Customs Department - Broker Bond of Trust Breached in Gold Smuggling Case: SC Refuses to Interfere with Kerala HC Ruling of Revoking License [Read Judgement]

The Supreme Court in a recent case has dismissed the Special Leave Petition (SLP) filed by the appellant challenging the Kerala High Court’s decision that upheld the revocation of its Customs Broker licence in a diplomatic‑cargo gold smuggling case.

Cappithan Agencies, a licensed Customs Broker operating at Cochin Port, filed Bills of Entry for consignments declared as diplomatic cargo. On 5 July 2021, officers of the Preventive Department seized 30.245 kg of gold concealed in one such consignment.

Investigations revealed repeated misdeclarations in at least three consignments, where airway bills showed private individuals as consignors but the Bills of Entry falsely declared the consignor as the “Ministry of Foreign Affairs, Abu Dhabi.”

Following the seizure, an offence report was filed, and a show cause notice was issued under Regulation 17(1) of the CBLR, 2018. By the show cause notice, the appellant was directed to show cause as to why its customs broker license should not be revoked under Rule 14 of theCBLR, 2018 on account of violation under Regulation 10(a), (d), (e), (m) and (n) respectively and penalty should not be imposed on the appellant under Regulation 18 of the CBLR, 2018.

Although the appellant furnished a preliminary reply to the show cause notice, the Commissioner appointed an Enquiry Officer to conduct an enquiry into the matter and furnish a report before him.

The Commissioner of Customs, after looking into the enquiry report, revoked the broker’s licence, imposed a penalty of ₹50,000, and ordered forfeiture of the security deposit. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the revocation, and the Kerala High Court confirmed the Tribunal’s order in June 2025.

The broker argued that the adjudicating authority erred in denying cross‑examination of Customs officers, violating Regulation 17(4). It also contended that the enquiry report was submitted beyond the 90 days prescribed under Regulation 17(5), rendering the proceedings time‑barred. Further, it alleged a violation of natural justice, claiming relevant documents were not supplied at the time of the show cause notice.

The Revenue countered that Cappithan Agencies knowingly facilitated misdeclarations, failed to exercise due diligence under Regulation 10(d), (e), (m), and (n), and colluded with individuals involved in smuggling. The Department highlighted that the broker’s omissions and commissions directly abetted the smuggling of over 136 kg of gold, including the seized consignment.

The Kerala High Court held that the denial of cross‑examination was justified since the officers in question had no role in the breach of obligations alleged against the broker. On the issue of delay, the Court agreed with the Tribunal that the 90‑day period under Regulation 17(5) was directory, not mandatory, as the licence had not been suspended during the enquiry and no prejudice was caused.

The Court also rejected the plea of violation of natural justice, noting that the broker had received both the show cause notice and the enquiry report and was allowed to respond.

Importantly, the Court observed that the Customs Broker occupies a position of trust in the clearance chain, and repeated misdeclarations of consignor details in diplomatic cargo amounted to a serious breach of that trust. It was further observed that once that trust was broken, the Customs Broker ceases to inspire the confidence of the Customs Department in relation to his functioning, and he loses the right to seek a reinstatement of his license under the Regulations.

The High Court ruled that there was no need to interfere with the decision of CESTAT that had upheld the revocation of the license of the appellant. Aggrieved, the appellant filed an SLP before the Supreme Court.

The Supreme Court bench of Justice J.B. Pardiwala and Justice Prasanna B. Varale dismissed the SLP, finding no ground to interfere with the Kerala High Court’s ruling.

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