Exemption Interpretation Not Customs Broker’s Responsibility: CESTAT Quashes Licence Revocation

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, has set aside the revocation of the Customs Broker licence holding that the broker could not be penalised for the importer’s wrongful claim of exemption benefits, particularly when such benefits had been extended by Customs authorities themselves in earlier clearances. The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) has observed that the exemption benefit had been consistently extended by Customs authorities in earlier clearances. The importer had paid differential duty after a departmental investigation. Penal action proposed against the broker under Section 114A of the Customs Act, 1962 had been dropped in the main adjudication proceedings. The broker had filed Bills of Entry based on documents and declarations provided by the importer and had prepared checklists indicating classification and duty details. The appellant, a licensed Customs Broker (CB) operating under the Customs Brokers Licensing Regulations (CBLR), 2018, challenged an Order-in-Original dated 25 June 2024 passed by the Principal Commissioner of Customs (General), Mumbai. The impugned order had revoked the CB licence, ordered forfeiture of the security deposit, and imposed a penalty for alleged violations of Regulation 10(d), 10(e), and 10(f) of the CBLR, 2018. The proceedings stemmed from an offence report relating to imports made by M/s Adler Mediequip Private Limited, which allegedly claimed ineligible exemption under Notification No. 50/2017-Customs dated 30 June 2017 on imported titanium alloy products. The Customs authorities alleged that the broker failed to properly advise the importer and allowed wrongful availment of concessional duty benefits. While proceedings were initiated in 2018 and the licence was initially suspended, the Tribunal had earlier revoked the suspension in 2019. However, after completion of inquiry proceedings, the licensing authority passed the revocation order in 2024, leading to the present appeal. Out of the three alleged violations, the Principal Commissioner dropped charges under Regulations 10(e) and 10(f), concluding there was no evidence that the broker had provided incorrect information or withheld relevant instructions from the importer. However, the Commissioner sustained the charge under Regulation 10(d), which mandates that a Customs Broker must advise clients to comply with the provisions of the Customs Act and bring instances of non-compliance to the notice of authorities. The Commissioner held that the broker failed to verify the eligibility of the exemption and did not alert Customs authorities regarding the discrepancy. The Tribunal found significant contradictions in the Commissioner’s reasoning. On one hand, the Commissioner held that the broker failed to verify the importer’s eligibility for exemption. On the other hand, the order itself acknowledged that the issue involved interpretation of the exemption notification, which could only be conclusively determined during departmental examination and was “beyond the scope of obligations” prescribed under CBLR. The Bench observed that such inconsistent findings reflected non-application of mind and rendered the revocation unsustainable. The Tribunal emphasised that determination of eligibility for exemption or rate of duty is the exclusive function of the “proper officer” under the Customs Act and cannot be delegated to a Customs Broker. Relying on earlier precedent involving the same appellant and judicial principles laid down by higher courts, the Bench held that making a claim for exemption based on a bona fide belief does not amount to misdeclaration. Though the proceedings spanned several years, the Tribunal held that timelines under CBLR are directory and not mandatory. Given that part of the delay was attributable to litigation before the Bombay High Court, the delay alone was not fatal to the proceedings. Setting aside the impugned order, the Tribunal allowed the appeal and restored the Customs Broker licence of Fairdeal Shipping Agency Private Limited. The revocation, forfeiture of security deposit, and penalty were quashed. Case Details Case Title: Fairdeal Shipping Agency Private Limited v. Principal Commissioner of Customs (General) Citation: JURISHOUR-120-CESTAT-2026(Mum) Case No.: : Customs Appeal No. 87390 of 2024 Date: 19.02.2026 Counsel For Appellant : Anil Balani, Advocate Counsel For Respondent: Dinesh Nanal, Authorised Representative Click Here To Read Order Read More: GST General Penalty For Delayed Annual Return Not Sustainable When Late Fee Already Been Paid: Madras HC

Exemption Interpretation Not Customs Broker’s Responsibility: CESTAT Quashes Licence Revocation

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