Customs Broker Not Liable for Exporters’ Fraudulent Activities If Documents Were Verified and Actions Taken in Good Faith: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a customs broker cannot be held liable for fraudulent activities committed by exporters if the broker has duly verified all documents and acted in good faith.

Auro Logistix, the appellant, is a licensed customs broker operating under the Customs Brokers Licensing Regulations (CBLR), 2018. The Principal Commissioner of Customs (Airport and Air Cargo Complex), Kolkata, passed two separate orders on March 4, 2024, revoking the broker’s license, forfeiting its security deposit, and imposing a penalty of Rs. 50,000 in each case.

The orders alleged violations of Regulations 10(b), 10(d), 10(m), 10(n), and 10(q) of the CBLR, 2018, in connection with two export consignments that were allegedly overvalued by exporters K.S. Impex and Ankraj Developers Pvt. Ltd.

The department claimed that the customs broker had failed to exercise due diligence, accepted documents from unauthorized persons, and facilitated the filing of shipping bills for exporters involved in overvaluation and use of fake suppliers. It argued that the broker had not properly verified the genuineness of the exporters and their transactions, which resulted in the misuse of export benefits.

The appellant’s counsel argued that all documents, including GST registration, Importer Exporter Code (IEC), Permanent Account Number (PAN), and Aadhaar of the exporters, had been properly verified.

The counsel explained that the goods were subjected to 100 percent examination by customs, and no discrepancies were found. They stated that the broker had no role in valuation and relied on valid documents provided by the exporters.

The counsel further argued that the supplier’s GST registration was active at the time of filing and any subsequent cancellation by tax authorities could not be attributed to the broker. The appellant’s counsel that it had fully cooperated with the investigation and had not violated any provisions of Regulation 10.

The department’s counsel argued that the broker failed to ensure due diligence and allowed export documents to be filed without verifying the genuineness of the suppliers, which led to fraudulent claims.

The two-member bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that no evidence was produced to show that the customs broker was involved in any fraudulent activity.

The tribunal explained that the broker had performed all required verifications and that mere acceptance of documents from the exporters could not amount to a breach of the regulations. It pointed out that obligations under Regulation 10 should be reasonably construed and cannot impose strict liability when the broker acts in good faith.

The tribunal held that there was no violation of Regulations 10(b), 10(d), 10(m), 10(n), or 10(q) and that the license revocation, security forfeiture, and penalty were not sustainable. The orders of the Principal Commissioner were set aside, and the appeal was allowed with consequential relief.

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