CESTAT Mumbai Sets Aside Customs Broker Licence Revocation For Lack Of Independent Findings

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has set aside the revocation of a Customs Broker's licence. It found that the customs department failed to establish that the broker had breached its obligations while handling exports that were later alleged to have been overvalued to claim higher duty drawback.

A tribunal comprising Judicial Member S.K. Mohanty and Technical Member M.M. Parthiban held that the licensing authority had failed to independently examine the allegations before revoking the licence.

It observed, "the learned Principal Commissioner, as a licensing authority, had not independently examined the various allegations levelled against the appellant CB, before passing the impugned order in adjudication of the inquiry proceedings."

Merchant & Sons, a licensed Customs Broker, challenged an order revoking its licence, forfeiting its security deposit and imposing a penalty of ₹50,000.

The customs department alleged that the broker had handled about 990 shipping bills for four exporters accused of overvaluing export goods to claim undue duty drawback. It also alleged that the broker had failed to exercise due diligence and comply with its obligations under the Customs Brokers Licensing Regulations.

After examining the record, the tribunal found that the Principal Commissioner had accepted the inquiry officer's findings without independently analysing the broker's defence or the evidence on record. It also noted that the impugned order contained no specific findings linking the exports handled by Merchant & Sons with the alleged fraudulent modus operandi relied upon by the department. The tribunal held that, on this ground alone, the order revoking the licence could not withstand legal scrutiny.

The tribunal also rejected the department's attempt to attribute the exporters' alleged overvaluation to the Customs Broker. Relying on its earlier decision in Trinity International Forwarders and the Delhi High Court's ruling in Kunal Travels, it observed that valuation of export goods is a matter for assessment by Customs authorities. A Customs Broker has neither the authority nor the responsibility to determine the value negotiated between an exporter and an overseas buyer.

Quoting its earlier decision, the tribunal observed: "The Customs Broker has neither any authority nor any responsibility to assess the value of the imported goods or export goods."

The tribunal partly allowed the appeal. It set aside the revocation of the licence, forfeiture of the security deposit and the penalty of ₹50,000 after finding that the department had failed to establish the alleged breaches relied upon to revoke the licence.

However, it upheld a penalty of ₹10,000 because Merchant & Sons did not participate in the departmental inquiry proceedings. The tribunal noted that the broker had nevertheless cooperated with the customs investigation by giving statements.

For Appellant: Advocate N.D. George, 

For Respondent: L. B. D'Coasta, Authorized Representative