Delhi HC restricts reinstating Suspension of CBL due to violation of CBLR citing Principle of Proportionality [Read Order]

The New Delhi High Court restricted the Suspension of customs brokers license (CBL) due to violation of Customs Brokers Licensing Regulations, 2018 ( “CBLR 2018”), as the licensee has already suffered in its business for 13 months. Applying the principle of proportionality, the Court held that the suspension/ revocation for a period of 13 months is a sufficient period considering the nature of violation.

The revenue filed appeal under Section 130 of the Customs Act, 1962, inter alia, challenging the Final order dated 2nd January, 2025 passed in Customs Appeal No. 50251/2024 ( “impugned order”) by the Customs, Excise, Service Tax Appellant Tribunal (“CESTAT”). Vide the impugned order, the CESTAT has set aside the Orderin-Original dated 23rd February, 2024 and ruled in favour of M/S Jaiswal Import Cargo Services Ltd.

The customs brokers license (“the subject license”) of Respondent - M/s Jaiswal Import Cargo Services Ltd., was suspended due to non-compliance of the Customs Brokers Licensing Regulations, 2018 ( “CBLR 2018”). The said Order-in-Original has been set aside by CESTAT vide the impugned order. In effect, therefore, the revocation of the license of the Respondent has been set aside.

The allegation against the Respondent was that one M/s Tanu Trading vide Bills of Entry No. 3673416 dated 09th December, 2022 had imported certain cosmetic items with the intention to re-export the same. However, the said goods instead of being deposited in a bonded warehouse, were in fact, diverted to the local market for home consumption.

An offence report dated 9th May 2023 was then filed for action against the Respondent for having enabled the diversion. A Show Cause Notice (‘SCN’) was then issued on 4th September, 2023 and after the inquiry report dated 28th November, 2023 the impugned Order-in-Original was passed on 23rd February 2024. The Order-in-Original held that the Respondent violated the CBLR 2018.

These allegations were considered by the CESTAT in the impugned order which held that the KYC documents pertaining to the importer were duly verified by the Respondent. These documents were not fraudulent or fake. It was held by CESTAT that the only obligation of the Customs broker is to physically verify the premises and the verification of the Government issued documents.

The CESTAT observed that the KYC documents pertaining to the importer such as IEC, GSTIN, Axis Bank letter regarding the AD code, copy of the PAN and Aadhar card of the proprietor Importer. There is nothing on record that these documents have been proved to be fraudulent or fake. It has been repeatedly held that there is no legal requirement of the CB to physically verify the premises and verification of the government issued documents can be verified from the portal. This has been done by the appellant.

The Tribunal held that the revocation of CB license by the Customs authorities is not sustainable, and impugned order is set aside with consequential benefit, if any. Accordingly, the appeal is allowed.”

The submission of SSC for the Department is that the Customs Broker has a duty and obligation to ensure that there is no violation of the CBLR 2018. Further, the various statements which were recorded during the investigation by the Department revealed the complicity of the Respondent. The role played by the Respondent was more active and the it had failed to oversee clearance of the goods from Customs which led to the illegal divergence. Proper authorisation was also not obtained from the importer by the Respondent as per the Appellant.

In exercise of the powers conferred under SubRegulation (1) of Regulation 16 of the Customs Broker Licensing Regulation 2018 (CBLR,2018) the Customs Broker License No. R-81/DEL/CUS/2006 (PAN: AACCJ5444N) of M/s Jaswal Import Cargo Service Ltd was suspended at all the Customs stations/ports of India with immediate effect vide Order-in-Original No.36/ZR/Suspension/Policy/2023 dated 16.06.2023.”

The suspension was thereafter revoked on 17th August, 2023 which is recorded in para no. 9 of the Order-in-Original. However, when the Order-inOriginal was passed on 23rd February 2024, the license was again revoked. This order continued till the final order of the CESTAT on 2nd January 2025. Therefore, for a total period of 13 months, the Respondent’s business had come to a standstill. The primary responsibility here was of the importer and at best the allegation against the Customs Broker was that it was complicit with the importer.

The appeal filed by the Department now seeks to reinstate the revocation against the Customs broker which this Court is not inclined to do. There is no doubt that Customs Brokers do have significant responsibility under the CBLR 2018 which ought to be performed with diligence and commitment. The fact that the Respondent did not oversee the clearance and the warehousing of the goods leading to diversion of the goods in the domestic market is a clear infraction.

However, the Respondent has already suffered in its business for 13 months. Applying the principle of proportionality, this Court is of the opinion that the suspension/ revocation for a period of 13 months is a sufficient period considering the nature of violation.

Counsel for the Respondent on instructions submitted that as a matter of retribution, the Respondent is willing to contribute a sum of Rs. 4 lakh towards some good cause. Taking this statement on record, the Court of Justice Prathiba M. Singh and Justice Shail Jain held that the suspension of 13 months and with payment of Rs. 4 lakh, the SCN proceedings can come to an end.

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