The Delhi High Court has held that a procedural error committed during proceedings for revocation of a Customs Broker Licence does not automatically require the proceedings to be quashed when the defect can be rectified by granting the Customs Broker an opportunity to cross-examine the witnesses concerned.
A Division Bench comprising Justice Anil Kshetarpal and Justice Shail Jain upheld an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) remanding licence-revocation proceedings to the Commissioner of Customs for fresh adjudication and held that Regulation 17(4) of the Customs Brokers Licensing Regulations, 2018 expressly confers upon a Customs Broker the right to cross-examine persons examined in support of the allegations forming the basis of the proceedings. Therefore, where oral statements are relied upon to establish charges against a Customs Broker, a corresponding opportunity to cross-examine the persons making those statements must be provided.
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At the same time, the High Court rejected the Customs Broker’s contention that the failure to permit cross-examination required the revocation proceedings to be set aside in their entirety. The Court ruled that CESTAT was empowered to remand the matter so that the procedural defect could be corrected.
The Appellant is a licensed Customs Broker, under Section 130 of the Customs Act, 1962. It challenged CESTAT’s final order dated March 19, 2026, through which the Tribunal had set aside the Commissioner’s order and remanded the matter for fresh adjudication after allowing the Customs Broker an opportunity to cross-examine the witnesses.
The dispute originated from an investigation initiated against M/s Disha Enterprises on December 14, 2021, concerning an alleged attempt to export diamonds concealed in plastic hot fix. Diamonds reportedly valued at approximately Rs.1.56 crore were seized on December 16, 2021, under Section 110 of the Customs Act.
During the investigation, Customs authorities recorded statements under Section 108 of the Act from several persons, including individuals connected with the Customs Broker.
The company’s directors, Moti Khanna and Samir Jha, and its H-Card holder, Pankaj Kumar, stated that the Customs Broker had no knowledge of the alleged concealment. According to them, the export documents had been filed on the basis of documents supplied by the exporter. Statements of other persons allegedly connected with the attempted export were also recorded.
An offence report dated July 1, 2022 was subsequently issued against the Customs Broker. Based on that report, a show-cause notice dated September 26, 2022 proposed revocation of its licence for alleged violations of Regulations 10(d), 10(e), 10(m), 10(n), 10(q) and 13(12) of the CBLR.
The Customs Broker requested the Inquiry Officer to examine the witnesses whose statements were proposed to be relied upon. It also invoked the procedure contemplated under Section 138B of the Customs Act.
The Inquiry Officer, however, submitted a report dated December 22, 2022 without examining those witnesses. The report relied upon statements recorded by Customs authorities during the investigation.
Although the Customs Broker reiterated its request for examination of the witnesses while submitting its representation against the inquiry report, the Commissioner passed an order dated March 14, 2023 revoking its Customs Broker Licence. The Commissioner also ordered forfeiture of the security deposit and imposed a penalty of Rs.50,000.
On appeal, CESTAT held that the Commissioner was not justified in dispensing with the examination of the witnesses whose statements had been relied upon.
The Tribunal found that such statements could not be used against the Customs Broker without following the applicable procedure and providing an opportunity for cross-examination. It consequently set aside the Commissioner’s order and remanded the case for fresh adjudication.
The Customs Broker approached the High Court against the remand order. It argued that none of the persons whose statements formed the basis of the charges had been examined by the Inquiry Officer and that it had therefore been deprived of its right to cross-examine them.
It was contended that remanding the case for examination and cross-examination of the witnesses would effectively allow the Customs Department to fill a lacuna in its case. The company further argued that the proceedings stood vitiated because of non-compliance with the procedure prescribed under Regulation 17 of the CBLR.
The Customs Department defended CESTAT’s decision and submitted that the case had properly been remanded for fresh adjudication in accordance with law.
Examining the statutory framework, the High Court observed that Section 108 of the Customs Act empowers a gazetted Customs officer to summon a person whose attendance is considered necessary for giving evidence or producing documents or other material during an inquiry under the Act.
Section 138B, meanwhile, governs the relevancy of statements under specified circumstances. The Court noted that, considering its statutory setting, Section 138B principally concerns proceedings relating to offences and prosecutions. The proceedings against the appellant were not for its prosecution for an offence but concerned the revocation of its Customs Broker Licence.
The Court therefore examined the independent procedural safeguards contained in Regulation 17 of the CBLR.
Under Regulation 17(3), the Inquiry Officer must consider relevant documentary evidence and take such oral evidence as may be relevant or material to the inquiry. Regulation 17(4) entitles the Customs Broker to cross-examine persons examined in support of the grounds forming the basis of the proceedings.
Permission to examine a person may be declined where the Inquiry Officer finds that person’s evidence irrelevant or immaterial. In such a situation, however, the Inquiry Officer must record the reasons for refusing permission in writing.
The High Court observed that none of the witnesses whose statements were relied upon had been examined by the Inquiry Officer in the present case. Instead, the Inquiry Officer relied upon statements recorded during the Customs investigation and submitted the inquiry report on that basis.
The Bench held that when oral evidence is sought to be relied upon in an inquiry, the Customs Broker must be provided the corresponding opportunity to cross-examine the witnesses.
The Court explained that the procedure under Regulation 17 bears some resemblance to a domestic disciplinary inquiry. It clarified, however, that this similarity does not mean that every principle governing disciplinary proceedings between an employer and an employee must be imported into proceedings under the CBLR.
The requirement to provide cross-examination arose specifically from Regulation 17(4), which the Commissioner could not have overlooked.
The High Court rejected the argument that CESTAT’s remand allowed the Customs Department to fill a lacuna in its case.
It observed that the remand was ordered because of a procedural infirmity in the inquiry. CESTAT had noticed that infirmity, while the Commissioner had failed to address it.
The Customs Broker was also unable to point to any provision prohibiting CESTAT from remanding a matter for fresh adjudication in proceedings arising under the CBLR.
The Court further rejected the contention that every error in following Regulation 17 must necessarily result in the proceedings being decided in favour of the Customs Broker.
It held that an error in following the prescribed procedure does not invariably require the Commissioner’s order to be set aside without permitting further proceedings, particularly when the defect can be rectified by providing the Customs Broker the required opportunity.
The High Court stated that the proceedings initiated against a Customs Broker for alleged misconduct arising from a purported failure to comply with Regulation 10 could not be terminated altogether merely because of a curable procedural error.
Finding no ground to interfere with CESTAT’s decision, the High Court dismissed the appeal and closed the pending applications.
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