Delhi High Court Says Customs Broker's Licence Need Not Be Revoked For Every CBLR Violation

The Delhi High Court has upheld the view that revocation of a customs broker's licence is not warranted for every violation of the Customs Brokers Licensing Regulations, 2018 (CBLR), and that the punishment must be proportionate to the nature of the violation.

The Division Bench of Justices Avneesh Jhingan and Shail Jain endorsed the view while dismissing an appeal filed by the Customs Department challenging a CESTAT order which had declined to revoke Respondent's licence over its alleged role in an attempted export of prohibited goods to China.

The case arose after the Directorate of Revenue Intelligence (DRI) received information about an alleged attempt to export non-woven fabric used for manufacturing masks by misdeclaring it as packing material. The shipment was subsequently put on hold, and the goods were seized after examination revealed that they were non-woven fabric, a prohibited item for export.

Respondent, the customs broker that filed the shipping bill, was proceeded against for allegedly failing to obtain authorisation from the exporter and verify the relevant KYC documents. The exporter had denied issuing the shipping bill and stated that it had never exported goods to China.

The Commissioner of Customs, in an order passed in July 2021, found that the active role in the attempted export had been played by Respondent's employee and another individual, Pushpraj Yadav. The investigation did not establish an active role on the part of the customs broker itself.

While the Commissioner declined to revoke the licence, the security deposit was forfeited and a penalty of ₹50,000 was imposed. On appeal, CESTAT set aside the forfeiture of the security deposit but upheld the penalty. It also rejected the Customs Department's plea seeking revocation of the licence.

Before the High Court, the Customs Department argued that Respondent could not escape its obligations under the CBLR by shifting the blame to its employee. It contended that the violation warranted revocation of the licence under the applicable regulations.

The High Court however noted that the Commissioner of Customs had found no active role on the part of Respondent in the attempted export. It also took note of the steps taken by the company to terminate the employee's services and lodge an FIR.

It observed that although shifting the blame to an employee would not completely absolve the customs broker of responsibility, the circumstances indicated that the violation was not deliberate or intentional. The Tribunal had accordingly considered the proportionality of the punishment and found that the penalty of ₹50,000 would suffice.

The Court observed,

“A finding of fact was recorded that in view of the nature of violation by the respondent and having not played any active role the upholding of imposition of penalty of Rs.50,000/- shall suffice. Further that for every violation of the CBLR the revocation of license cannot be resorted to…The tribunal gave a factual finding with regard to the proportionality of the punishment viz-a-viz the violation of the terms of CBLR. The finding recorded suffers from no factual or legal error much less perversity. ”

It distinguished the Supreme Court's decision in Commissioner of Customs v. K.M. Ganatra & Co., noting that the case involved repeated violations, whereas no such allegations had been made against Respondent.

As such, the Court dismissed the Department's appeal.

For Appellant: Advocate Anushree Narain, SSC with Apurv Yadav

For Respondent: Dr. Prabhat Kumar, Advocates Pralabh Mathur and Karan Kanwal