Licence Revocation Set Aside Due to Lack of Evidence Linking Customs Broker to Fradulent Exports

Dutta Clearing Agent Pvt.Ltd Vs Commissioner of Customs (CESTAT Kolkata)

The appeal was filed against Order-in-Original dated 15.07.2024, whereby the Commissioner revoked the Customs Broker licence of the appellant and imposed a penalty of ₹50,000 for alleged violations of Regulations 10(d), 10(e), 10(i), 10(n), and 10(q) of the Customs Broker Licensing Regulations (CBLR), 2018.

The case arose from an offence report alleging fraudulent exports of goods such as tiles and automobile parts to Nepal through LCS Bhimnagar. Investigations indicated that the goods mentioned in invoices and e-way bills were never actually transported or exported. The Revenue relied primarily on the statement of a G-Card holder, who admitted to digitally uploading invoices and KYC documents using allegedly fake or manufactured documents and claimed involvement in the export activities. Based on this statement, the authorities alleged that the appellant Customs Broker had violated statutory obligations and facilitated fraudulent exports.

The appellant contested the findings on two main grounds. First, it denied any involvement in the impugned export shipments, asserting that the exports were carried out by the exporters themselves without the involvement of the appellant as a Customs Broker. In support, the appellant submitted copies of Shipping Bills showing that the shipments were filed on a “self” basis. Second, the appellant raised objections regarding non-adherence to prescribed timelines for conducting the enquiry under the CBLR.

Upon examination of records, the Tribunal observed that the allegation against the appellant was primarily based on the statement of the G-Card holder. It noted that there was no categorical assertion in the statement linking the appellant firm directly to the handling of the disputed exports. The statement merely indicated that the individual was employed with the appellant.

The Tribunal emphasised that involvement of a Customs Broker in export transactions must be established through credible documentary evidence, and the Shipping Bills constitute the most reliable proof in this regard. In the present case, the Shipping Bills clearly indicated that the exports were carried out by the exporters themselves and not through the appellant as a Customs Broker. In the absence of any documentary evidence to establish the appellant’s role in the exports, the findings of violation of Regulations 10(d), (e), (i), (n), and (q) were held to be unfounded and legally unsustainable.

The Tribunal further noted that there was no finding in the impugned order demonstrating that the appellant had any connection with or knowledge of the alleged fraudulent exports. The absence of substantive evidence linking the appellant to the transactions rendered the allegations baseless.

On the issue of procedural timelines, the Tribunal examined the sequence of events and found that the enquiry process substantially complied with the prescribed timelines under Regulation 17. Although there was a delay in submission of the enquiry report beyond 90 days in one instance, the overall process, including issuance of notice, submission of report, and passing of order, was found to be broadly in accordance with legal requirements. Therefore, the procedural challenge was not accepted.

The Tribunal also addressed the appellant’s contention regarding denial of cross-examination. It noted that the appellant failed to specify the individual it sought to cross-examine, and therefore could not claim violation of principles of natural justice.

Ultimately, the Tribunal held that there was no substantive evidence to implicate the appellant or to establish its involvement in the alleged fraudulent exports. In the absence of such evidence, penal action including revocation of licence, forfeiture of security deposit, and imposition of penalty could not be sustained.

Accordingly, the Tribunal set aside the impugned order of the Commissioner and allowed the appeal.

FULL TEXT OF THE CESTAT KOLKATA ORDER

The appellant, a Customs Broker Firm, aggrieved with the Order-in-Original No.01/TECH/CBLR/2024 dated 15.07.2024 has filed the impugned appeal, assailing the same.

2. Vide the impugned order, the ld. Commissioner has revoked the Customs Broker License No.1/CHA/2015 (CBLMS No.2015PTNA10017) and Parent Policy Section EDI Lic. No.AADCD8123DCH001 of the appellant in violation of the conditions prescribed under Regulation 10 of the CBLR 2018. The ld.Commissioner has also imposed a penalty of Rs.50,000/- on the appellant vide the impugned order.

3. The Offence Report dated 25.10.2023 placed on record points out to an unprecedented surge in export of certain commodities like tiles, automobile parts from India to Nepal vide LCS Bhimnagar. The investigations conducted alleged revelation of fraudulent export thereof aimed at defrauding Government exchequer. It is the case of the Revenue that upon verification of the invoices and the e-way Bills, it was noticed that no such vehicles carrying the said goods actually moved towards LCS Bhimnagar or ever crossed into Nepal. The report further goes on to state that one Shri Ganga Singh, G-Card Holder is the pivotal person behind the said fraudulent exports and claims that he had digitally made the IRN invoices in question related to said fraudulent exports. It is on the basis of the statement dated 10.10.2023 of this Ganga Singh (G-Card Holder), that he conducted the business of Customs on behalf of M/s. Dutta Clearing Agent Pvt.Ltd. (the appellant Customs Broker). His statement also refers to and accepts the digital uploading of the invoices and the KYC documents of the exporters in e-Sanchit allegedly on the basis of fake/manufactured documents. It is noticed from the case records and the impugned Offence Report that the authorities have expressly stated “Shri Ganga Singh, G-Card Holder of M/s. Dutta Clearing Agent Pvt.Ltd., CHA violated the Customs Act to defraud the Government exchequer”.

4. It is on the strength of the aforesaid allegation and the statement of Shri Ganga Singh that the Revenue have come upon heavily on the appellant and charged him for violation of the provisions of the CBLR 2018 in terms of the Regulation 10(d), 10(e), 10(i), 10(n) and 10(q) of the same.

