The Delhi High Court quashed the penalty under the Customs Broker Licensing Regulation, 2018 ( CBLR, 2018 ) as the commissioner failed to appreciate the finding that exporters were not in existence on the date of export. The Commissioner of Customs erred in accepting the findings of the Inquiry Officer regarding the failure of Customs Broker to comply with the provisions of Regulation 10(d), 10 (m), 10 (n) & 10 (q) of the CBLR, 2018.
Naman Gupta, the Custom House Agent ( CHA ) challenged the Order-in-Original passed by the respondent, revoking the Custom Broker License of the petitioner, forfeiting the entire security deposit and imposing the penalty of Rs. 50,000/-.
The petitioner was granted a license to operate as a Custom Broker ( CB ), which was valid up to 19.12.2025. The instant matter pertains to the previous exports of ball bearings, the investigation of which, was initiated by SIB, ACC, Kolkata based on four live export consignments of unbranded ball bearings on 24.09.2020 filed by M/s Gupta Vyapar ( IEC CTGPG 6543A ). These four consignments were highly over-valued for export to defraud the exchequer by way of getting very high Input Tax Credit ( ITC ) Refunds and other export-related incentives.
It was found that a total of 35 consignments of similar/identical description had been exported, out of which, 23 consignments had been cleared by M/s Naman Gupta & Associates ( Custom Broker ). The total ITC claimed by such exporters was Rs. 3.3 crores approximately, while the total drawback claimed was to the tune of Rs. 36.62 lakhs. It was seen that the petitioner was involved in the clearance of 23 shipping bills of ball bearings filed by nine different exporters. Out of nine exporters, five were found to be non-existent. Two exporters i.e. M/s National Auto Parts and M/s Beam International were admitted to have been involved in the export unintentionally.
Two other exporters M/s Theism Tradecom Private Limited and M/s Nitya Enterprises did not appear to record their statements. Statements of Md. Ishtiyaque Ahmad, Proprietor of M/s Beam International and Sh. Sanjit Ghosh, Proprietor of M/s National Auto Parts was recorded under Section 108 of the Customs Act, 1962. The statement of the Authorized Representative of the petitioner was also recorded under Section 108 of the Customs Act, 1962.
A purported offence report dated 11.08.2021 was forwarded by the Deputy Commissioner of Customs, Air Cargo Complex, who initiated action against the petitioner for the violation of Regulation 10(d), 10 (m), 10 (n) & 10 (q) of the Customs Broker Licensing Regulation, 2018 ( CBLR, 2018 ). Based on such offence report and the relied upon documents forwarded by the Customs Authorities including the statements recorded under Section 108 of the Customs Act, 1962 by the prohibition order dated 13.10.2021, the Principal Commissioner of Customs, ( Airport & ACC ), Kolkata prohibited the petitioner from carrying out his duties as a Custom Broker within the West Bengal Commissionerate.
The prohibition order was valid for 30 days from the issuance thereof and lost its force by efflux of time. The respondent passed a purported order under Regulation 16 (1) of the regulations suspending the C.B. License of the petitioner with immediate effect and directed the petitioner to appear post-decisional hearing on 13.12.2021. After considering the oral and written statements made on behalf of the petitioner, by order dated 24.12.2021, the respondent passed a suspension order under Regulation 16 (2) of the said regulations.
Respondent issued a Show Cause Notice dated 05.01.2022 under Regulation 17 (1) of the regulations, requiring the petitioner to show cause within 30 days from the date of the notice as to why he should not be held responsible for the alleged contravention of provisions of Regulation 10 (d), 10 (m), 10 (n) & 10 (q) and why his Custom Broker License should not be revoked and penalty be not imposed under Regulation 17 & 18 thereof.
As per regulation 17 (4) of CBLR, 2018, if the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines the permission to examine any person on the ground that his evidence is not relevant or material, he needs to record the reasons in writing for doing so but the Inquiry Officer assigned no reason what so ever.
The Commissioner of Customs ignored the error on the part of the Inquiry Officer to grant an opportunity for cross-examination of the exporters and rather observed that the object behind cross cross-examination of the witnesses appeared to be to merely prolong/discredit the investigation and the denial of cross-examination by the Inquiry Officer has not impacted the objectivity of the Inquiry.
A division bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that the Commissioner of Customs failed to appreciate that there was no specific finding of the jurisdictional GST authorities that such exporters were not in existence on the date of export. Therefore, it cannot be concluded that the exporters who engaged the petitioner to handle the clearance of the goods, were not in existence on the date of export.
The Commissioner of Customs erred in accepting the findings of the Inquiry Officer regards the failure of the Customs Broker to comply with the provisions of Regulation 10(d), 10 (m), 10 (n) & 10 (q) of the CBLR, 2018.
The Court held that the Customs Broker cannot be held liable because exporters were not traceable, after the issuance of ‘Let Export Orders’ and export of the goods out of the country. While allowing the petition, the Court quashed the impugned order.
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