The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, has set aside an order revoking the Customs Broker (CB) licence of Mumbai-based Customs Brokerholding that the allegations of violation of the Customs Brokers Licensing Regulations (CBLR), 2018 were not supported by the facts on record and that the proceedings suffered from procedural delays.

The bench of Ajay Sharma  (Judicial Member) and M.M. Parthiban (Technical Member) has observed that the record contained documentary evidence such as authorization letters, Import Export Code (IEC) details, PAN and KYC documents, and communications with Customs authorities. These documents contradicted the allegation that the broker had failed to conduct the required verification or maintain records.

The proceedings stemmed from a Directorate of Revenue Intelligence (DRI) investigation into alleged overvaluation of export consignments by exporters including M/s Paras Industries, Mumbai. According to the investigation, export values declared before Indian Customs were allegedly much higher than the values recorded by customs authorities in Dubai, resulting in the wrongful availment of export incentives and drawback benefits.

The DRI alleged that the Customs Broker had handled 36 shipping bills filed by M/s Paras Industries and failed to properly verify Know Your Customer (KYC) documents, obtain authorization letters, and maintain other mandatory records. Based on these findings, disciplinary proceedings were initiated under the CBLR, 2018.

The allegations were related to failure to advise clients to comply with customs law under Regulation 10(d); Failure to exercise due diligence under Regulation 10(e); and Failure to verify the antecedents and identity of clients under Regulation 10(n).

The Tribunal noted that the licensing authority had concluded that the Customs Broker had actively connived with exporters in claiming undue drawback benefits and had negligently relied upon documents furnished by the exporter without proper verification.

A key factor in the Tribunal’s decision was the delay in conducting the disciplinary proceedings.

The Bench observed that the inquiry report was submitted beyond the prescribed period under the CBLR, and the final adjudication order was also issued after expiry of the statutory timeline. The Tribunal noted that in an earlier case involving the same Customs Broker, it had already held that compliance with timelines prescribed under the CBLR is mandatory and that failure to adhere to those timelines vitiated the proceedings.

The Tribunal therefore held that a different view could not be taken in the present matter and that the impugned order was liable to be set aside on the ground of procedural delay alone.

The Tribunal also relied heavily on previous judicial precedents dealing with overvaluation of export goods.

Referring to earlier CESTAT rulings, the Bench reiterated that a Customs Broker has no authority to determine or re-determine the value of export goods. Export transaction values are negotiated between exporters and overseas buyers, while customs valuation for duty purposes is the responsibility of the exporter and customs authorities.

The Tribunal emphasized that Customs Brokers merely process shipping documents based on information supplied by exporters and cannot be expected to independently assess whether goods have been overvalued unless there is clear evidence of their involvement in the alleged fraud.

It further noted that the alleged overvaluation was detected only after subsequent investigations by the DRI and that there was no evidence showing that the Customs Broker had knowledge of, or participated in, any such scheme.

The Bench also referred to the Delhi High Court’s decision in Kunal Travels (Cargo) v. Principal Commissioner of Customs, where it was held that a Customs House Agent is not expected to act as an investigator into the genuineness of every import-export transaction and is entitled to rely on documents and authorizations furnished by clients.

According to the Tribunal, imposing a higher standard of investigation on Customs Brokers would be inconsistent with the statutory framework governing their role.

Concluding that the findings of violation under Regulations 10(d), 10(e), and 10(n) could not be sustained, the Tribunal held that the Principal Commissioner’s order was contrary to the evidence available on record.

Accordingly, CESTAT set aside the order revoking the Customs Broker licence, quashed the forfeiture of the security deposit, and removed the penalty imposed on the appellant. The appeal was allowed in full.

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