The Delhi High Court has held that Customs House Agent ( CHA) cannot be held liable for illegal acts of importer firms after clearance of goods from the customs station.
D S Cargo Agency, the Appellant has filed the present appeal under Section 130A of the Customs Act, 1962 (‘the Act’), impugning an order dated 26.03.2021 (the impugned order) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (‘the Tribunal’) in Customs Appeal.
By the order dated 04.02.2019, the Commissioner had (i) revoked the Appellant’s Customs Broker License (‘the CB License’); (ii) directed forfeiture of the security deposit of ₹ 75,000/- furnished by the Appellant; and (iii) imposed a penalty of ₹ 50,000/- on the Appellant.
The question that arises for consideration is whether the Appellant, under Customs Brokers Licensing Regulations, 2018 (‘the CBLR, 2018’) read with Customs Brokers Licensing Regulations, 2013 (the CBLR, 2013’), is liable for reporting an offence committed about goods stored in the bonded warehouse, after the same has been imported and the professional role of the Customs Broker in the clearance of the goods had ended.
The Appellant is a proprietorship firm of Mr. Diva Kant Jha, who was a Customs Broker and at the material time was holding the CB License, which was then valid up to 09.03.2019. The said license was issued under Regulation 9(1) of Customs House Agent Licensing Regulations, 2004 (‘CHALR, 2004’).
The Appellant, in the normal course of trade, was authorized by (i) M/s Accturists Overseas (OPC) Pvt. Ltd., (ii) M/s Spark Exports, and (iii) M/s Horrens Exim (‘importer firms’) for import of goods. The Appellant based on documents received from the said entities, carried out KYC for the said firms.
The Appellant filed nine (9) bills of entry about M/s Accturists Overseas (OPC) Pvt. Ltd, five (5) bills of entry about M/s Spark Exports and two (2) bills of entry about M/s Horrens Exim. The Directorate of Revenue Intelligence (‘DRI’) received information that the said importer firms were evading customs duty by diverting the imported goods stored in the customs bonded warehouse, into the domestic market without payment of applicable customs duty. It was also informed that forged documents have been relied upon by the said importer firms to show the re-export of the warehoused goods.
A show cause notice (‘SCN’) was issued to the Appellant stating that the Appellant had failed to perform its various obligations under the CBLR, 2018 read with the CBLR, 2013; and had acted in contravention thereof. The SCN further proposed revocation of the license, forfeiture of security and imposition of penalty. On enquiry, it was found that the allegations made in the SCN are proved against the Appellant and recommended action. The Commissioner revoked the Appellant’s CB license, forfeited the security deposit of ₹ 75,000/- and imposed a penalty of ₹ 50,000/-.
It was submitted that the illegality committed by the importer firms admittedly occurred after the role of the Appellant had come to an end. It was argued that the Appellant had no role to play in the diversion of the goods and there is admittedly, no allegation that the Appellant had any prior knowledge of the said intentions of the importer firms or that he has abetted in the aforesaid act of diversion.
On a plain textual reading of the Regulation, it is apparent that a Customs Broker is required to transact the business at the Customs Station either personally or through his/her authorized employee. In the facts of this case, there is no material on record to indicate/suggest that the Appellant had not carried out the work of filing the B/Es either personally or through his authorized employee.
It was observed that the Appellant is not liable for reporting an offence committed by the importer firms about goods stored in the public bonded warehouse after the professional role of the Customs Broker in the clearance of goods has ended and no such responsibility of reporting offences can be read into Regulation 10(d) of CBLR, 2018.
It was viewed that there is no finding against the Appellant that he in any manner connived with the importer firms or abetted the said firms in their wrongful actions in diverting the goods to the domestic market without payment of customs duty, which led to the loss to the revenue. There is no finding that the Appellant earned extra commission for the assignment for clearance of imported goods from the Customs Station or has partaken in the illegitimate gains made by the importer firms.
“A penalty of revocation of license for failing to collect the KYC forms unjustly restricts the Appellant’s ability to undertake the business CHA for the entire life.”, the court viewed.
Keeping in view the proportionality doctrine and keeping in view that the Appellant has already been unable to work for 4½ years, the division bench comprising Justice Yashwant Varma and Justice Manmeet Pritam Singh Arora set aside the impugned order of the Tribunal as well as the order-in-original.
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