2025 (6) TMI 1364 - AT - Customs

Revocation of the Customs Broker License - forfeiture of the entire security deposit - imposition of penalty - attempt to aid the importer to bye-pass the policy restrictions - failure to discharge the obligations cast upon him under Regulation 10(d) (e) (n) of CBLR 2018 - HELD THAT - Though the CHA/Customs Broker acted in good faith still there are other grey areas like the above which require clarifications but however the same are not explained by the CHA/CB. This does not ipso facto mean that the Revenue has proved violations of Regulations of CBLR 2018 to the extent of cancelling the very license issued to the Customs Broker apart from forfeiture of the entire Security Deposit and imposing penalty. Considering the above and the fact that the Customs Broker could have been more diligent in discharging his obligations cast not only towards his clients but also to justify holding H card it is deemed appropriate to modify the impugned order by setting aside the revocation of license and forfeiture of entire Security Deposit; however reducing the penalty to Rs.5, 000/- as a deterrent. Appeal disposed off.

Summary

The core legal question considered by the Tribunal is whether the revocation of the Customs Broker License, forfeiture of the entire security deposit, and imposition of penalty under the Customs Brokers Licensing Regulations (CBLR), 2018 by the Commissioner is justified in the facts and circumstances of the case.

Several subsidiary issues arise in connection with this main question, including:

• Whether the Customs Broker failed to exercise due diligence and discharged obligations under Regulation 10(d), (e), and (n) of CBLR, 2018 by submitting incorrect or inconsistent documents to Customs;
• Whether the Customs Broker colluded with the importer to circumvent import policy restrictions by presenting dual sets of documents with conflicting dates;
• The relevance and effect of discrepancies in Bill of Lading dates, Certificate of Origin dates, and invoice dates on the legality of the import and Customs clearance;
• Whether the Customs Broker's conduct amounts to a violation warranting revocation of license and forfeiture of security deposit under Regulations 14, 17, and 18 of CBLR, 2018;
• The extent of the Customs Broker's responsibility and liability for errors or misrepresentations in documents supplied by the importer;
• The applicability of judicial precedents regarding the scope of due diligence expected from Customs Brokers and their liability for innocent filing of incorrect documents.

Issue-wise detailed analysis:

1. Duty of Due Diligence and Verification under CBLR, 2018

The relevant legal framework includes Regulation 10(d), (e), and (n) of the Customs Brokers Licensing Regulations, 2018, which impose on Customs Brokers the obligation to advise clients to comply with Customs laws and allied statutes, to verify documents with reasonable suspicion, and to exercise due diligence in filing Bills of Entry. Regulation 14 empowers the Commissioner to revoke licenses for violations, and Regulation 18 authorizes imposition of penalties.

The Court noted that the Customs Broker filed the Bill of Entry declaring the terms of sale as CIF, whereas the contract and invoices clearly stated FOB. Further, two sets of documents with conflicting Bill of Lading dates (29.08.2019 and 06.09.2019) and Certificate of Origin dates were submitted, which did not tally with the invoice dates. The Customs Broker admitted receiving the second set of documents after filing the Bill of Entry but claimed inability to amend the entry post Import General Manifest (IGM) filing.

The Commissioner found that the Customs Broker failed to discharge obligations under Regulation 10 by not verifying discrepancies and by attempting to aid the importer in bypassing import restrictions effective from 31.08.2019, when the import policy changed from "Free" to "Restricted" for the goods in question.

The Inquiry Officer, however, concluded that the charges were not proved, but the Commissioner disagreed, emphasizing the primary responsibility of the Customs Broker to ensure submission of correct documents after due verification.

The Tribunal acknowledged that while the Customs Broker acted in good faith, the discrepancies and failure to cross-check documents indicated a lack of due diligence, though not rising to the level justifying license revocation and full forfeiture of security deposit.

