MAY 27, 2024

By S K Rahman, IRS, working as AR at Delhi CESTAT

(PART - 2 of The Series of Two Articles)

THIS is Part 2 of the series dealing with appeals against suspension and revocation of Customs Broker license under Customs Brokers Licensing Regulations, 2018, (herein after referred as "CBLR'18"). In Part 1 of the series we have covered about appeals against suspension of Customs Broker license becoming infructuous and what should be content of offence report. In this Part 2 of the series, we would be covering importance of certain reports/orders and role played by Custom Broker with respect to various provisions of Regulation 10 of CBLR'18.

1. Offence case under Customs Act and CB case under CBLR' 18:

The starting point for initiation of action against Custom Broker licence under CBLR'18 is registering of an offence case under Customs Act 1962. This offence case is against an importer or exporter but in many cases the Custom Broker is also made a Co-noticee depending upon the role played by the Custom Broker. Thus Custom Broker being a Co-noticee in the offence case under Customs Act 1962 has great impact on the proceedings initiated against the Custom Broker under CBLR'18. In Hon'ble CESTAT, generally, the appeals pertaining to Custom Broker under CBLR'18 come up for hearing earlier than the appeals pertaining to the offence cases under Customs Act 1962 which would come up at a later stage. The offence report sent by the organisation booking such offence case shall clearly contain the role played by the Custom Broker in the offence case.

2. In these Offence cases, it is necessary to prove 'abetment' of Custom Broker, if it is there. In the Customs offence case, it is essential to prove the element of abetment as envisaged under Section 107 of the IPC. Without the element of abetment being present and discussed in the Order-in-Original (OiO), the penalties on noticees such as Customs Broker do not sustain judicial scrutiny of Hon'ble CESTAT. The element of 'abetment' as given in Section 107 of IPC:

Section 107 Abetment of a thing: A person abets the doing of a thing, who:

1. Instigates any person to do that thing; or

2. Engages with one or more other person or persons in any conspiracy for the doing of that thing, if an act or illegal omission takes place in pursuance of that conspiracy, and in order to the doing of that thing; or

3. Intentionally aids, by any act or illegal omission, the doing of that thing.

Thus the role of Custom Broker shall be clearly brought out for abetment, if it is there, in the Customs offence case. Co relation has to be there of the proceedings against Custom Broker licence under CBLR'18 with role of Customs Broker as Co-noticee in offence case under Customs Act 1962.

3. During the hearings of such cases of Custom Broker licence under CBLR'18 before the Hon'ble CESTAT, the following reports/orders play a crucial role

a. Offence Report:- whether the offence report brings out all the requisite details as mentioned above

b. Enquiry Report:- Inquiry report submitted under Regulation by Asst / Dy Commissioner whether it has documentary evidence and oral evidences, if any,,evidences for or against the Customs Broker, cross examination details, if asked for by the Customs broker etc all findings for the purpose of ascertaining the correct position.

c. Order-in-Original by Commissioner:- The Order-in-Original by Commissioner may discuss the contents of the report of the inquiry and the representation of Customs Broker on it and should be a well reasoned speaking Order

4. While deciding such cases of Custom Broker licence under CBLR'18, the Hon'ble CESTAT has taken a stand that under Rule 10(n) of CBLR'18, the Customs Broker was expected to verify correctness of Importer Exporter Code (IEC)number, Goods and Services Tax Identification Number (GSTIN), identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. It did not ask him to physically verify the existence of the Importer/exporter. Moreover, these documents are issued by various Government agencies and so further verification of authenticity of these documents is not in the domain of the Customs Broker.

5. One of the latest cases where the Hon'ble CESTAT has taken a view that it is not the responsibility of Custom Broker to physically verify the Government issued documents is quoted below for illustration purpose :

6. In the case of Friends Cargo Services Vs Commissioner Of Customs, (Airport & General), New Delhi, in Customs Appeal No. 51471 of 2022 the Hon'ble CESTAT in its Final Order No. 50241 /2024 dt. 13-02-2024 2024-TIOL-252-CESTAT-DEL. has held that (ref para 11 of the Order) "…...Therefore, once verification of the address is complete as discussed above, the responsibility cast on the appellant under Regulation 10(n) stands fulfilled …. It is not necessary that the CB appellant has to only conduct a physical verification or launch an investigation. So long as the CB can find documents which are independent, reliable and authentic to establish the identity of his client, this obligation is fulfilled……"

7. The Revenue, instead of just relying upon role played by Custom Broker under Regulation 10(n), may do proper investigation to bring out facts about role played by Custom Broker with respect to

a. Regulation 10(d) : to advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations there of, and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be;

b. Regulation 10(e) : to exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage;

c. Regulation 10(f) : not to with hold information contained in any order, instruction or public notice relating to clearance of cargo or baggage issued by the Customs authorities, as the case may be, from a client who is entitled to such information;

8. To illustrate, in the case of M/s Sanjay Prabhakar vs Commissioner of Customs, Airport & General, New Custom House, New Delhi in Customs Appeal No. 51402 of 2019, investigation proved that the fabricated documents were prepared in the office of the F card holder; it was on record that the IEC holder had sublet his IEC for monetary consideration and the Customs broker was aware of the same. It was proved that proper authorisation was not obtained as per Clause 10(a), the question of exercising due diligence under Clause 10(e) and advising his clients about the provisions of the Act and Rules as per Clause 10(d) is not satisfied. The appellant had violated the provisions of Clause 10(f) also as he had knowingly withheld the information that the IEC had been. The appellant had connived with fraudsters and had failed his duties as a customs broker required under CBLR, 2018. The Hon'ble CESTAT has passed Final Order NO. 51158/2023 dt 05.09.2023 - 2024-TIOL-493-CESTAT-DEL stating that (ref para 14 of the Order) "forgery nullifies everything. It is an admitted fact that the documents such as the invoice and the packing list was prepared by the appellant in his office……"."…. we find no reason to interfere with the findings in the impugned order. The appeal is accordingly dismissed."

