CESTAT Quashes Order Of Forfeiture Of Security Deposit, Sustained The Penalty On Customs Broker

The two-member bench headed by Justice Dilip Gupta (President) and Raju (Technical Member) has observed that the forfeiture of security deposit of Rs. 5 lakhs and imposition of a penalty of Rs. 50,000 under Regulation 18 of CBLR, 2018 is excessive.

The appellant filed the appeal against the forfeiture of security and imposition of a penalty.

The appellant argued that the appellant was a Limited Liability Partnership with two partners, namely Umesh Kumar Bhalla and Ashu Chauhan. The appellant obtained a customs broker licence. On June 20, 2017, one of the partners, Ashu Chauhan, expired. On 11.12.2017, a new partnership deed was executed between Umesh Kumar Bhalla, John Verghese and Ajit Singh Malik to revive the LLP in terms of section 7 of the Limited Liability Act, 2008. The details of the reconstituted partnership deed were registered with the Ministry of Corporate Affairs on 01.09.2018. The appellant filed their first Bill of Entry on October 6, 2018 and on October 10, 2018, intimation was filed with Customs for the addition of new partners in the Customs record.

The appellant submitted that the proceedings were initiated against the appellant for violating the Customs Broker Licensing Regulation, 2018 as the appellant failed to follow the second provision of Regulation 7 (2) of CBLR, 2018. After enquiry, the order was issued by the Commissioner of Customs for forfeiture of a security deposit of Rs. 5 lakhs and a penalty of Rs. 50,000 was imposed on the appellant.

The appellant pointed out that the appellant did not pick up any business during this period and the delay in reporting the change of constitution of the LLP occurred because the surviving partner was not in the right frame of mind after the death of his partner. The delay was not significant and it has been recognised by the order as the order does not revoke the licence but only forfeits the security and imposes a penalty.

The appellant contended that the Customs Broker Licence was taken by the appellant under the earlier Regulations, namely the Customs Broker Licensing Regulations, 2013. The CBLR, 2013 contained a different period for reporting the changes in Regulations 12 and 13. The registration with the Ministry of Corporate Affairs was obtained on 1.09.2018 and the intimation to Customs was given on 10.10.2018. It was well within the time limit prescribed in Regulation 7 of the CBLR 2018 as well as Regulation 13 of the CBLR, 2013. The appellant sought a full waiver of forfeiture of security as well as any penalty imposed in the order.

The department contended that even if the licence was obtained under CBLR 2013, and the show cause notice invokes CBLR 2018, the proceedings do not get vitiated. The charges in the show cause notice are crystal clear and mere incorrect invocation of the regulation does not nullify the show cause notice. The LLP was formed as soon as the partnership deed was executed between the three partners, and it is not disputed the fact that the intimation to the Customs was filed on 10.10.2018.

The CESTAT has observed that the change of constitution of a customs broker needs to be communicated within 60 days from the date of such change for the grant of a licence under Regulation 7. The change was made on December 11, 2014, but it was reported only on October 10, 2018 after a considerable delay.

The tribunal held that there was a clear violation of CBLR, 2013 under which the appellant was licensed. The appellant has violated the provisions as mere wrong mention of the relevant CBLR would not vitiate the order.

"The appellant has claimed that the delay occurred largely due to the fact that one of his partners died and he was not in the right frame of mind. It is noticed that the impugned order has, taking a lenient view, not revoked the licence of the appellant," the CESTAT took note.

Case Title: M/s Star CHA Management Services LLP Versus Commissioner of Customs, (Airport & General)

Citation: Customs Appeal No. 52731 Of 2019

Dated: 22.07.2022

Counsel For Appellant: Advocate R.P. Jindal

Counsel For Respondent: Authorized Representative Nagender Yadav

Click Here To Read/Download Order