsibility to verify these aspects.

Application: Suspension on grounds of failure to verify description and value was unjustified.

Competing Arguments: The Revenue argued the broker's failure to verify contributed to misuse; the Tribunal rejected this as beyond the broker's remit.

Conclusion: Suspension on these grounds was not sustainable.

Issue 3: Verification of Existence and Credentials of Exporter

Legal Framework: Customs Brokers are expected to conduct KYC and verify exporter credentials such as PAN, IEC, GST registration. The existence of an exporter is relevant to prevent fraudulent transactions.

Court's Reasoning: The appellant produced extensive KYC documents including Aadhar, PAN, IEC, GST registration, and bank certificates. The Revenue's claim that the exporter was non-existent was based on Customs officers' verification at the premises, conflicting with official documents issued by competent authorities.

Key Evidence: The exporter filed a writ petition for release of seized goods, indicating existence. GST registration was cancelled suo moto effective 7.2.2023 but the timing of cancellation was after the transactions and after Customs' initial verification request.

Application: The Tribunal held that the appellant did verify the existence and credentials to the extent possible and cannot be faulted for subsequent cancellation of GST registration or findings of non-existence by Customs officers.

Competing Arguments: Revenue relied on Customs officers' physical verification; appellant relied on documentary evidence and subsequent legal proceedings.

Conclusion: Suspension on grounds of non-verification of exporter's existence and credentials was unjustified.

Issue 4: Effect of GST Registration Cancellation on Broker's Liability

Legal Framework: GST registration is a key credential for exporters; cancellation may indicate non-genuineness. However, the timing and knowledge of cancellation are material.

Court's Reasoning: The GST registration was cancelled suo moto effective 7.2.2023 but the Customs officers only received confirmation of cancellation on 1.2.2024 after initiating investigation. Until then, the broker and department operated under assumption of valid registration.

Key Findings: The broker had obtained GST registration details as part of KYC. The cancellation post-dated the transactions and was not known at the time of filing.

Application: The broker cannot be held liable for failure to verify a GST registration that was cancelled retroactively after the relevant transactions.

Conclusion: Suspension on this ground was not sustainable.

Issue 5: Whether Suspension Should be Revoked Pending Inquiry

Legal Framework: Suspension is a preventive measure pending inquiry and final decision on licence revocation. The Tribunal has discretion to revoke suspension if grounds are not made out.

Court's Reasoning: Since the inquiry and final decision on revocation are pending, the Tribunal limited itself to the question of justification of suspension confirmation. Having found the grounds insufficient, it ordered revocation of suspension with immediate effect.

Competing Arguments: Revenue sought continuation of suspension pending inquiry; Tribunal prioritized fairness and absence of justification for suspension.

Conclusion: Suspension was set aside; licence and related cards to be returned to appellant.

Significant Holdings

"Therefore, it appears that the continuation of business transaction by the Customs Broker would be prejudicial to the interest of the Revenue and immediate action under Regulation 16 of CBLR, 2018 is warranted to prevent further misuse of Customs Broker Licence." (Paragraph 5 of Suspension Order)

The Tribunal held that this reasoning was not supported by evidence regarding the broker's failure to verify description, value, or existence of exporter.

"Nothing in the Customs Act or the CBLR authorizes the Customs Broker to examine the goods. The Customs Broker has to file Shipping Bills as per the documents and the goods are then brought into the Customs area... Therefore, if the goods are found to be different than what is declared in the shipping bill, the Customs Broker cannot be held responsible."

"The appellant had obtained the GSTR of the exporter as a part of KYC... Until the cancellation, not only the appellant but even the department was operating under the assumption that the appellant existed."

"Considering all the above, we find that confirmation of suspension of the Customs Broker licence of the appellant in the impugned order cannot be sustained and needs to be set aside."

Core principles established include that suspension under Regulation 16 requires clear and supported grounds demonstrating immediate necessity; Customs Brokers' duties do not extend to physical verification of goods or independent valuation; KYC verification based on official documents suffices; and retroactive cancellation of credentials cannot be held against the broker if unknown at the time.

Final determinations:

- The confirmation of suspension under Regulation 16(2) was not justified on the facts.

- The appellant Customs Broker did not fail in its duties as alleged.

- Suspension of the Customs Broker licence was set aside with immediate effect.