5. The appellants have essentially placed two-fold arguments before us –

(a) that the appellant was nowhere the Customs Broker handling the aforesaid export shipments and

(b) questioned the non-adherence to the timelines prescribed for conduct of enquiry as stipulated in terms of Section 17 of the said Regulations, prescribing timelines in terms of sub-section 5 and sub-section 7 thereof.

6. In arguments before us the appellant has completely disassociated himself with the impugned shipments and by way of records as placed before us copies of Shipping Bills as per list below clearly stating that the CHA concerned with the said shipments were the party themselves. List of such Shipping Bills enclosed to the records is as under :-

7. For records, a copy of first page of one of these Shipping Bills is scanned hereinbelow :

8. The aforesaid act of export/attempted export – as “himself”, being a factual contention cannot be merely dismissed based on a solitary statement of the alleged employee Shri Ganga Singh. The fact that the CHA is involved and concerned with the present shipments is required to be determined on the basis of credible documentary evidence, and there can be no better proof than the Shipping Bill itself. Given that the appellant Customs Broker was not involved with the exports, as shipment made “By himself” i.e. on self-basis, nor there being any documentary evidence to suggest otherwise, the finding that the firm breached Regulation 10(d), (e), (i), (n) and (q) are completely unfounded and therefore cannot be sustained being legally inconsistent. For sake of records, the legal provisions are enumerated below :

Regulation 10. Obligations of Customs Broker. — A Customs Broker shall —

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(d) advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in case of non­compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be;

(e) exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage;

(i) not attempt to influence the conduct of any official of the Customs Station in any matter pending before such official or his subordinates by the use of threat, false accusation, duress or the offer of any special inducement or promise of advantage or by the bestowing of any gift or favour or other thing of value;

(n) verify correctness of Importer Export Code (IEC) number, Goods and Services Tax Identification Number (GSTIN), identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information;

(q) co-operate with the Customs authorities and shall join investigations promptly in the event of an inquiry against them or their employees;

9. It is also placed on record that before the lower authorities concerned, during the course of the enquiry under the provisions of CBLR, the appellant had mentioned the names of the alleged fake/non-existent exporters and with regard to the Shipping Bills alleged to be filed by them had categorically asserted that the said exporters have filed the impugned Shipping Bills on their own, and the appellant was not the Customs Broker in respect of the said exports. The Ld.Counsel for the appellant further submitted that only to shield their own officers, the authorities found an easy scapegoat in the appellant. That being so would certainly be a matter of concern. There is also no categorical assertion in the statement of the G-card holder Shri Ganga Singh that the said Customs Broker i.e. the appellant firm had handled/dealt with the said exports. The said statement only asserts that Shri Ganga Singh worked for the said CHA firm, implying thereby that he was in employment with the appellant’s firm.

10. We notice from records that the appellant indeed was not the Customs Broker in respect of the impugned exports. That being the position alleging the appellant for the violation of the aforesaid provisions in law is completely meritless and without application of mind. There is no finding in the order of the lower authority to impute the appellant CHA as the person concerned for such dubious and fraudulent exports.

11. The appellant has also argued that there is complete non­adherence to the timelines set out for conduct of the enquiry, which indeed are of a mandatory nature. The courts have also repeatedly held such timelines to be sacrosanct and mandatory. Thus, while the appellant was served with the show cause notice on 19.01.2024, we note from records that no enquiry report was submitted within 90 day as prescribed in terms of Regulation 17(5) which is dated 29.05.2024 (111 days) i.e. well beyond the prescribed 90 days period. We note that this enquiry report revolves around the solitary statement of Shri Ganga Singh, a G-Card Holder, recorded on 10.10.2023.

12. Likewise, in terms of Sub-Regulation 7 of Regulation 17, the adjudicating authority is required to issue appropriate orders within 90 days from the date of such enquiry report. From the facts on record it is evident that the enquiry officer Shri Tirupurari Saran, Assistant Commissioner of Muzaffarpur Division has in fact submitted the report on 18.04.2024. Thus, while the impugned notice is dated 19.01.2024, we find that the enquiry officer’s report has in effect been prepared and submitted in accordance with the prescriptions of the law. It isfurther noticed that in terms of Regulation 17(7) the Adjudicating authority is required to grant 30 days’ time for the appellant to respond to the same after the enquiry report has been made over to the appellant, – in this case the said enquiry report is dated 29.05.2024 and the order of the learned authority passed on 15.07.2024, pursuant to the response of the appellant received to the enquiry report tendered by the enquiry authority. For reasons thus we do not find the process undertaken in the matter as violative of the legal prescriptions. However, we find there is nothing on record to impute the appellant per se in view of the factual recording on the export documents of shipments being carried out by ―IEC himself‖ and there being nothing authoritative led on record by the authorities to connect the said shipments to the Customs Broker..

13. We also note from records, that the request of the appellant for cross-examination could not fructify as the appellant failed to indicate the name of the person (whom they wanted to cross-examine). The appellant therefore cannot resort to plea alleging denial of natural justice. Para 6.7.6 of the impugned order is material in this regard.

14. Thus, for lack of substantive evidence to implicate and associate the appellant with the said shipments and to impute any knowledge of such fraudulent exports on their part, we are of the considered view that the appellant cannot be subjected to penal consequences as entailed in law. For reasons thereof, we set aside the impugned order of the Commissioner qua the appellant, revoking the said licence, ordering forfeiture of Security Deposit and subjecting them to a penalty of Rs.50,000/- under Regulation 18.

15. The appeal stands allowed.

(Order pronounced in the open court on 24.04.2026.)