Belated Detection Of Importer's Misuse Of Duty-Free Imports Cannot Be Attributed To Customs Broker: CESTAT

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal has set aside the revocation of the Customs Broker licence of Aggressive Shipping & Logistics Pvt. Ltd. It held that diversion or misuse of duty-free imports by an importer, detected later by the Directorate of Revenue Intelligence (DRI), cannot automatically be attributed to the Customs Broker.

A coram of Judicial Member S K Mohanty and Technical Member M.M. Parthiban was hearing an appeal against an order of the Principal Commissioner of Customs (General), Mumbai. The order had revoked the license, forfeited the security deposit and imposed penalty for alleged violations of the Customs Brokers Licensing Regulations (CBLR), 2013.

The Customs Broker had cleared consignments in 2017 for an importer who was later investigated by the DRI. The probe alleged misuse of the Advance Authorization Scheme by diverting duty-free imports into the domestic market. Based on the offense report, the Broker's license was suspended and later revoked for alleged violations of several provisions (Regulation 11) of the CBLR, 2013.

The tribunal examined each charge separately. It drew a clear line between the broker's obligations at the time of import and the importer's conduct after clearance. It noted that the alleged misuse surfaced only after the goods were cleared and related to post-import diversion by the importer.

The tribunal said the broker could not be blamed when authorities themselves had cleared the goods without noticing any violation. It held that the broker was not expected to foresee a future misuse by the importer. Allegations of collusion and lack of due diligence, the tribunal said, were unsupported by evidence. Valid IEC, Advance Authorization, and import documents were on record.

On the question of client verification (KYC), the tribunal said the Customs Broker had done what the rules require. It noted that the broker had checked the importer's identity and credentials using the documents prescribed by the government. This was sufficient, the tribunal said, and in line with official CBIC guidelines. As a result, the tribunal set aside the findings that the broker had failed to exercise due care, diligence or efficiency.

However, the tribunal did find one procedural lapse. It noted that the customs broker had not obtained a written authorisation from the importer before handling the clearances. Since this requirement exists to formally establish the broker–client relationship, the tribunal said the lapse could not be ignored. At the same time, it held that this shortcoming did not warrant cancellation of the licence. A monetary penalty, it ruled, was sufficient to address the violation.

The tribunal set aside the revocation of the license and forfeiture of the security deposit. It reduced the penalty to Rs 10 thousand and restored the customs broker license. It reiterated that post-import violations by an importer cannot, by themselves, justify cancellation of a customs broker's license without proof of prior knowledge or active involvement.