No allegation of Undue financial benefit from Importer: CESTAT deletes Penalty under Regulation 22 of CBLR [Read Order]

The Bangalore bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) deleted the penalty under Regulation 22 of the Customs Broker Licensing Regulation ( CBLR ), 2013, citing that there was no allegation of the party receiving any undue financial benefits by abetting the alleged illegality from the importer.

The appellant, Cappithan Agencies challenged a penalty of Rs. 10,000 imposed by the Adjudicating Authority under Regulation 22 of the Customs Broker Licensing Regulation ( CBLR ), 2013. The penalty was linked to allegations that an importer, M/s Antoni & Decourel Organic Chemical Company, had imported raw materials for drug and pharmaceutical manufacturing without the necessary clearance from the Assistant Drug Controller (ADC) and without a proper import license.

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 The consignment was cleared through various clearing agents, including the appellant, with 33 consignments being processed at the Air Cargo Complex, Chennai, between December 2012 and April 2013. While the appellant cleared three Bills of Entry, the rest were handled by another Customs Broker, M/s Ever Trust Shipping and Logistics Pvt. Ltd. Although the Adjudicating Authority acknowledged that the appellant was not directly involved in the actions of its authorized signatory in Chennai, it concluded that the appellant failed to properly supervise its employees, violating Regulation 17(9) of CBLR, 2013. Consequently, a penalty of Rs. 10,000 was imposed, leading to the present appeal.

During the hearing, the appellant's representative, Mr. Balagopal, reiterated the arguments made in response to the Show Cause Notice. He emphasized that, under Regulation 20(4) of CBLR, the appellant, as a Customs Broker, was entitled to cross-examine the witnesses whose statements were relied upon by the Inquiry Officer and the Adjudicating Authority. Although the appellant had requested cross-examination during the inquiry, the request was denied on the grounds that the documentary and oral evidence was deemed sufficient. The request was similarly rejected during the adjudication process, with the Adjudicating Authority supporting the Inquiry Officer’s reasoning.

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The appellant's counsel cited several legal precedents, including a ruling by the Telangana High Court in the case of M/s Shasta Freight Services Pvt. Ltd. vs CC, Hyderabad, to support the argument that the appellant was wrongfully penalized under Regulation 17(9). It was argued that neither the Show Cause Notice nor the inquiry report mentioned any violation of Regulation 17(9), making the findings of the Commissioner unsustainable.

On behalf of the respondent, Mr. Rajesh Shastry defended the findings of the Adjudicating Authority, arguing that the Customs Broker is liable for the actions and omissions of its employees. He also reiterated that the decision to deny cross-examination was justified based on the evidence.

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After hearing both parties, Judicial Member P.A. Augustian and Technical Member Pullela Nageswara Rao considered the central issue, whether the appellant could be held responsible for the actions of its employees. It was acknowledged that the appellant was not directly involved in the alleged misconduct of its signatory in Chennai and that there was no indication of any financial gain from the importer's illegal actions.

Regarding the request for cross-examination under Regulation 20(4) of CBLR, the Tribunal noted that the Adjudicating Authority had relied on the statements of multiple individuals. The Telangana High Court ruling in M/s Shasta Freight Services Pvt. Ltd. clarified that Customs Brokers are entitled to cross-examine individuals whose statements form the basis of the proceedings. Therefore, the Adjudicating Authority should have granted the appellant an opportunity for cross-examination before relying on these statements.

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Given that the proceedings were based on statements from employees and agents of the importer, the Tribunal concluded that the failure to allow cross-examination violated Regulation 20(4) of CBLR. As a result, the Tribunal found the Adjudicating Authority’s decision unsustainable and allowed the appeal, granting any consequential relief in accordance with the law.

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