2023 (2) TMI 75 - HC - Customs

Revocation of Customs Broker License - forfeiture of security deposit - penalty - guilty of misconduct - misdeclaration of goods by the exporter (M/s Balaji International) and attempted to facilitate export of goods otherwise restricted at the material time - classification of export consignment of Glucose Test Strips - N/N. 59/2015 -20 dated 04.04.2020 - HELD THAT - It is material to state that the consignment of Glucose Test Strips was held up at the material time on the ground that the items were restricted. In this regard the exporter and the Department had exchanged correspondence. It is not disputed that the consignment was finally cleared. Admittedly, the goods in question were correctly described as Glucose Test Strips in the Shipping Bills and these goods were exported after the initial hold up. It is, thus, not difficult to accept that at the material time, there may have been some confusion as to the classification of the goods as has been contended by the appellant. In the present case, the exporter had classified the goods in question under CTH 90279090. It is the exporter s stand that the said classification was a correct one. The appellant had candidly stated that there was some confusion at the material time. In his statement, he had also candidly admitted that the shipping bill was filed during the period of lock down and that there was a mistake. He had also stated that he was not aware that the goods in question, namely, glucose tested strips contained reagents. He had also stated that they always took due care before filing shipping bill, but due to shortage of staff during the lock down period, a mistake had occurred - it is apparent that the appellant had been remiss, however, the appellant s candid admission must also be read along with his statement that he was not aware that the goods in question contained reagents. It is apparent in the given facts that it cannot be held that the appellant had misconducted itself, thus, the only ground on which the appellant s licence is revoked was failure to comply with the regulations, which would follow in case there was a failure to comply with the obligations under regulation 10 of CBLR, 2018. However, it is also material to note that Regulation 14 confers a discretion on the Principal Commissioner whether to revoke the license and forfeit the security deposit - In this case the exporter was fully aware of the issue regarding classification and, the exporter had also corresponded with the department and had asserted that the goods in question were not restricted. Undisputedly, the goods in question were correctly described in the Shipping Bill as glucose testing strips . Further, the appellant had explained that there was confusion on his part and had candidly admitted his mistake. In the given facts, any error on the part of the appellant to inform the exporter regarding the classification of the goods cannot be considered as sufficiently grave so as to forfeit the appellant s license. The learned Tribunal had not examined the material facts of the present case to ascertain whether an action under Regulation 14 was justified. The impugned order as well as the order dated 11.06.2021 passed by the Commissioner of Customs to the extent that it revokes the appellant s license and forfeits the security deposit is set aside - Appeal allowed in part.

Issues Involved:
1. Jurisdiction of the Commissioner to revoke the Customs Broker License.
2. Justification of revoking the Customs Broker License, forfeiting the security deposit, and imposing a penalty.
3. Classification of 'Glucose Test Strips' under the Customs Tariff Act.
4. Compliance with Regulation 10(e) of the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018).

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner to Revoke the Customs Broker License:
The appellant argued that the Commissioner lacked jurisdiction to revoke the license under Regulation 14 of the CBLR, 2018, since the suspension of the license had already been revoked. The Tribunal, however, sustained the revocation order. The High Court noted that the Commissioner's order revoking the suspension did not restrict the Commissioner from concluding proceedings regarding revocation of the license.

2. Justification of Revoking the Customs Broker License, Forfeiting the Security Deposit, and Imposing a Penalty:
The appellant contended that the revocation of the license, forfeiture of the security deposit, and imposition of a penalty were disproportionate and not justified. The High Court observed that the appellant had candidly admitted to a mistake due to confusion during the lockdown period and that the exporter was aware of the classification issue and had corresponded with the department. The Court found that the Tribunal had not examined whether the action under Regulation 14 was justified, considering the material facts.

3. Classification of 'Glucose Test Strips' under the Customs Tariff Act:
The appellant had classified 'Glucose Test Strips' under CTH 90279090, while the respondent argued that the correct classification was under ITC HS code 38.22, making the goods restricted for export under Notification No. 59/2015-20 dated 04.04.2020. The High Court noted that the goods were correctly described as 'Glucose Test Strips' and that there was some confusion regarding their classification at the material time. The Court acknowledged that the goods fell within the restricted items under the notification but also noted the subsequent amendment that clarified the restriction.

4. Compliance with Regulation 10(e) of the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018):
The Inquiry Officer found that the appellant violated Regulation 10(e) by failing to exercise due diligence in classifying the goods correctly. The High Court referred to the case of Kunal Travels (Cargo) v. CC (I & G), which stated that due diligence under Regulation 10(e) pertains to the information imparted to the client, not necessarily to background checks of the consignment. The Court found that the exporter was fully aware of the classification issue and had corresponded with the department, and thus, the appellant's failure to inform the exporter about the correct classification could not be considered sufficiently grave to justify revocation of the license.

Conclusion:
The High Court set aside the impugned order and the Commissioner's order dated 11.06.2021, to the extent that it revoked the appellant's license and forfeited the security deposit. The appeal was partly allowed, and the challenge to the levy of the penalty was not pressed by the appellant's counsel.

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