Responsibility Of Customs Broker Does Not Include Keeping Continuous Surveillance On Client: CESTAT

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the responsibility of the customs broker under Regulation 10(n) of the Customs Brokers Licensing Regulations, 2018 does not include keeping continuous surveillance on the client.

The bench of Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that the responsibility of the customs broker under Regulation 10(n) does not include keeping continuous surveillance on the client to ensure that he continues to operate from that address and has not changed his operations. Therefore, once verification of the address is complete, if the client moves to a new premises and does not inform the authorities or does not get his documents amended, such an act or omission of the client cannot be held against the customs broker.

The Directorate General of Analytics and Risk Management of the Central Board of Indirect Taxes and Customs analyzed data, identified risky exporters involved in fraud, got the requisite verification done by the jurisdictional GST officers, and identified exporters who could not be found at all physically at their registered premises. DGARM also found that exports by these exporters were handled by certain customs brokers, including the appellant, and reported them to the respective commissionerates, including the appellant.

The Commissioner issued a show cause notice to the appellant and appointed an inquiry officer, who, after considering the reply filed by the appellant and completing the inquiry, submitted his inquiry report.

The inquiry officer found that the charge in the show caused notice that the appellant violated Regulations 10(d), 10(e), and 10(n) of CBLR, 2018.

After considering the SCN, the inquiry report, and the representation, the Commissioner passed the impugned order holding that the appellant had violated Regulations 10(d) and 10(n) of CBLR 2018, but there is no evidence of a violation of Regulation 10(e). He revoked its Customs Brokers license, forfeited the security deposit, and imposed a fine of Rs. 50,000 on it.

The allegation in the show cause notice and the finding in the impugned order that the appellant had violated Regulations 10(d) and (n) are based on the fact that the appellant had filed two shipping bills in the name of M/s Arise Enterprises (of which one was purged by the system because no goods were brought for export within time) and ready-made garments were exported against the shipping bill declaring high values to claim undue export benefits. The Additional Commissioner of Customs, Mundra, held that, on verification, Arise was found to be non-existent. Based on the order of the Additional Commissioner, Mundra, that Arise did not exist, the Commissioner concluded that the appellant, who filed the shipping bill for Arise, had violated Regulations 10(d) and (n) of CBLR, 2018.

The Commissioner recorded that the exporter Arise was found to be non-existent on verification. The rent agreement uploaded by it on the GST Portal was found to be forged, and the owner of the premises denied having signed any such agreement. Therefore, the exporter as well as his supply chain were fake. The GST registration of the exporter was cancelled suo moto by the department.

The appellant, as the customs broker, had no responsibility with respect to the registration of the exporter under GST or the documents submitted or uploaded by the exporter in order to obtain the GST registration. The responsibility of the appellant under Regulation 10(d) can only be related to the exports or imports that it handled. Nothing in the SCN or in the order establishes that the appellant had not advised its client, the exporter, to comply with the law or that it was aware that the exporter had not complied with any law and had still not brought it to the notice of the Assistant Commissioner or Deputy Commissioner.

Regulation 10(d), which requires the customs broker to advise its client, can only be interpreted with respect to the imports or exports of the client with whom it is dealing, whether it is the Customs Act, Rules and Regulations, or other allied acts. The customs broker has no responsibility to advise its clients about compliance with any other law or compliance with respect to any other import or export consignment that it is not dealing with.

The tribunal held that the Commissioner was not correct in holding that the appellant Customs Broker had violated Regulations 10(d) and 10(n) of CBLR, 2018.

Counsel For Appellant: Priyanka Goel

Counsel For Respondent: Munshi Ram Dhania

Case Title: M/s Pushpanjali Logistics Versus Commissioner of Customs (Airport & General)

Case No.: Customs Appeal No. 55801 Of 2023

Click Here To Read The Order