Different Views On Import Classification Do Not Establish Broker Misconduct: CESTAT New Delhi

On 28 October, the New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that a difference of opinion over the classification of imported goods does not, by itself, establish misconduct by a Customs Broker.

A Bench comprising Officiating President Dr. Rachna Gupta and Technical Member P. V. Subba Rao allowed Anubhav Cargo Movers' appeal against the revocation of its Customs Broker licence, forfeiture of its security deposit and imposition of a penalty of Rs. 50,000. It observed:

“Both classifications are plausible and further detailed examination of the chapter notes, section notes, Rules of Interpretation, etc. can help classify the imported goods under one or the other. Simply because the Customs broker or importer took one view and the adjudicating authority took another view, it does not prove any wrongdoing on the part of the importer or customs broker.”

The case arose from two Bills of Entry filed by Anubhav Cargo Movers in October 2020 and January 2021 on behalf of importer Anil Enterprises for boiled betelnuts imported from Indonesia. The broker classified the goods under Customs Tariff Item 2106 90 30, covering betel nut products known as “Supari”, and the goods were cleared.

In December 2022, the Department issued a show-cause notice proposing to reclassify the goods under tariff item 0802 80, covering arecanuts, and recover the differential duty. The Commissioner of Customs (Import and General), New Delhi, subsequently revoked the broker's licence, forfeited its security deposit and imposed a penalty of Rs. 50,000 for alleged violations of Regulations 10(d) and 10(e) of the Customs Brokers Licensing Regulations, 2018.

These provisions require Customs Brokers to advise clients on compliance with the law and exercise due diligence in ascertaining the correctness of information provided to clients.

The Tribunal explained that Section 17 of the Customs Act, 1962, requires importers to self-assess duty but empowers the proper officer to reassess it if the self-assessment is incorrect. It distinguished an incorrect declaration of facts, such as the quantity or nature of goods, from a dispute over tariff classification involving competing interpretations of the law.

It observed that Customs Brokers generally rely on available documents and do not have the power to open and inspect imported goods. They must exercise due diligence in declaring the nature and quantity of goods based on those documents. However, liability may arise where evidence establishes connivance in misdeclaration or knowledge of a misdeclaration that is not reported to the authorities. It held:

“Needless to say that such foresight and anticipation are humanly impossible and there is no obligation on the Customs Broker to have such a vision into the future or to read the minds of the officers and advise his client accordingly.”

Further, the Bench noted that the Bills of Entry instructed the officer granting out-of-charge clearance to verify whether the goods fell under tariff item 2106, yet the goods were cleared. It held that adopting a classification based on the broker's understanding of the tariff did not, by itself, establish a failure to advise its client or exercise due diligence.

Accordingly, the CESTAT set aside the impugned order and directed the Commissioner to enable Anubhav Cargo Movers to resume operations by allowing it to file documents on the Indian Customs Electronic Gateway portal.

Counsel for Appellant: Ramchander Sankhla and Rahul Sankla

Counsel for Respondent: Amit Arora, Authorised Representative