The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that the customs broker not liable for illegal actions of importer firms subsequent to cargo clearance from customs station.
The appellant is a customs broker holding a license, which is valid up to September 1, 2026. The investigation report, which was forwarded from DRI, HQs, for initiating proceedings against the appellant and others, respectively, on the allegation that Ramesh Wadhera and Sanjeev Maggu were engaged in evasion of customs duty by way of diverting the goods stored in customs-bonded warehouses into the domestic market without payment of customs duty and that the documents were forged or fabricated to show re-exported warehoused goods.
The license of the appellant was revoked under Regulation 17 of CBLR, along with forfeiture of the security deposit and imposition of a fine of Rs. 50 lakhs.
The counsel submitted that the appellant had transacted business either personally or through employees of the firm. Shri Sanjeev Maggu had never dealt with the customs authority on behalf of the Customs Broker and hence there is no violation of Regulation 10(b). According to him, the actual offence had occurred at the time of clearance of the goods from the warehouse and for which act neither the appellant was involved nor he performed any work in connection there with. Thus, there is no link between the offence and the duty/obligation assigned on the CHA and, therefore, there is no violation of Regulation 10(d).
The Authorized Representative for the Revenue reiterated the findings of the adjudicating authority and submitted that as per statement dated 25.07.2017, the appellant had admitted that he knew that Shri Sanjeev Maggo is the actual owner but he never informed the department of this fact and thereby he connived with Shri Sanjeev Maggu in the fraud caused to the government exchequer and thereby violated the provisions of Regulation 10(d). Similarly, the appellant failed to exercise due diligence to ascertain the correctness of the information which resulted in contravention of Regulation 10(e).
A Two-Member Bench comprising Binu Tamta, Member ( Judicial ) and P.V. Subba Rao, Member ( Technical ) observed that “The appellant cannot be linked to the fraud and the same cannot be stretched to contravention of the provisions of the Regulations. We find from the records of the case that the appellant in order to verify the existence of the premises of the two importer firms had sent letters by speed post asking them to submit the requisite documents and in response thereto he received the KYC documents. It has been repeatedly held that it is not the legal requirement to physically verify the business premises or the residential premises of the importer.”
“The decision of the High Court in D.S. Cargo clarifying that the illegal actions of the importer firms subsequent to the clearance of the cargo from the Customs Station do not attract the violation on the part of the Customs Broker is binding on us and we do not find any reason to differ from the same as the controversy had arisen in the same set of facts in both the cases. Hence the impugned order upholding the revocation of the license and also the forfeiture of the security amount is set aside, however the penalty imposed is upheld” the Bench noted.
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