Attempt To Export SCOMET Item Without Authorization Is Serious Violation; CESTAT Upholds Penalty Against Customs Broker

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that an attempt to export specialized chemicals, organisms, machinery, equipment, and technology (SCOMET) items without the required authorization is a serious violation.

The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that there is no evidence of the appellant/customs broker profiting from the attempted export of triethanolamine. Action has been taken against both the exporter and the appellant under the provisions of the Customs Act, and a penalty of Rs. 5,000 was imposed on the appellant under Section 114(i). The appellant has been without a license since 26.7.2023, which means out of work for about a year.

The appellant is a licensed customs broker. The Customs Broker challenged the order passed by the Customs Commissioner revoking its Customs Broker Licence under Regulations 14 & 18 read with Regulation 17 of Customs Brokers Licensing Regulations, 2018. The Customs Commissioner has forfeited its security deposit and imposed a penalty of Rs. 50,000 on it for violating Regulation 10(d) of Customs Brokers Licensing Regulations (CBLR), 2018.

Triethanolamine is one of the specialized chemicals, organisms, machinery, equipment, and technology (SCOMET) items that have dual use—several normal industrial or other uses and also use in the manufacture of Weapons of Mass Destruction (WMD).

The export of SCOMET items is not prohibited but is restricted under the Foreign Trade Policy, and they are listed in Appendix 3 to Schedule 2 of the ITC (HS) classification. List 1C of this Schedule lists chemicals whose export requires an export authorization if they are exported to countries other than those listed in Table 1. Triethanolamine is listed at S. No. 17 of the list as SCOMET Entry IC017. Therefore, triethanolamine could not have been exported to Mozambique without an authorization, and the exporter had no authorization.

The customs broker contended that there was no mens rea and the triethanolamine was covered by the exporter's undertaking, which stated that it was not a SCOMET item and that it would be used for soil testing. The appellant was never investigated, and no adverse evidence is taken on record by the department against it. The value of triethanolamine was less than Rs. 500/-. The SCN was issued after 255 days of receiving the offense report. The case was already adjudicated by the Assistant Commissioner, and a penalty under Section 114 of the Act was imposed.

The tribunal held that it would meet the ends of justice if the penalty of Rs. 50,000/- imposed on the customs broker is upheld but the revocation of license and forfeiture of security deposit are set aside.

Counsel For Appellant: Alok Agarwal

Counsel For Respondent: M R Dhaniya

Case Title: Flyover Cargo Pvt. Ltd. Versus Commissioner, Customs-New Delhi (Airport And General)

Case No.: Customs Appeal No.55467 of 2023

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