CESTAT Sets Aside Customs Broker Licence Revocation, Cites Contradictory Findings

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) at Mumbai recently set aside the revocation of a Customs Broker licence after finding that the adjudicating authority recorded contradictory findings.

A bench of Judicial Member S.K. Mohanty and Technical Member M.M. Parthiban allowed the appeal filed by Fairdeal Shipping Agency Pvt. Ltd. against the order of the Principal Commissioner of Customs (General), Mumbai.

“Such apparent contradiction in the findings of the adjudicating authority in the impugned order, in our view reflects the non-application of mind in deciding the issue by the learned Principal Commissioner for revoking the license of the appellant CB; imposing penalty on them and for forfeiture of security deposit. Therefore, on this ground alone the impugned order is liable to be set aside.”, it said.

The case arose from imports of titanium alloy by Adler Mediequip Private Limited. The importer claimed exemption under Notification No. 50/2017 Customs and an earlier 2012 Customs notification. The department alleged that the exemption was wrongly availed.

Proceedings were initiated against the Customs Broker under Regulations 10(d), 10(e), and 10(f) of the Customs Brokers Licensing Regulations, 2018. The Commissioner dropped the charges under Regulations 10(e) and 10(f).

However, he held that the broker violated Regulation 10(d) by not properly advising the importer and by not informing customs authorities about the alleged ineligibility. The licence was revoked, the security deposit was forfeited, and a penalty was imposed.

Before the tribunal, the broker argued that it filed the Bills of Entry based on documents provided by the importer. It pointed out that similar imports had earlier been cleared by customs authorities with the same exemption benefit.

It also highlighted that in adjudication proceedings under the Customs Act arising from the same show cause notice, penal action proposed against the broker had been dropped and the importer had paid the differential duty.

Examining the impugned order, the tribunal noted that the Commissioner had observed that the broker “did not even cross verify the eligibility criteria to claim notification benefit” and “could not observe & inform about the discrepancies to the importer or customs authority.”

In the same order, however, the Commissioner also recorded that the case was “more a case of wrong interpretation of the notification benefit, which could only be brought out during the examination by the Department, and thus it is much beyond the scope of obligations on the CB.”

The bench found these conclusions irreconcilable. It held that the contradictory reasoning showed nonapplication of mind.

The tribunal further observed that customs authorities themselves had been extending the exemption benefit at the time of clearance. It noted that the adjudication proceedings under the Customs Act had dropped penal action against the broker.

“Therefore, when the very basis of the offence report itself had dropped action against the appellant CB, the alleged violation of Regulation 10(d)/11(d) ibid on the basis of such offence report, does not have any legal sanction for sustaining it.”

The Bench concluded that the finding of violation of Regulation 10(d) (which requires a Customs Broker to advise the client to comply with the law and report noncompliance to customs authorities) was not supported by evidence.

It set aside the revocation of the licence, the forfeiture of the security deposit, and the penalty, and allowed the appeal.

For Appellant: Advocates Anil Balani

For Respondent: Dinesh Nanal, Authorized Representative