Illegal Actions Of Importer Firms Subsequent To Cargo Clearance From Customs Station Does Not Make Customs Broker Liable: CESTAT

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the illegal actions of the importer firms subsequent to the clearance of the cargo from the Customs Station do not attract a violation on the part of the Customs Broker.

The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the customs broker, in order to verify the existence of the premises of the two importer firms, sent letters by speed post asking them to submit the requisite documents, and in response thereto, he received the KYC documents.

The appellant, a customs broker, is holding a license, which is valid up to September 1, 2026. An investigation was initiated against M/s Leo Cargo Services Pvt. Ltd., M/s D.S. Cargo Agency, and M/s R.P. Cargo Handling Services. The investigation report, which was forwarded from DRI, HQs, for initiating proceedings against the appellant and others, respectively, on the allegation that Ramesh Wadhera and Sanjeev Maggu were engaged in evasion of customs duty by way of diverting the goods stored in customs-bonded warehouses into the domestic market without payment of customs duty. It was revealed that the documents were forged or fabricated to show re-exported warehoused goods.

On adjudication, the license of the appellant was revoked under Regulation 17 of CBLR, along with forfeiture of the security deposit and imposition of a fine of Rs. 50 lakhs.

The appellant contended that it had transacted business either personally or through employees of the firm. Sanjeev Maggu had never dealt with the customs authority on behalf of the customs broker, and hence there is no violation of Regulation 10(b). The actual offense had occurred at the time of clearance of the goods from the warehouse, and for which neither the appellant nor he performed any work in connection therewith. Thus, there is no link between the offense and the duty or obligation assigned to the CHA, and, therefore, there is no violation of Regulation 10(d).

The department contended that the appellant admittedly knew that Sanjeev Maggo was the actual owner, but he never informed the department, and he connived with Sanjeev Maggu in the fraud caused to the government exchequer and by violating the provisions of Regulation 10(d). Similarly, the appellant failed to exercise due diligence to ascertain the correctness of the information, which resulted in a contravention of Regulation 10(e).

The tribunal held that Sanjeev Maggu never acted on behalf of the appellant (customs broker) but acted on behalf of the importer. The appellant, either himself or through his employees, transacted with the customs authority for clearance of the goods. Thus, there is no violation of Regulation 10(b) of CBLR, 2018. The appellant cannot be linked to the fraud, and the same cannot be stretched to contravene the provisions of the Regulations.

The tribunal quashed the order upholding the revocation of the license and the forfeiture of the security amount; however, the penalty imposed was upheld.

Counsel For Appellant: Priyadarshi Manish

Counsel For Respondent: Nagendra Yadav

Case Title: M/s R.P. Cargo Handling Services Versus Commissioner of Customs (Airport & General)

Case No.: Customs Appeal No. 50490 of 2019

Click Here To Read The Order