Revocation of license of Customs broker not warranted on mere allegations of mis-declaration & under-valuation of goods

Hearing an appeal filed by a Customs Broker to challenge revocation of Customs broker’s license under relevant provisions of the Customs Brokers Licensing Regulations 2018 and imposition of penalty, the CESTAT Principal Bench at New Delhi observed that penalties imposed had to be commensurate to the gravity of the alleged offence committed, particularly where the allegations of mis-declaration and under-valuation of goods, against the Appellant had been disproved.

A Division Bench of Binu Tamta, Member Judicial and Hemambika R. Priya, Member Technical observed that consequences of revocation of Customs Broker’s license, were considerably severe, as it would deprive the Appellant of his livelihood and also imperil his right to conduct business or profession.

The Appellant was represented by B. L. Garg, Advocate whereas the Respondent-Department was represented by Nagendra Yadav, AR.

The Appellant, a Customs Broker, was issued a letter from the Directorate of Revenue Intelligence (DRI), regarding violations committed by various Customs brokers. With regard to gross misdeclaration and undervaluation of electronic items imported. It was alleged by the DRI that the value of the goods was roughly about 5% of the actual value of the goods and in some occasions, the declared value was even less that the freight amount.

Some of the accused persons had also admitted that the under-declared portion of the value of the goods including the prepaid freight, was remitted through hawala and non-banking channels.

Subsequently, Show Cause Notice (SCN) was issued to the Appellant for alleged contravention of Regulations 1(4), 10(a), 10(d), 10(e) and 10(n) of the Customs Broking Licensing Regulations 2018 (CBLR). The Notice also proposed to revoke the Appellant’s license as Customs Broker, forfeit the security deposit as per Regulation 14 read with Regulation 18 read with Regulation 17 of CBLR 2018. Penalty was imposed too.

The Appellant was more specifically, charged with sub-letting his Customs Broker’s license to two persons who were primary accused of under-valuation of imported goods.

On adjudication, the Commissioner of Customs relied on the statement of the primary accused, recorded under Section 108 of the Customs Act 1962. It was alleged that the broker failed to verify the value of the goods before filing Bill of Entry and that he aided the importer in the undervalued import and thereby led to the attempt to import mis-declared and over-valued goods, with mala fide intent and knowingly abetted illegal import of the consignments. Therefore, the Commissioner revoked the Appellant’s Customs Brokers

On hearing the contentions of both parties, the Bench observed that the Adjudicating Authority did not rely on any evidence of a concrete nature, before holding that the Appellant had played a vital role in the scheme devised by various unscrupulous importers to de-fraud he Revenue by evading the customs duty, that they with malafide intention and knowingly abetted illegal import of the consignments involving gross mis-declaration and undervaluation.

The Bench found there to be no material from the statement of the Appellant to even remotely suggest that he was privy to the actual activity of facilitating the import. In this scenario, on what basis the adjudicating authority has arrived on the findings of mis-declaration and undervaluation against the appellant was missing.

Regarding, the imposition of penalty, the Bench observed it to be disproportionate to the seriousness of the alleged contraventions, as discussed in the preceding paragraphs. However, it was sustained by the Bench, as was the forfeiture of the security deposit.  

Therefore, the Bench opined that such findings pertaining to revocation of Customs Broker’s license, were unsustainable in the absence of any material and therefore deserved to be set aside.

Cause Title: Shyam Singh Vs Commissioner of Customs [Customs Appeal No. 50033 of 2023 / 2023-Enterslice-3-CESTAT-Del]

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