2020 (1) TMI 596 - AT - Customs

Revocation of CHA licence - forfeiture of security deposit - undervaluation of imported goods - HELD THAT - The penalty of revocation imposed against the appellant is disproportionately harsh in the context of the alleged quantum of undervaluation. The delay on the part of the licensing authority in proceeding against the licensee for more than 10 years and, that too, for this minor dereliction, if any, does not appear warranted. The allegation against the importer was that of undervaluation. There is no allegation of the appellant having been involved in the process of negotiations, or dealings, with the shipper. There is no evidence, except the statement said to have been recorded from a former Director of the appellant-company, that the antecedents were not verified. While the Director would not have been concerned with such verification, there is no evidence on record that such obligation under regulation 11(n) of Customs Broker Licensing Regulations, 2013 had not been undertaken by an employee of the licensee - the role of the appellant in the alleged undervaluation is not evident. In these circumstances, the findings of the enquiry officer do not appear to have any basis. The conclusion arrived at by the licensing authority that verification of antecedents would have led to detection of the undervaluation does not appear to be founded on logic. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Revocation of Customs Broker License.
2. Alleged undervaluation of imported goods.
3. Compliance with Customs Brokers Licensing Regulations.
4. Proportionality of the penalty imposed.

Issue-wise Detailed Analysis:

1. Revocation of Customs Broker License:
The appellant, M/s Omkar Freight Forwarders Pvt Ltd, had their license revoked by the Commissioner of Customs (General), Mumbai Zone – I, under regulation 14, read with regulation 17(7), of Customs Brokers Licensing Regulation, 2018. The revocation was due to alleged non-compliance with regulations 11(d) and 11(n) of Customs Brokers Licensing Regulations, 2013. The appellant argued that they handled only one of the seven consignments and were not involved in the undervaluation process. The tribunal found the penalty of revocation disproportionately harsh considering the minor dereliction and the delay of over 10 years in proceedings against the licensee.

2. Alleged Undervaluation of Imported Goods:
The consignment handled by the appellant involved a differential duty of ?1,70,485/-, a small portion of the total ?20,32,002/- undervaluation alleged against the importer, M/s Asia Impex. The tribunal noted that there was no evidence of the appellant’s involvement in negotiations or dealings with the shipper. The role of a customs broker is limited to dealing with cargo and documents required for clearance, making it virtually impossible to deduce undervaluation from physical verification or documentary scrutiny.

3. Compliance with Customs Brokers Licensing Regulations:
The charges against the appellant were based on regulations 11(d) and 11(n), which require advising clients to comply with the Customs Act and verifying the correctness and antecedents of clients. The tribunal found no evidence, except a statement from a former Director, that the appellant failed to verify antecedents. The former Director’s resignation in 2017 and the lack of notification to the new Director were not sufficient grounds for revocation. The tribunal emphasized that the appellant’s role did not include verifying the genuineness of transactions or background checks beyond what was provided by the client.

4. Proportionality of the Penalty Imposed:
The tribunal considered the penalty of revocation disproportionate, especially given the minor nature of the infraction and the significant delay in proceedings. The reliance on the Delhi High Court’s decision in Kunal Travels (Cargo) v. Commissioner of Customs highlighted that the customs broker’s due diligence does not extend to verifying the genuineness of the transaction or the client’s background beyond the provided documents. The tribunal concluded that the findings of the enquiry officer lacked basis and the licensing authority’s conclusion was not founded on logic.

Conclusion:
The tribunal set aside the impugned order and allowed the appeal, finding the revocation of the customs broker’s license unjustified and disproportionate to the alleged infraction. The decision emphasized the limited role of customs brokers in verifying transactions and the importance of proportional penalties for regulatory violations.