ROLE, RESPONSIBILITIES OF CUSTOMS BROKERS AND PENALTIES FOR INFRACTIONS OF CUSTOMS LAW AND CUSTOM BROKER LICENSING REGULATIONS.
Customs Broker ( hereinafter called “CB” or Custom House Agent) is a very important person in the transactions in the Custom House. CBs are appointed as an accredited broker as per the Customs Brokers Licensing Regulations ( in short CBLR regulations), and is expected to discharge all its responsibilities under them. Violations even without intent are sufficient to take action against Customs Act and CBLR regulations. At the same time, that the Customs Broker is not expected to do the impossible. Further, the work related to the interpretations of various exemption notifications, classification aspects of the imported/ exported goods, applicability of different compliances under plethora of laws, rules and regulations is not an easy task and there are chances of omission as an ordinary prudent person. Be it so, it is equally true that the Customs Broker is expected to act with great sense of responsibility and take care of the interests of both the client and the Revenue. CB is expected to advise the client to follow the laws/rules/regulations, and if the client is not complying, it is obligated under the Regulations to report to the Revenue authorities.
Hence, the CB occupies a very important position in the Customs House. The Customs procedures are complicated. The importers have to deal with a multiplicity of agencies viz. carriers, custodians like BPT as well as the Customs. The Importer would find it impossible to clear his goods through these agencies without wasting valuable energy and time. The CUSTOMS BROKER is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CB by the importers/ exporters as well as by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed.
Regulations 10 of the CB Licensing Regulations fists out obligations of the CB. Any contravention of such obligations even without intent would be sufficient to invite upon the CB the punishment(s) listed in the Regulations.
The relevant regulation is reproduced below :
Regulation 10. Obligations of Customs Broker: –
A Customs Broker shall –
(a) obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be;
(b) transact business in the Customs Station either personally or through an authorized employee duly approved by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be;
(c) not represent a client in any matter to which the Customs Broker, as a former employee of the Central Board of Indirect taxes and Customs gave personal consideration, or as to the facts of which he gained knowledge, while in Government service;
(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 non-compliance, 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;
(f) not withhold information contained in any order, instruction or public notice relating to clearance of cargo or baggage issued by the Customs authorities, as the case may be, from a client who is entitled to such information;
(g) promptly pay over to the Government, when due, sums received for payment of any duty, tax or other debt or obligations owing to the Government and promptly account to his client for funds received for him from the Government or received from him in excess of Governmental or other Customs charges payable in respect of cargo or baggage on behalf of the client;
(h) not procure or attempt to procure directly or indirectly, information from the Government records or other Government sources of any kind to which access is not granted by the proper officer;
(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;
(j) not refuse access to, conceal, remove or destroy the whole or any part of any book, paper or other record, relating to his transactions as a Customs Broker which is sought or may be sought by the Principal Commissioner of Customs or Commissioner of Customs, as the case maybe;
(k) maintain up to date records such as bill of entry, shipping bill, transhipment application, etc., all correspondence, other papers relating to his business as Customs Broker and accounts including financial transactions in an orderly and itemised manner as may be specified by the Principal Commissioner of Customs or Commissioner of Customs or the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case maybe;
(l) immediately report the loss of license granted to him to the Principal Commissioner of Customs or Commissioner of Customs, as the case may be;
(m) Customs his duties as a Customs Broker with utmost speed and efficiency and without any delay;
(n) verify correctness of Importer Exporter 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;
(o) inform any change of postal address, telephone number, e-mail etc. to the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, of all Customs Stations including the concerned Deputy Commissioner or Assistant Commissioner of the Commissionerate who has granted the license immediately within two days;
(p) maintain all records and accounts that are required to be maintained under these regulations and preserve for at least five years and all such records and accounts shall be made available at any time for the inspection of officers authorised for this purpose; and
(q) co-operate with the Customs authorities and shall join investigations promptly in the event of an inquiry against them or their employees.
The CB thus has the status of a professionally qualified person akin to an Advocate, Chartered Accountant or number of other professions which requires a minimum standards of knowledge for minimum standards of conduct. If the CB acts negligently or dishonestly, the Custom House can be defrauded money due to the Government, and in good faith permit import or export of prohibited goods. The damage done to innocent importers by misleading their documents for such purposes by Custom House Agent would be enormous.
CUSTOMS BROKER IS BOUND TO CHECK THE GENUINENESS OF THE CLIENT ( EXPORTER OR IMPORTER).
The foremost and first duty of the CB is to check the genuineness of the existence and credentials of the client before filing the papers for export or import. He is supposed to comply with the KYC requirements based on the proper documentation. Once the genuineness of the exporter / importer from the relevant documents is verified and the CB is reasonably satisfied, his role and responsibility in this regard ends. It is clear that the customs broker is not expected to do the impossible and is not expected to physically verify the premises of the importer or doubt the documents issued by the government authorities for KYC. At the same time, it is equally true that the customs broker expected to act with great sense of responsibility and take care of the interests of both the client and the Revenue. Thus, the role of the CB appears to be limited to verify the verify correctness of Importer Exporter 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. It does not involve the physical verification of the premises of the IEC holder.
