The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi Principal Bench, has set aside proceedings against a Customs Broker after finding that the Department’s show cause notices were “absolutely vague” and failed to substantiate the alleged violations of the Customs Broker Licensing Regulations, 2018 (CBLR).

The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao, Member (Technical) has observed that the allegations against the Customs Broker could not be sustained where the show cause notices did not clearly specify how the alleged conduct amounted to violations of the applicable regulations. 

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The two appeals arose from proceedings initiated through show cause notices dated May 3, 2024 and September 23, 2024, alleging violations of Regulations 10(d) and 10(e) of the CBLR, 2018. The Commissioner of Customs (Airport & General), New Delhi had consequently ordered revocation of the Customs Broker’s licence, forfeiture of the security deposit and imposed a penalty of ₹50,000.

The underlying customs dispute concerned a Bill of Entry filed on December 2, 2020 for an importer identified in the Tribunal’s order as M/s. Sym Company. The goods were declared as “Boiled Beetle Nuts”, with an assessable value of approximately ₹44.42 lakh, and were classified under Customs Tariff Heading (CTH) 21069030 as beetle nut products, commonly known as supari.

According to the Department, examination of the goods revealed that they had been wrongly classified. The goods were considered classifiable under CTH 080280 as areca nuts, since boiling had not altered their essential character as beetle nuts. The Department also alleged undervaluation, noting that the goods had been imported at approximately ₹84 per kg, whereas a minimum import price of ₹251 per kg had been prescribed under the relevant DGFT notification.

The Customs Broker was consequently alleged to have failed to exercise the required due diligence and to have failed to properly advise the importer.

Before the Tribunal, the Customs Broker argued that the show cause notices did not clearly set out the specific allegations constituting the alleged regulatory violations. According to the appellant, the notices effectively left it to the Customs Broker to interpret the offence report and determine for itself what conduct was alleged to have violated the CBLR.

The appellant contended that a show cause notice must clearly communicate the allegations so that the noticee can effectively defend itself. Reliance was placed on judicial precedents including Gorkha Security Services v. Government (NCT of Delhi), Global Links v. Principal Commissioner of Customs, Airport & General, New Delhi, Commissioner of Customs (Airport and General), New Delhi v. Global Links, and Kunal Travels (Cargo) v. CC (I & G), IGI Airport, New Delhi.

The Customs Broker also relied upon an earlier decision in its own case, where the Tribunal had set aside proceedings arising in similar circumstances. Significantly, the Delhi High Court had subsequently affirmed that Tribunal decision while dismissing the Department’s appeal.

The Tribunal examined the show cause notices as well as the corresponding orders-in-original and found that the proceedings were essentially based upon an earlier order-in-original dated November 29, 2023.

According to the Bench, the allegations concerning the Customs Broker had not been properly substantiated. On comparing the present proceedings with the earlier case involving the same Customs Broker, the Tribunal found that the two matters had been decided in similar circumstances and on an identical basis. It therefore held that the earlier Tribunal decision was directly applicable and binding.

The Tribunal also relied on the fact that the earlier decision had been challenged by the Revenue before the Delhi High Court, which had affirmed the Tribunal’s ruling.

The Tribunal reproduced significant observations from the Delhi High Court’s earlier decision. The High Court had noted that the Department had relied upon material borrowed from a show cause notice issued under the Customs Act, 1962, which related to penalties under Sections 112(a), 112(b), 114AA and 117.

However, the High Court observed that the Department was required to explain in the Customs Broker’s show cause notice how the material relied upon satisfied the requirements for recording a prima facie violation of the specific CBLR provisions.

The High Court found that the Customs Broker had not been provided with specific allegations explaining the manner in which the alleged violations were attributable to it.

The High Court further held that although the adjudicating authority had discussed the alleged violations in detail, the order-in-original had travelled beyond the scope of the show cause notice. It observed that a vague show cause notice, or an adjudication order based on material that was never properly made part of the notice, could violate the principles of natural justice.

The Tribunal also referred to the Supreme Court’s decision in Commissioner of Central Excise, Bangalore v. Brindavan Beverages (P) Ltd., reported in (2007) 5 SCC 388.

The principle highlighted from the Supreme Court ruling was that a show cause notice constitutes the foundation of the Department’s case. If the allegations are vague, lack sufficient particulars or are unintelligible, the noticee may not receive a proper opportunity to meet the allegations.

This principle assumed particular significance in the present dispute because the Tribunal found that the allegations against the Customs Broker had not been articulated with sufficient clarity.

The Tribunal examined the wording of the show cause notice and found it substantially identical to the notice considered in the earlier proceedings.

The notice stated that the Customs Broker appeared to have violated various provisions of the CBLR, including Regulations 10(a), 10(d), 10(e), 10(n) and 13(12). It also set out the general obligations contained in Regulations 10(d), 10(e) and 10(n).

Regulation 10(d) requires a Customs Broker to advise the client to comply with the Customs Act and other applicable laws and regulations and to bring non-compliance to the notice of the appropriate Customs officer. Regulation 10(e) requires the Customs Broker to exercise due diligence to ascertain the correctness of information imparted to the client in relation to cargo or baggage clearance. Regulation 10(n) concerns verification of the Importer Exporter Code, GSTIN, identity and functioning of the client at the declared address through reliable and authentic documents, data or information.

However, merely reproducing regulatory provisions was not sufficient. The Tribunal found that the Department had failed to clearly connect the alleged conduct of the Customs Broker with the specific regulatory contraventions.

The Bench concluded that the Revenue had failed to substantiate the allegations concerning violation of the CBLR.

The Tribunal observed that the wording of the proceedings effectively left the Customs Broker to determine for itself what allegations could be “culled out” from the material placed on record. Such an approach, according to the Tribunal, could not satisfy the requirement of a valid and meaningful show cause notice.

The Tribunal therefore held that the show cause notices themselves were fundamentally defective.

On the preliminary ground that the contents of the show cause notices were “absolutely vague,” the Tribunal set aside the notices and, consequently, the impugned orders dated February 21, 2024 and February 28, 2025 passed by the Commissioner of Customs.

The appeals were accordingly allowed.

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