2025 (6) TMI 1029 - HC - Customs

Revocation of customs broker license under Rule 14 of the CBLR 2018 - levy of penalty under Regulation 18 of the CBLR 2018 - violation under Regulation 10(a) (d) (e) (m) and (n) respectively - non-extension of an opportunity to cross examine Customs Officers - Failure to produce relevant documents to the appellant at the time of issuance of Show Cause Notice -commission of error by not adhering the time frame depicted as per Regulation 17 (5) of the CBLR 2018 - Commission of error by not considering that the Annexure B is issued beyond the scope of Show Cause Notice - Commission of error by not considering the Judicial Discipline - commission of error by issuing Annexure B Order-in-Original without studying the relevant documents. Non-extension of an opportunity to cross examine Customs Officers - HELD THAT - The reasoning of the Appellate Tribunal is found to be unassailable more so when the appellant does not have a case that the statement of any particular person was relied upon in the show cause notice that was issued to the appellant. It is also not in dispute that the appellant was given an opportunity to file a detailed representation against the enquiry report that was made available to him as part of the adjudication proceedings before the Commissioner. Under the said circumstances the appellant cannot be heard to contend that he had a right to cross-examine even other persons such as Officers and staff of the Customs Department who did not have a role to play in the breach of obligations alleged against the appellant under the CBLR. Failure to produce relevant documents to the appellant at the time of issuance of Show Cause Notice - HELD THAT - As rightly found by the Appellate Tribunal in paragraph 9 of its order that as per the Regulations the appellant was entitled to receive only those documents that were mentioned in the show cause notice and the enquiry report that was drawn up by the Enquiry Officer during the adjudication proceedings before the Commissioner. Since it is not in dispute that the appellant received both the show cause notice and the enquiry report and that he was afforded an opportunity of filing representations against both we fail to see how the appellant can sustain a contention regarding violation of natural justice. Commission of error by not adhering the time frame depicted as per Regulation 17 (5) of the CBLR 2018 - HELD THAT - The specific contention raised by the appellant in terms of Regulation 17 (5) with regard to the submission of the enquiry report being beyond the period of 90 days from the date of issuance of notice under Regulation 17 (1) was dealt with by the Appellate Tribunal in a practical sense and on finding that in as much as there was no suspension of the license of the appellant there was no prejudice caused to the appellant inasmuch as he had been permitted to carry on his activities as a customs broker and therefore the 90 days period envisaged in Regulation 17 (5) had to be seen only as directory and not mandatory in the peculiar circumstances that arose in this case. There are no illegality or impropriety in the said finding of the Appellate Tribunal. Although the learned counsel for the appellant brought to notice a recent order of the CESTAT that allowed an appeal preferred by the appellant against an earlier order imposing penalty on it for violating the provisions of the Regulations it is felt the same may not be of much avail to the appellant in the instant appeal. The important aspect that requires to be taken note of in such cases is that the relationship between the Customs Department and the Customs Broker appointed in terms of the Regulations is essentially one of trust. Once that trust is broken and the Customs Broker ceases to inspire the confidence of the Customs Department in relation to his functioning he loses the right to seek a reinstatement of his license under the Regulations. This Customs Appeal is dismissed by upholding the impugned order of the Tribunal and answering the questions of law raised against the appellant and in favour of the Department.

Summary

The core legal questions considered by the Court in this Customs Appeal pertain to the procedural and substantive validity of the revocation of a Customs Broker's license and imposition of penalty under the Customs Broker Licensing Regulations (CBLR), 2018. Specifically, the issues examined include: whether the adjudicating authority erred in denying the appellant the opportunity to cross-examine Customs officers under Regulation 17(4) of the CBLR; whether relevant documents were improperly withheld at the time of issuance of the show cause notice; whether the authorities failed to comply with the prescribed time frame under Regulation 17(5); whether the appellate authority erred in considering materials beyond the scope of the show cause notice; whether judicial discipline was disregarded by the appellate authority; and whether the adjudicating authority issued orders without adequately studying relevant documents. Additionally, the Court addressed whether the appellant violated specific obligations under Regulation 10 of the CBLR, 2018, including due diligence and proper verification duties, in relation to the clearance of consignments falsely declared as diplomatic cargo.

Regarding the entitlement to cross-examination of Customs officers, the Court referred to Regulation 17(4) of the CBLR, which mandates that a Customs Broker is entitled to cross-examine persons examined in support of the grounds forming the basis of proceedings. However, the regulation also permits the Deputy Commissioner or Assistant Commissioner of Customs to decline permission to examine persons whose evidence is irrelevant or immaterial, with reasons recorded in writing. The Tribunal found that the appellant did not request cross-examination in their interim reply and only sought it in the final reply. The officers whose cross-examination was sought had cleared the consignments as diplomatic cargo based on declarations and had no direct role in the alleged breach of obligations by the Customs Broker. The Court upheld the Tribunal's reasoning that permitting cross-examination of these officers would amount to delay tactics, especially since their conduct was irrelevant to the core issue of whether the appellant violated the CBLR. The Court emphasized that the appellant was given adequate opportunity to file detailed representations against the enquiry report and that no particular person's statement was relied upon in the show cause notice. Thus, the denial of cross-examination of unrelated Customs officers did not violate principles of natural justice.