CUSTOMS BROKER IS RESPONSIBLE FOR THE ACTS OF HIS WORKERS AND HIS DUTY IN THIS REGARD IS LIMITED UPTO THE SUPERINTENDENCE AS A REASONABLE AND PRUDENT EMPLOYER.
The employees of the Customs Broker act as per the instructions of his employer and generally the CB cannot shirk and avoid responsibility for the acts of omission and commission of his employees. This principles is well in accord with the general laws and rules related to the civil liabilities under the various civil and criminal laws, where the responsibility of the employer is fastened on the basis of “qui facit per alium facit per se ( a person acting through another is supposed to act himself ) and “respondez superior” ( let the employer / authority be held responsible).
In a catena of judgments, it has been held that where the CB did not exercise its supervision and control over its employees specified in Regulation 20(7), he is liable for action.
Thus, where the CB is found to have sublet his license for pecuniary benefit and failed to maintain accounts, the matter was viewed seriously and the Order of revoking the licence was upheld in appeal. It was held that no lenient view is called for especially when the misconduct is intentional for pecuniary gains.
Accordingly, in a case where the letter for amendment of Shipping Bills was found to be signed by person not authorized to sign such documents and CB exercised no control on his employees in ensuring that his employees do not make any violation in getting work from unauthorized persons, it was held that violation of Regulation 19(8) stood established, and CB is liable for penal action.
THE CUSTOMS BROKER IS DUTY BOUND TO advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be.
He cannot take the plea that if there is any violation of the law within his knowledge, if he will spy for the Department, he will lose his business. Likely every professional, he is supposed to act with utmost sincerity and honesty.
Thus, in a case where the statutory compliances were required within a period prior to the arrival of the consignment, the CB was duty bound to inform the concerned Customs authorities. The imposition of penalty and forfeiture of the security amount was upheld, though the revocation of license was set aside on the ground of proportionality of punishment.
However, acting with prior knowledge about the violations and evasion of duty, the CB cannot escape punishment. Thus, where it was found that CB was handling the very same consignments and effecting clearances for the very same importer through various Ports by resorting to different classifications, Customs Broker was under an obligation to advise his client regarding correct classification of goods, which has attained finality. Having failed in his obligations contemplated under Regulation 11 of Customs Brokers Licensing Regulations, 2013, the CB license was suspended and suspension of license was held to be not perverse or arbitrary. (Regulation 19(1) of Customs Brokers Licensing Regulations ).
PRINCIPLES TO BE FOLLOWED IN DEPARTMENTAL ACTION AGAINST THE CB :
The following principles have emerged from the various judgments of the CESTAT / HIGH COURTS / APEX COURT : –
THE ACTION HAS TO BE TAKEN WITHIN THE STATUTORY PERIOD AS PRESCRIBED UNDER THE CBLR REGULATIONS AND WITHOUT INORDINATE DELAY :
It has been held that delay in taking immediate action of suspension or initiation of inquiry within a period of 90 days not vitiates the action of Commissioner. Consequently, CESTAT not justified in setting aside order or suspension of Customs Brokers Licence on the ground of delay between suspension and the notice of deviation or omission.
It was further held in another case that (a) If an order of suspension is passed suspending the license of the Customs Broker, either as an imminent action or pending enquiry, all further proceedings to be completed and a final order to be passed preferably within a time frame; (b) If no such final order is passed within such time, suspension of the license is to be treated as deemed to have been lapsed and the license is deemed to have been restored; (c) If no final order is passed even after the extended time-limit, officials concerned at every stage must give an explanation/report to the higher officials as to why the time-limit was not adhered to at every stage; (d) Based on the explanation/report submitted by the concerned officials, suitable action/corrective measure should be taken against the erring officials for not adhering to the time-limit, after giving them an opportunity of hearing; (e) However, before taking such action, it is to be seen as to whether such inaction within the time frame was due to some bona fide reason beyond the control of such authority or at the fault or deliberate non-cooperation of the licensee.
THE PRINCIPLES OF NATURAL JUSTICE MUST BE COMPLIED WITH AND REASONS BE DISCLOSED TO THE CONCERNED CB BEFORE SUSPENSION OR REVOCATION OF LICENSE :
It has been held that the power to prohibit the customs broker to work is extraordinary power, which should be exercised sparingly. It must be in revenue interest and not permanent or for indefinite period.
Further, though in case of exigencies, the prohibition order can be issued without prior sow cause notice, but it must be preceded with immediate disclosure of reasons for such prohibition and post-decision hearing complying with the principles of natural justice must be given.
