Failure of customs broker to observe due diligence leading to facilitate fake importers: CESTAT revokes licence

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The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) affirmed the revocation of the customs broker’s licence because the customs broker failed to conduct due diligence, allowing fake importers to operate.

The two-member bench of S.K. Mohanty (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the institution of customs brokers was created to facilitate the import and export of trade and, at the same time, to take care of the interests of revenue. Thus, a great responsibility has been cast upon the customs brokers to exercise due diligence while conducting their business.

The SIIB (import) Air Cargo Complex conducted an investigation into imports made by M/s. Akash Corporation and M/s. Sugam Auto India, who had engaged the appellant as a customs broker.

The department was of the opinion that the appellant/customs broker did not follow the procedure for examination of cargo for clearance and they did not verify the credentials of the importers.

The licence of the customs broker was suspended. The enquiry officer was appointed. The enquiry officer submitted a report. The enquiry report was served on the appellant and a personal hearing was granted. The appellant representative submitted a written submission and attended the personal hearing. The order forfeited the security deposit and licence imposed the penalty.

The customs broker assailed the order passed by the Commissioner of Customs (General), Mumbai by which the security deposit was forfeited and a penalty was imposed on the appellant.

The Customs Broker submitted that Commissioner while admitting that the case was not dealt with by the Department in the spirit of CBLR, 2013. The licence was suspended in 2016 and an enquiry report was received after two and a half years. The appellant had adequate and proportionate punishment and went on to hold that the custom broker had rendered himself liable for penalty. However, the commissioner also forfeited the security deposit. The enquiry report was time-barred.

The department submitted that the customs broker is a habitual offender. The enquiry report substantiates all the charges. The proprietor of the appellant confessed that none of his staff who handled the import documents had a customs pass.

The CESTAT held that the customs broker need not physically go to the customer premises to verify the genuineness. However, they cannot be careless about the customers and deal with people who claim to be representative of their customers.

The Tribunal observed that it was incumbent on the customs broker to conduct all possible enquiries through independent and reliable sources/documents to verify the credentials of the clients. No such effort was made by the appellant and no such document relied upon has been placed on record. Thus, they have failed to observe due diligence in this regard and thus ended up facilitating fake importers.

“We find that even in the impugned case, the appellant-customs broker did not prove his bonafides. We find that the learned commissioner, while passing the impugned order, has considered all the facts, including the punishment suffered by the appellant, and let them off with a penalty and forfeiture of security deposit. We find that the Learned Commissioner was not harsh in revoking the licence. We find that to that extent, the impugned order is reasoned, cogent, and legally maintainable,” the CESTAT observed.

Case Title: M/s. Sky Sea Services Versus Commissioner of Customs (General), Mumbai

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