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2025 (5) TMI 1460 - AT - CustomsRevocation of customs broker licence - forfeiture of security deposit - imposition of penalty - Overvaluation of export goods - breach of regulation 10(d) and regulation 10(m) of Customs Broker Licensing Regulations 2018 - imputation of misconduct - HELD THAT - The imputation of misconduct insofar as regulation 10(d) of Customs Broker Licensing Regulations 2018 is concerned revolves around the abetment of alleged illegal activities of the exporter rather than about the advise rendered by customs broker in relation to export goods. There is no specifics in that finding that the nature and content of the advice offered to the client was appropriate or that the manner in which the declaration of incorrect value that came to be revised by reference to valuation rules was attributable to any incorrect advice. The enquiry authority found no cause to uphold the charge of abetment which in the context of the obligation in regulation 10(d) is superfluous. The finding of the licensing authority is bereft of any justification for the repeated narratives conforming certain facts and the relationship of those facts offering evidence of incorrect advice afforded to the client by the customs broker. The findings therefore has no basis in the obligation devolving in regulation 10(d) of Customs Broker Licensing Regulations 2018 on the customs broker. Nonetheless we find that the alleged misdemeanour on the part of the exporter was limited to the claim for integrated tax as refund. Breach of provisions of Customs Act 1962 has been alleged against customs broker solely on re-assessed value of goods already exported. We are unable to ascertain from the records as to the manner in which refund of integrated tax would be subject to assessment under section 17 of Customs Act 1962 inasmuch as the refund would be just as much as had been discharged on the goods. There is nothing on record to indicate that the said integrated tax had not been discharged by the exporter or that the customs broker had anything to do with either insufficient payment of integrated tax or was cognizant of such deficiency on the part of the exporter. Revoking of licence and forfeiture of security deposit under regulation 14 of Customs Broker Licensing Regulations 2018 is disproportionately severe. Consequently the ends of justice would be met by not interfering with the penalty imposed on the appellant herein which in any case is beyond the scope of appeal before the Tribunal. Accordingly we set side the revocation of licence and forfeiture of security deposit to modify the impugned order to such extend.
The core legal questions considered by the Tribunal pertain to the propriety and correctness of penalties imposed under the Customs Broker Licensing Regulations, 2018, specifically:
Regarding the breach of regulation 10(d), the Tribunal examined the requirement that a customs broker must advise clients to comply with all rules and regulations and report non-compliance to designated customs officials. The enquiry revealed that the exporter failed to submit relevant documents such as supplier invoices, bank transaction proofs, and transport documents to substantiate the declared export value. The investigation established overvaluation of goods to claim undue IGST refund. The customs broker admitted unfamiliarity with the goods and lacked prior dealings with the exporter, which heightened the expectation of due diligence. The licensing authority found that the customs broker failed to advise the exporter properly and did not alert customs authorities regarding non-compliance, thereby violating regulation 10(d). However, the Tribunal noted that the enquiry authority only partly proved breaches under regulation 10(d) and 10(n), and did not uphold the charge of abetment of illegal activities. The Tribunal observed that the licensing authority's findings lacked specific evidence demonstrating that the customs broker's advice was incorrect or that the broker actively abetted misdeclaration. The Tribunal emphasized that the obligation under regulation 10(d) does not extend to responsibility for the officer's valuation determination, and the findings did not justify the conclusion that the customs broker failed in the advisory role as alleged. On the issue of regulation 10(n), which mandates verification of client identity and existence at the declared address, the enquiry uncovered discrepancies between the addresses mentioned in the IEC and GST registration certificates. Further, verification reports indicated that the addresses were untraceable and that the exporter's principal officers were not found at their registered addresses, suggesting the exporter was not genuinely operating from those locations. The customs broker admitted knowledge of address discrepancies but did not investigate further or conduct physical verification, relying instead on online document verification. The licensing authority held that such casual verification was inadequate and constituted a breach of regulation 10(n), as the customs broker failed to exercise due diligence to confirm the genuineness of the exporter's business premises. The Tribunal concurred with this finding, concluding that the customs broker's defense was unacceptable given the circumstances, and that failure to conduct independent inquiry or physical verification amounted to carelessness facilitating fraudulent export activities. Regarding the proportionality of penalties, the Tribunal considered that the exporter's alleged misconduct was confined to claiming undue integrated tax refunds based on overvalued export declarations. The Tribunal found no evidence that the customs broker was involved in or aware of any deficiency in payment of integrated tax, nor that the customs broker's conduct caused any loss to the revenue. The refund claim was subject to reassessment under customs valuation rules, but the Tribunal noted the absence of any indication that the refund itself was improperly paid or that the customs broker had a direct role in the tax payment process. Given these facts, the Tribunal held that revocation of the customs broker licence and forfeiture of the security deposit under regulation 14 were disproportionately severe sanctions. The Tribunal accordingly set aside the revocation and forfeiture, modifying the impugned order to that extent. However, the penalty imposed under regulation 18 was not interfered with, as it was beyond the scope of the appeal before the Tribunal. In summary, the Tribunal's reasoning established that while partial breaches of regulations 10(d) and 10(n) were sustainable against the customs broker, the evidence did not support a finding of full breach or abetment. The Tribunal emphasized the customs broker's duty to verify client identity and existence diligently but recognized limits to liability for valuation disputes and tax refunds. The Tribunal underscored the need for proportionality in imposing penalties, particularly revocation and forfeiture, when the customs broker's role and culpability were limited. Significant holdings include the following verbatim excerpts:
The Tribunal thus affirmed the partial breaches under regulations 10(d) and 10(n), rejected the charge of abetment, and held that the severe penalties of licence revocation and security forfeiture were not justified. The penalty under regulation 18 was maintained. This decision establishes the principle that customs brokers must exercise due diligence in client verification and advisory roles but are not automatically liable for valuation disputes or tax refund claims absent clear evidence of complicity or negligence beyond partial lapses. The proportionality of sanctions remains a key consideration in disciplinary proceedings under the Customs Broker Licensing Regulations, 2018.
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