REPEATED VILATIONS BY THE CUSTOMS BROKER TO BE VIEWED SERIOUSLY :
Where the CB is a habitual offence and there are repeated violations causing immense financial loss to revenue, and it has been established that there is subletting of licence, it has been held to be serious violation and misconduct reflecting Customs broker. Such misconduct has to be seriously viewed, and does not warrant taking of lenient view. Hence, exercise of discretion by CESTAT to restore licence after expiry of three years from date of its suspension was found to be bad in the eyes of law. ( – Regulations 13 and 23 of erstwhile Customs House Agents Licensing Regulations, 1984 – Regulation 22 of Customs House Agents Licensing Regulations, 2004).
PARALLEL ACTION BY ANOTHER COMMISSIONERATE PENDING THE ACTION BY THE JURISDICTIONAL COMMISSIOENRATE IS BAD AND NOT SUSTAINABLE :
The simultaneous action for same act, omission or enquiry pending or contemplated at other Customs stations, amounts to double jeopardy, which is not permissible under the law. Such action amounts to paralyze functioning of Customs Broker not only in Customs station where acts or omissions of Customs Broker are under scanner, but also in other customs stations and within parent Customs Commissionerate where Customs Broker is not found in violation of CBLR, 2013 There is no necessity, justification and legality of such order of suspension, which will surely overkill and legally unsustainable. Hence, the orders to such effect were set aside ( Regulation 19 of Customs Broker Licensing Regulations, 2013).
THE AUTHORITIES CANNOT DO INDIRECTLY WHAT CANNOT BE DONE DIRECTLY :
In case a involving the suspension of licence, it has been held that suspension cannot be indefinite as it affects livelihood of the CB. Suspension having been ordered eight months ago, further proceedings by way of inquiry against the petitioner must peremptorily be initiated within one month, failing which order of suspension shall stand revoked. The Authority cannot be permitted to achieve a goal (punishing the CB) indirectly which it cannot achieve directly – Regulation 21(2) of Custom House Agents Licensing Regulations, 1984.
DOCTRINE OF PROPORTIONALITY OF PUNISHMENT :
It is a trite law that the Article 14 of the Indian Constitution strikes at the very root of the arbitrariness, because an action, which is arbitrary, must necessarily involve the negation of the principles of reasonability and equality. The CBLR regulations involves penalties varying from lenient to very strong and extreme penalties. Therefore, the discretion must be exercised reasonably. The person exercising discretion must direct himself properly as per law. He must call his attention to the matters, which he is bound to consider. Similarly, he must exclude from his attention the matters, which are irrelevant to what he is to consider. If he does not obey those rules, he must truly be said, and is often said to be acting “unreasonably”. He must order the priorities of law and consider the aggravating ( also mitigating ) factors to decide the quantum and severity of punishment.
Hence, where there is no concrete evidence of the forgery or the abetment of such act by the Customs Broker, he cannot be said to have indulged in gross misconduct. Merely inadvertence without mala fide intent cannot be held to be grave violation. Hence, the penalty imposed was lowered in quantum.
Where in a case of import of prohibited goods by the G card of CB by filing the BOE without proper KYC Norms and also the goods were removed without proper examination and payment of duty, the CB was held liable for penalty. Hence, the imposition of penalty of Rs. 50,000/- and forfeiture of security were held to be fully justified in the facts and circumstances of the case.
THE CB CANNOT BE MADE CO NOTICEE AND DRAGGED INTO UNNECESARY LITIGATION IN THE CASE INVOLVING INTERPRETATION DISPUTES.
It has been noticed many a times that the CBs are made co-noticees by the Customs authorities in the show cause notices in the matters involving interpretative disputes.
Customs Brokers Licensing Regulations, 2018 (CBLR,2018) entail the provisions for action to be initiated against Custom Brokers for lapses on their part. Therefore, proceedings contemplated against a Customs Broker should be done as per the provisions contained in the CBLR, 2018 and must be distinguished from the proceedings for demand of duty/interest/imposing penalty under Customs Act, 1962.
The offence case booked should clearly contain the role played by the Custom Broker in the offence case. The Custom Broker being a Co-noticee in the offence case under Customs Act 1962 has to be linked to the proceedings initiated against the Custom Broker under CBLR, 2018. In these Offence cases, it is necessary to prove the element of ‘abetment’ of Custom Broker in the offence. Accordingly, implicating Customs Brokers as co-noticee in a routine manner, in matters involving interpretation of statute, must be avoided unless the element of abetment of the Customs Brokers in the investigation is established by the investigating authority. Further, the element of abetment should be clearly elaborated in the Show Cause Notice issued for the offence case under the provisions of the Customs Act, 1962.
Therefore, it is evident that the CB cannot be made a co noticee in a routine matter involving the interpretative disputes. Regarding their misconduct and violations, the CBLRs are self contained and self regulated provisions independent of the Customs Act.
This point also stands elaborated by the CBIC in the latest instructions contained in CBIC Instruction No. 20/2024-Customs dated 03.09.2024.
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