Exporters Not Traceable, Customs Broker Can't Be Held Liable After Issuance Of 'Let Export Orders': Delhi High Court

The Delhi High Court has held that as a customs broker, the petitioner cannot be held liable because exporters were not traceable after the issuance of 'Let Export Orders' and the export of the goods out of the country.

The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that once the Importer Exporter Code (IEC) particulars as mentioned are verified from the system as maintained by the Customs, there is no requirement statutorily placed upon the Custom House Agent (CHA) to undertake an independent exercise in order to verify the details as furnished by the exporter.

The petitioner was granted a license to operate as a customs broker (CB), which was valid up to December 19, 2025. The instant matter pertains to the previous exports of ball bearings, an investigation of which was initiated by SIB, ACC, and Kolkata on the basis of four live export consignments of unbranded ball bearings filed by Gupta Vyapar. The four consignments were highly overvalued for export to defraud the exchequer by way of getting a very high input tax credit (ITC) refund and other export-related incentives. The data pertaining to the export of ball bearings was analyzed for the period 01.01.2020 to 12.09.2020, in which it was found that a total of 35 consignments of similar or identical description had been exported, out of which 23 consignments had been cleared by M/s Naman Gupta & Associates (custom broker). The total ITC claimed by exporters was Rs. 3.3 crore, while the total drawback claimed was to the tune of Rs. 36.62 lakh.

It was seen that the petitioner was involved in the clearance of 23 shipping bills for ball bearings filed by nine different exporters. Out of nine exporters, five were found to be non-existent.

A purported offence report was forwarded by the Deputy Commissioner of Customs, who initiated action against the petitioner for the violation of Regulations 10(d), 10(m), 10(n), and 10(q) of the Customs Broker Licensing Regulation, 2018 (CBLR, 2018).

The department issued a Show Cause Notice under Regulation 17 (1) of the regulations, requiring the petitioner to show cause within 30 days from the date of the notice as to why he should not be held responsible for the alleged contravention of provisions of Regulations 10 (d), 10 (m), 10 (n), and 10 (q) and why his Custom Broker License should not be revoked and penalties not be imposed under Regulations 17 and 18 thereof.

The department agreed with the findings of the inquiry officer that CB has failed to comply with the provisions of Regulations 10 (d), 10 (m), 10 (n), and 10 (q) of the CBLR, 2018. The department passed the order revoking the customs broker license of the petitioner, forfeiting the entire security deposit, and imposing a penalty of Rs. 50,000.

The petitioner contended that the order is an outcome of the purported exercise to save the proper officer of customs, as the proper officer of customs assessed the shipping bills and issued “Let Export Orders” without raising any objection against the value of the exported goods in any manner. The customs authorities are hell-bent on penalizing the petitioner for the fault of the proper officer of customs, despite the fact that, as a customs broker, the petitioner has no role in assessing the value of the goods in any manner.

The court held that the customs broker is entitled to proceed on the basis that IEC has come to be generated in favour of the exporter after an appropriate background check has been conducted by the customs authorities. The further details that may have been captured and form part of the IEC Registration of an importer is one aspect that has to be verified by the customs authorities themselves. Moreover, it is also not the case of the Department that the IEC, GSTIN, PAN, and authorized dealer codes of the exporters were not genuine.

The court opined that the Commissioner of Customs erred in accepting the findings of the inquiry officer regarding the failure of the customs broker to comply with the provisions of Regulations 10(d), 10(m), 10(n), and 10(q) of the CBLR, 2018.

Counsel For Petitioner: Prabhat Kumar

Counsel For Respondent: Ajit Kumar Kalia

Case Title: Naman Gupta Versus Commissioner Of Customs Airport And General

Citation: 2024 LiveLaw (Del) 133

Case No.: W.P. (C) 15808/2022

Click Here To Read The Order