9. Revocation and Forfeiture of security:

As per Regulation 14 of CBLR' 18, the Principal Commissioner or Commissioner of Customs may, subject to the provisions of regulation 17, revoke the license of a Customs Broker and order for forfeiture of part or whole of security. But, in some cases it is noticed that adjudicating authority has taken decision not to revoke license but forfeiture of security has been done. As the Regulation 14 mentions of "and", it would not be legally correct not to revoke license but do forfeiture of security. In some of such cases, the Department has preferred appeal.

10. To illustrate, a show cause notice dated 28.01.2021 was issued to M/s Freight Logistics for violation of the provisions of Regulation 10(a), 10(e) and 10(n) of CBLR, 2018 and for taking action for revocation of the license and forfeiture of the security amount in terms of Regulation 14 read with Regulation 17 of CBLR, 2018 and also for imposition of penalty under Regulation 18 of CBLR, 2018 read with Regulation 17 of CBLR, 2018. The Commissioner of Customs (Airport & General), New Delhi vide Order-in-Original No. 75/MK/Policy/2021 dated 22.07.2021 has decided. "(i) I refrain from revoking the CB License No. R05/DEL/CUS/2008 (PAN : AABFF2641R) vlaid upto 28.08.2027 of M/s Freight Logistics, RZ-2048, Lane No. 26, Tugalakabad Extension, New Delhi-110019. (ii) I order for forfeiture of the whole amount of security deposit furnished by them; (iii) I impose penalty of Rs.50,000/- ". In this case,the impugned order was under challenge before Hon'ble CESTAT both by the Customs Broker and also by the Revenue. The challenge by the appellant Customs Broker vide M/s Freight Logistics vs Commissioner of Customs (Airport & General), New Delhi in Customs Appeal No. 50944 of 2021, is to the forfeiture of the security deposit and imposition of penalty of Rs. 50,000/-. The Revenue vide Commissioner of Customs (Airport & General), New Delhi vs M/s Freight Logistics in Customs Appeal No. 51839 of 2021 on the other hand has challenged the impugned order as it refrained from revoking the Customs Broker License of the appellant.

11. In cases where higher Appellate authorities have taken a similar view to release the revocation of license but forfeiture of security has been done, it is learnt that Department is making arrangements to file an appeal in such cases.

12. Courier Agents:- Similar are the cases with respect to Courier Agents. In the case of Commissioner Of Customs, New Delhi (Airport and General), Vs M/s.Air Logix Solutions, in Customs Appeal No. 52946 of 2019 = 2023-TIOL-1099-CESTAT-DEL, the respondent was using one Aadhar No. repeatedly with different Bills of Entry (BOE) for import of parcels through courier and it was found to have used 22433 times during the period from November 2017 to March 2018. A search was conducted at the premises of the respondent, no documents pertaining to KYCs (Know Your Customers) and POD (proof of delivery) were found which is in violation of provisions of Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 (hereinafter referred to as CIER'10) The Commissioner vide Order-in-Original No.92/MK/Policy/2019 dated 2.9.2019 has dropped the proceedings except to impose penalty of Rs.50,000/-. The said order has been reviewed and Department filed appeal before Hon'ble CESTAT. The Regulation 12(1)(iv) of CIER'10 requires an authorised courier to verify the antecedents, correctness of IEC number, identity of his client and the functioning of his client in the declared address by using reliable, independent, authentic documents, date or information. The Regulation 12(1) (v) of CIER'10 requires the couriers to exercise due diligence to ascertain the correctness and completeness of any information which he submits to the proper officer with reference to any work related to the clearance of imported goods or of export goods. The Hon'ble CESTAT vide Final Order No 51591/2023 dt 23-11-2024 (ref para 23 of the Order) has ordered that "the findings under challenge are hereby set aside and the appeal of Department is hereby allowed. Consequently the courier licence of the respondent is hereby revoked. Early hearing application is also disposed of. "

13. Thus, whatever case laws are applicable for customs broker, the same are applicable for courier agents also

14. Thus the take aways from these case laws are

a. Co relation has to be there of the proceedings against Custom Broker licence under CBLR'18 with role of Customs Broker as Co-noticee in offence case under Customs Act 1962

b. The Revenue, instead of just relying upon role played by Custom Broker under Regulation 10(n), may like to do proper investigation to bring out facts about role played by Custom Broker with respect to other sub Regulations of Regulation 10 of CBLR'18

c. One shall not split revocation and forfeiture of security by refraining from revoking the CB License but ordering for forfeiture of the security deposit furnished by them and imposing penalty under Regulation 18 of CBLR'18 as existing Regulation 14 read with Regulation 17 of CBLR'18 does not permit the same.

15. Last but not the least, before initiating any proceedings on Custom Broker licence in CBLR'18, one has to be doubly cautious it as it relates to a livelihood and sustenance of the Customs Broker. On the basis of the study conducted on Final Orders issued by Principal Bench CESTAT Delhi during the period from June 2023 to 26th May 2024 on Customs Broker under CBLR'18, it is very clear that, unless the investigations prove the role of the Customs Broker, it is not prudent to either suspend the Custom Broker licence under Regulation 16 or to revoke the licence under Regulation 17 of CBLR'18

(The views expressed are personal and not in official capacity)