Delhi High Court Upholds CESTAT Order Restoring Customs Broker License, Faults Vague Show Cause Notice

The Delhi High Court has upheld a CESTAT order restoring an entity's customs broker licence, holding that action based on a vague show cause notice cannot be sustained in law.

A division bench of Justices Nitin Wasudeo Sambre and Ajay Digpaul dismissed an appeal filed by the Commissioner of Customs challenging the CESTAT order which had set aside the revocation of the respondent's Customs Broker licence.

The dispute arose from an order dated February 14, 2024 by which the customs authorities had revoked the licence of the respondent under the Customs Brokers Licensing Regulations, 2018 (CBLR). The order alleged violations of Regulations 10(a), 10(d), 10(e) and 10(n) of the CBLR.

However, the Tribunal set aside the revocation order on August 28, 2024, observing that the allegations against the broker were not clearly articulated in the show cause notice.

The Revenue challenged the Tribunal's decision, contending that the show cause notice sufficiently referred to the alleged violations and relied on material extracted from an earlier notice issued under the Customs Act.

It contended that the Tribunal had failed to appreciate that the inquiry report and the Order-in-Original clearly established violations of the licensing regulations.

The respondent, on the other hand, submitted that the show cause notice did not specify the manner in which the alleged violations were committed and therefore failed to provide an adequate opportunity to respond.

Agreeing with the respondent, the High Court observed,

“the least that was expected of the appellant was to specify in the show cause notice, as to how the said material comes within the ambit and satisfaction of the opinion to be formed for the purpose of prima facie recording violation of the regulations 10(a), 10(d), 10(e) and 10(n). However, the respondent was not provided with any specific allegations explaining the mode or manner in which the alleged violations are attributable to them.”

The Court further observed that though the Order passed by the Department considered in detail the violations by the respondent, the fact remained that the Order had travelled beyond the scope of the show cause notice.

“It is a settled position of law that in case if the show cause notice is vague or the order based on the show cause notice considers such material which was never part of the record of the show cause notice, the order can be said to be in violation of the principles of natural justice,” the Court added.

Reliance was placed Commissioner of Central Excise v. Brindavan Beverages Pvt. Ltd., where the Supreme Court held that a show cause notice forms the foundation of the Department's case and must contain clear and specific allegations.

As such, the court dismissed the appeal filed by the customs department and upheld the Tribunal's decision restoring the broker's licence.

For Appellant: Advocates Amit Garg, Vikrant Jain, and Ragini Singh

For Respondent: Advocate Salil Arora and Reeva Chugh Arora