2. Collusion and Submission of Dual Sets of Documents

The Commissioner's order held that the Customs Broker, in connivance with the importer, produced two sets of documents with different dates to circumvent the import policy restrictions. The Customs Broker's representative admitted that the invoice had a Bill of Lading date of 06.09.2019, but the Bill of Entry was filed based on a Bill of Lading dated 29.08.2019 as per the IGM, which could not be amended after filing.

The Tribunal noted that no evidence on record demonstrated that the Customs Broker informed the Revenue about the second set of documents. The statements under Section 108 of the Customs Act, 1962, were referenced in the Show Cause Notice but not addressed in the Inquiry Officer's report. The statement of the Customs Broker's representative was not retracted.

Despite these grey areas, the Tribunal found that the Revenue had not conclusively proved collusion or intentional wrongdoing by the Customs Broker to the extent of justifying license revocation.

3. Responsibility for Incorrect or Inconsistent Documents Supplied by Importer

The Customs Broker relied on judicial precedents holding that the exercise of due diligence does not require deep background checks of exporters/importers and that innocent filing of incorrect documents should not be attributed to the Customs Broker. These precedents emphasize that liability for incorrect information does not automatically extend to the Customs Broker if documents were filed innocently and without knowledge of falsity.

The Tribunal recognized this principle but emphasized that the Customs Broker still has an obligation to verify documents with reasonable suspicion and to advise clients accordingly, as per Regulation 10(d) of CBLR, 2018.

In this case, the Customs Broker admitted noticing discrepancies but did not take corrective steps or inform the department, which constitutes a failure to meet the regulatory standards.

4. Application of Law to Facts and Treatment of Competing Arguments

The Tribunal carefully weighed the Commissioner's findings against the Inquiry Officer's report and the Customs Broker's submissions. It found that the Inquiry Officer's report was inadequate and failed to address key evidence such as statements recorded under Section 108 and discrepancies in documentation.

However, the Tribunal also found that the Revenue had not proved violations to the extent warranting the harsh penalty of license revocation and full forfeiture of security deposit. The Customs Broker's conduct showed lack of due diligence but not deliberate or fraudulent intent.

The Tribunal balanced the interests of regulatory enforcement and fairness to the Customs Broker, recognizing that the Customs Broker could have been more diligent but also acted in good faith based on documents supplied by the importer and shipping line.

5. Final Conclusions and Orders

The Tribunal held that the revocation of the Customs Broker License and forfeiture of the entire security deposit were not justified on the facts. However, it upheld the finding that the Customs Broker failed to fully discharge obligations under the CBLR and imposed a reduced penalty of Rs. 5,000/- as a deterrent.

The Tribunal set aside the revocation and forfeiture but maintained a monetary penalty to emphasize the importance of due diligence and compliance.

Significant holdings include the following verbatim excerpt:

"Considering the above, and the fact that the Customs Broker could have been more diligent in discharging his obligations cast not only towards his clients but also to justify holding 'H' card, we deem it appropriate to modify the impugned order by setting aside the revocation of license and forfeiture of entire Security Deposit; however, reducing the penalty to Rs.5,000/- (Rupees Five thousand only) as a deterrent."

Core principles established or reaffirmed:

• Customs Brokers have a primary responsibility to verify and ensure submission of correct documents with reasonable suspicion and due diligence under Regulation 10 of CBLR, 2018;
• Failure to detect discrepancies or to inform the department about non-compliance may attract penalties but does not ipso facto justify license revocation unless deliberate wrongdoing is proved;
• Judicial precedents protect Customs Brokers from liability for innocent filing of incorrect documents but do not absolve them from their regulatory obligations to verify and advise clients;
• Revocation of license and forfeiture of security deposit are severe penalties requiring clear and convincing evidence of violations and intent;
• Regulatory authorities must balance enforcement with fairness, considering the totality of facts and the conduct of the Customs Broker.

In conclusion, the Tribunal modified the impugned order by reinstating the Customs Broker's license and refunding the security deposit but imposed a reduced penalty to underscore the need for compliance and vigilance in Customs clearance procedures.