On the question of adherence to the time frame under Regulation 17(5), the Court analyzed the requirement that the enquiry officer submit the inquiry report within 90 days from the date of issuance of the show cause notice under Regulation 17(1). The appellant contended that the inquiry report was submitted beyond this period, rendering the proceedings time-barred. The Court noted that the show cause notice itself was issued well within the prescribed 90-day period from receipt of the offence report, thus not time-barred. The delay in submission of the inquiry report was acknowledged but deemed directory rather than mandatory, especially since no suspension of the appellant's license occurred during the delay and the appellant continued to operate as a Customs Broker. The Court found no prejudice to the appellant resulting from the delay, particularly given the appellant's own delays in furnishing responses and insistence on cross-examination of irrelevant officers. Consequently, the Court upheld the Tribunal's pragmatic approach that the timeline under Regulation 17(5) was not strictly mandatory in the circumstances.

Concerning the appellant's claim that relevant documents were not furnished at the time of issuance of the show cause notice, the Court relied on the regulatory framework which entitles the Customs Broker to receive only those documents mentioned in the show cause notice and the enquiry report. It was undisputed that the appellant received both the show cause notice and the enquiry report and was afforded the opportunity to file representations. The Court held that this satisfied the requirements of natural justice, and the contention of document withholding was untenable.

The Court then examined whether the appellant violated specific obligations under Regulation 10 of the CBLR, 2018, which impose duties such as advising clients to comply with customs laws, exercising due diligence to verify information, performing duties efficiently, and verifying the correctness of client details using reliable documents. Investigations revealed that the appellant had filed Bills of Entry declaring consignors as the "Ministry of Foreign Affairs, Abu Dhabi" when airway bills showed actual consignors as private individuals. This mis-declaration was deliberate to facilitate clearance as diplomatic cargo, which is exempt from customs duty. The appellant's Branch Manager admitted filing Bills of Entry based on instructions from a person no longer employed by the UAE Consulate, without verifying his authority or the authenticity of documents. The appellant failed to exercise due diligence, verify client identity, or report irregularities to Customs, thereby abetting smuggling of gold concealed in diplomatic cargo. The Court found that these acts constituted clear violations of Regulations 10(d), (e), (m), and (n), demonstrating mens rea and collusion with a smuggling syndicate.

The Court also considered the affidavit filed by the Customs Commissioner explaining the rationale for revoking the license. It highlighted that Customs Brokers occupy a position of trust and are expected to ensure compliance with customs laws. The appellant's conduct in mis-declaring consignor details, failing to verify documents, and facilitating smuggling of large quantities of gold was a grave breach warranting stringent action. The Commissioner's affidavit detailed the statutory requirements for licensing, the appellant's failure to meet these standards, and the economic harm caused by the appellant's lapses. The Court noted that previous penalties imposed on the appellant were independent and did not mitigate the seriousness of the current violations.

The appellant's reliance on a recent CESTAT order allowing an appeal against an earlier penalty was found to be of limited relevance. The Court emphasized that once the trust between the Customs Department and the Customs Broker is broken, reinstatement of the license is not warranted. Given the appellant's involvement in smuggling-related breaches, the Court found no justification to interfere with the revocation order.

In conclusion, the Court upheld the findings of the Commissioner and the Customs, Excise and Service Tax Appellate Tribunal, dismissing the appeal. The Court affirmed that the procedural safeguards under the CBLR were observed, the time limits were adhered to in substance, and the appellant's substantive violations of regulatory obligations justified revocation of the license and imposition of penalty.

Significant holdings include the Court's endorsement of the principle that the right to cross-examination under Regulation 17(4) is limited to persons whose evidence is relevant and material to the proceedings, and refusal to permit cross-examination of irrelevant witnesses does not violate natural justice. The Court also held that timelines under Regulation 17(5) are directory when no prejudice is caused and the appellant's right to practice is not curtailed. The Court underscored the critical importance of due diligence and truthful declarations by Customs Brokers, establishing that mis-declaration of consignor details to facilitate duty exemption and smuggling constitutes a breach of trust justifying license revocation. The Court stated: "The Customs Broker is supposed to safeguard the interest of both the importers and the Customs. A lot of trust is placed in Customs Brokers especially by the department to discharge his duties with utmost sincerity and genuineness so as to ensure all the regulations are complied with." The final determination was that the appellant's license revocation and penalty imposition were valid and justified under the CBLR, 2018 and the Customs Act, and the appeal was dismissed accordingly.