2025 (3) TMI 1196 - AT - Customs

Breach of regulation 10(d) 10(e) 10(n) and 13(2) of Customs Brokers Licensing Regulations 2018 - entire case of the licensing authority appears to have been built upon the conclusion that the exporter on record were a mere fronts and that the beneficiary of the admitted over-valuation were those who controlled the transactions behind the scenes - HELD THAT - In the impugned order there is neither hint nor whisper of such grievance on the part of the client and yet that did not deter the licensing authority from holding that the customs broker had deviated from the obligations set out in regulation 10(e) of Customs Brokers Licensing Regulations 2018 which only the client could be concerned with. The facts relied upon as well as the conclusion thereupon in the impugned order are far from that contemplated under regulation 10(e) of Customs Brokers Licensing Regulations 2018. There are no hesitant in holding that the licensing authority has erred to hold that to be proved. There is of course a fundamental stipulation that it is the responsibility of the customs broker to advice client to comply with all the statutory provisions that applicable to clearance of the goods belonging to the client. It is however not necessary that every single provision in the several statutes would have to be intricted to the client. Neither is it necessary that it is the owners/officials of the importer/export entity who should be subjected to such education. That well may be impossible and it clearly not the intent of the Regulation that the customs broker should conduct a teachimg course on procedural and legal stipulations pertaining to clearance of the goods. The breach of such obligation would have to be inferred from facts which demonstrate negligence on part of customs broker to advice contextually - There is no evidence to conclude that the licensing authority was correct in determining breach of regulation 10(d) of Customs Brokers Licensing Regulations 2018. There is no doubt that the antecedents of the client need verification and to the extent that the specifics of such verification are set out in the said Regulation existence of documentation would suffice as compliance. There is no allegation that the client was not in possession of genuine importer-exporter code (IEC) or for that matter of GST registration. Nonetheless the records do show that no operations appeared to have been carried out at the declared address of the exporter. Whether verification of the premises would have prevented overvaluation of goods is moot; however that the exporter did not operate at the declared address indicates that the verification carried out by the customs broker was but cursory or non-existent. Licences issued to customs brokers is not merely an entry into practice of a trade or profession but is contingent upon expectation on the part of licensing authority that antecedents of importer/exporter are not doubtful - It would therefore appear that the appellant had restricted itself to verification of documents to the extent of availability in the public domain. Clearly undertaking of work on behalf of the exporter without proper knowledge about the activities of the exporter is in breach of the obligation devolving on the customs broker under regulation 10(n) of Customs Brokers Licensing Regulations 2018. To the extent that the licensing authority has held that the customs broker to be in breach thereof we find no reason to disagree thereupon. The charge of violation of regulation 10(n) of Customs Brokers Licensing Regulations 2018 is therefore upheld. Conclusion - Only regulation 10(n) of Customs Brokers Licensing Regulations 2018 stands affirmed fastening of all the detriments available in the Regulation is clearly disproportionate. The imposition of penalty under regulation 18 of Customs Brokers Licensing Regulations 2018 suffices to meet the ends of justice. Accordingly while setting aside the revocation of licence and forfeiture of security deposit the imposition of penalty of Rs. 50, 000/- upheld. Appeal disposed off.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment revolve around the alleged breaches of the Customs Brokers Licensing Regulations, 2018 by the appellant, a customs broker. The specific issues include:

Whether the appellant breached regulation 10(d) by failing to advise the client to comply with statutory provisions.
Whether the appellant violated regulation 10(e) by not exercising due diligence in verifying the correctness of information related to cargo clearance.
Whether the appellant breached regulation 10(n) by failing to verify the correctness of client details, particularly the physical address.
Whether the appellant violated regulation 13(2) by failing to supervise the conduct of employees adequately.

ISSUE-WISE DETAILED ANALYSIS

Regulation 10(d) - Advising Clients on Compliance

Legal Framework and Precedents: Regulation 10(d) requires customs brokers to advise their clients to comply with statutory provisions related to the clearance of goods.
Court's Interpretation and Reasoning: The Tribunal noted that the obligation to advise does not necessitate instructing clients on every statutory provision. The focus should be on contextual advice relevant to the client's operations.
Key Evidence and Findings: The Tribunal found no evidence that the appellant failed to provide necessary advice, particularly since the issue was related to valuation, which is speculative and governed by specific rules under the Customs Act, 1962.
Application of Law to Facts: The Tribunal concluded that there was no evidence of the appellant's involvement in overvaluation or any breach of regulation 10(d).
Treatment of Competing Arguments: The Tribunal dismissed the licensing authority's reliance on statements and assumptions without concrete evidence of negligence.
Conclusions: The Tribunal held that the licensing authority erred in determining a breach of regulation 10(d).

Regulation 10(e) - Due Diligence in Information Verification

Legal Framework and Precedents: Regulation 10(e) mandates customs brokers to exercise due diligence in verifying information related to cargo clearance.
Court's Interpretation and Reasoning: The Tribunal emphasized that the licensing authority's reliance on statements suggesting a conspiracy was irrelevant to the obligations under regulation 10(e).
Key Evidence and Findings: The Tribunal found no connection between the alleged facts and the obligations under regulation 10(e).
Application of Law to Facts: The Tribunal determined that the licensing authority's conclusions were not supported by evidence relevant to regulation 10(e).
Treatment of Competing Arguments: The Tribunal noted the lack of client dissatisfaction, which is crucial for invoking regulation 10(e).
Conclusions: The Tribunal concluded that the licensing authority incorrectly held a breach of regulation 10(e).

Regulation 10(n) - Verification of Client Details

Legal Framework and Precedents: Regulation 10(n) requires customs brokers to verify the correctness of client details.
Court's Interpretation and Reasoning: The Tribunal acknowledged the absence of the exporter at the declared address as a failure of verification by the appellant.
Key Evidence and Findings: The Tribunal found that the appellant's verification of the client's premises was cursory or non-existent.
Application of Law to Facts: The Tribunal upheld the licensing authority's conclusion that the appellant breached regulation 10(n) by not verifying the client's operational premises.
Treatment of Competing Arguments: The Tribunal dismissed the appellant's reliance on document verification alone as insufficient.
Conclusions: The Tribunal upheld the charge of violation of regulation 10(n).

Regulation 13(2) - Supervision of Employees

Legal Framework and Precedents: Regulation 13(2) requires customs brokers to supervise their employees' conduct.
Court's Interpretation and Reasoning: The Tribunal found no evidence of negligence or complicity by the appellant's employees during the export process.
Key Evidence and Findings: The Tribunal noted the absence of evidence indicating employee misconduct during the relevant customs procedures.
Application of Law to Facts: The Tribunal concluded that the appellant did not breach regulation 13(2).
Treatment of Competing Arguments: The Tribunal rejected the licensing authority's assertions of vicarious liability without supporting evidence.
Conclusions: The Tribunal found no breach of regulation 13(2) by the appellant.

SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The facts relied upon, as well as the conclusion thereupon, in the impugned order are far from that contemplated under regulation 10(e) of Customs Brokers Licensing Regulations, 2018."
Core Principles Established: The Tribunal emphasized that each regulatory obligation must be considered independently, and evidence must specifically relate to the alleged breach.
Final Determinations on Each Issue: The Tribunal upheld the breach of regulation 10(n) but dismissed the charges related to regulations 10(d), 10(e), and 13(2).

The Tribunal modified the impugned order by setting aside the revocation of the license and forfeiture of the security deposit, while upholding the imposition of a penalty of Rs. 50,000 under regulation 18 of the Customs Brokers Licensing Regulations, 2018.

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