Misinterpretation of Regulation 10: CESTAT Clarifies Customs Brokers Are Not Responsible for Educating Clients on Compliance [Read Order]

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that customs brokers cannot be held responsible for educating clients on compliance under Regulation 10 of the Customs Brokers Licensing Regulations (CBLR), 2018.

Sarajdeep Logistics Pvt. Ltd., the appellant, was a licensed customs broker whose license was revoked by the Principal Commissioner of Customs (General), Mumbai. The revocation was based on alleged violations of multiple provisions under Regulation 10 of the CBLR, including failure to verify importer details, failure to advise clients on compliance, and failure to ensure efficient customs clearance.

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The proceedings against the appellant were initiated following the examination of goods imported under a Bill of Entry that was found to be non-compliant with the Foreign Trade Policy and quality control regulations for toys. The customs department alleged that Sarajdeep Logistics had failed to discharge its responsibilities as a customs broker and imposed a penalty of Rs. 50,000 in addition to revoking its license.

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The appellant argued that the inquiry proceedings were flawed and relied solely on statements recorded under Section 108 of the Customs Act, 1962, which are not legally conclusive evidence. The appellant’s counsel relied on Thakkar Shipping Agency v. Collector of Customs, Bombay and Shasta Freight Services Pvt. Ltd. v. Principal Commissioner of Customs, Hyderabad, to support their claim that customs brokers cannot be held accountable for the contents of sealed containers or the misdeclarations made by importers.

The revenue’s counsel argued that the customs broker had not exercised due diligence in verifying the identity of the importer and ensuring compliance with regulations. They argued that the broker’s failure to advise the client on legal requirements and report non-compliance constituted a breach of its obligations under the CBLR.

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The two-member bench comprising C.J. Mathew (Technical Member) and Ajay Sharma (Judicial Member) observed that customs brokers are responsible for the correct filing of documents but are not expected to act as educators or enforcers of compliance for their clients. The tribunal further observed that there was no substantive evidence to support the allegations and that the charges relied entirely on statements deemed inadmissible in law.

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The tribunal ruled that the revocation of the appellant’s license and the imposed penalty were unjustified. The tribunal clarified that the obligations under Regulation 10 do not impose a duty on customs brokers to act as surrogates of licensing authorities for educating importers. The tribunal set aside the revocation order and allowed the appeal.

To Read the full text of the Order CLICK HERE

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