While answering in favour of D S Cargo Agency (appellant), the Delhi High Court has clarified that a Customs Broker is not required to report an offense committed by an importer once the goods have been cleared and the Customs Broker's role in the clearance process has ended.

The Division Bench comprising of Justice Yashwant Varma and Justice Manmeet Pritam Singh Arora observed that “The imported goods meant for the re-export were stored at the public bonded warehouses and the illegality by the importer firms was committed when the said goods were diverted by them into the domestic market without payment of the applicable custom duty. It is stated by the Respondent that the said importer firms filed fabricated documents to falsely show the re-export of the goods. However, admittedly, the Appellant herein had no role to play at this stage when the false documents of re-export were filed by the importer firms with the Customs authorities”.

Advocate Mohd. Faraz Anees appeared for the Appellant, whereas Advocate Anushree Narain appeared for the Respondent.

The brief facts of the case were that the appellant was a proprietorship firm owned by Mr. Diva Kant Jha, a Customs Broker. The appellant claimed to have interacted with an individual named Lalit Dongra on behalf of M/s Accturists Overseas (OPC) Pvt. Ltd., and all inquiries related to filing B/Es were directed by Sanjeev Maggu, who represented himself as the Chief Manager of the three importer firms. On July 14, 2017, the Directorate of Revenue Intelligence (DRI) received information suggesting that the importer firms were evading customs duties by diverting imported goods stored in the customs bonded warehouse into the domestic market without paying the applicable customs duty. It was also alleged that forged documents were used to indicate the re-export of the warehoused goods. Consequently, the Commissioner issued an order-in-original on Feb 04, 2019, revoking the appellant's CB license, forfeiting the security deposit, and imposing a penalty. This action was taken as the appellant had allegedly failed to fulfil its obligations under the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018) along with Customs Brokers Licensing Regulations, 2013 (CBLR, 2013) and had acted in contravention of these regulations. Subsequently, the appellant filed a Customs Appeal before the Customs, Excise and Service Tax Appellate Tribunal (Tribunal), which upheld the Commissioner's order-in-original.

After considering the submission, the Bench noted that the key question at hand was whether the appellant, under the CBLR, 2018 read with the CBLR, 2013, held a responsibility to report an offense related to goods stored in a bonded warehouse after the goods had been imported and the Customs Broker's professional involvement in clearing the goods had concluded.

Recognized that the appellant's obligation in the given circumstances was limited to facilitating the clearance of goods for warehousing at the Customs Station, and no further, the Bench pointed that the appellant's role as a Customs Broker concluded once the imported goods, after being cleared at the Customs Station, arrived at the public bonded warehouse.

The Bench highlighted that the imported goods intended for re-export were stored at these public bonded warehouses, and the illegality committed by the importer firms occurred when they diverted these goods into the domestic market without paying the required customs duty.

Thus, the appellant had no role to play at this subsequent stage when the importer firms submitted false documents for re-export to the Customs authorities, acknowledged the Bench.

The Bench further observed that the evidence showed that the individuals in control of the importer firms had acted independently when they conspired to defraud the revenue. There was no indication that they were acting under the guidance or advice of the appellant.

“Regulation 10(d) of CBLR, 2018 does not impose any such responsibility on the Customs Broker to report such offenses. The appellant's duty to bring issues of non-compliance to the attention of the Customs authorities was limited to the documents submitted by the Customs Broker during the clearance of goods from the Customs Station at the time of entry or departure. In this case, there was no finding that there was any error or discrepancy in the warehousing bill of entry submitted by the appellant at the Customs Station”, added the Bench.

Although, the Bench did take note that the appellant failed to provide the KYC records of the importer firms to the DRI and Customs authorities, despite committing to do so, however, clarified that this inaction on the appellant's part did not warrant the imposition of the maximum punishment, which was the revocation of the license.

Therefore, in consideration of the principle of proportionality, the High Court concluded that the orders of the Tribunal and the order-in-original, to the extent that they revoked the appellant's license and forfeited the security deposit, should be set aside.

However, the penalty of Rs. Fifty thousand imposed by the orders shall be upheld, added the Court.

Cause Title: D S Cargo Agency v. Commissioner of Customs

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Delhi High CourtJustice Yashwant VarmaJustice Manmeet Pritam Singh Arora

Pankaj Bajpai