CHA allows Unauthorized Person to use License: CESTAT upholds Penalty, Declines to Cancel License and Forfeit Security [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has upheld the imposition of penalty on a Customs Broker for allowing an unauthorized person to use its license, but declined to revoke the license or forfeit the security deposit.

The Directorate of Revenue Intelligence (DRI) intercepted a container, originally declared as carrying zinc ingots, which was later found to conceal over 7.2 metric tonnes of red sanders, a prohibited item for export.

The investigation revealed that the proprietor of Thirumala Logistics, K. Murugan, had allowed his relative, P.S. Suresh of M/s Jaya Freight Logistics, who did not hold a valid Customs Broker license, to use the firm’s license to file the shipping bill and handle customs clearance.

After the inquiry, the adjudicating authority imposed a penalty of ₹50,000 on the Customs Broker under the Customs Brokers Licensing Regulations, 2013 (CBLR), but stopped short of cancelling the license or forfeiting the security deposit.

The Revenue appealed, contending that the violations of Regulations 10 and 11(b) of CBLR were serious and warranted stricter action, including revocation of the license. They relied on the Supreme Court’s decision in Commissioner of Customs v. K.M. Ganatra & Co. (2016), which held that even unintentional violations by Customs Brokers can invite punishment.

The Tribunal, however, upheld the adjudicating authority’s lenient approach. It reasoned that while Thirumala Logistics had indeed contravened Regulation 11(b) by permitting an unauthorized person to transact business at the Customs Station, the circumstances of the case did not justify revocation of the license or forfeiture of security.

The bench said that Regulation 18 of CBLR allows for either revocation of the license or imposition of penalty, and the discretion exercised by the adjudicating authority to impose only a penalty was proper.

It was also noted by the tribunal that there was no evidence linking the Customs Broker directly with the attempted smuggling of red sanders, and precedent cases such as Skyline Shipping & Logistics v. Commissioner of Customs and Maheshwari Rocks (P) Ltd. v. Commissioner of Customs supported a balanced approach where brokers were not penalized beyond their actual role.

Thus, the bench of Ajayan TV (a judicial member) and Vasa Seshagiri Rao (a technical member) sustained the fine and ordered Thirumala Logistics to make sure that CBLR is strictly followed in the future ahead, as repeated violations might result in more severe penalties.

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