Bombay High Court Upholds CESTAT: Violation of Regulation 17(4) Vitiates Customs Broker Licence Revocation

Background and Context

The Bombay High Court, in Principal Commissioner of Customs (General) Vs Suswashis Clearing and Forwarding Agency, recently examined the legality of a Customs Broker licence revocation where the proceedings were conducted without granting an opportunity for cross-examination, as mandated under Regulation 17(4) of the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018).

The Revenue had approached the High Court challenging an order dated 16 February 2024 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The Tribunal had:

  • Set aside the order of the Principal Commissioner of Customs (General), Mumbai;
  • Held that the Customs Broker’s licence could not be deemed to be revoked in the manner done;
  • Quashed the forfeiture of security deposit for the second time; and
  • Deleted the penalty imposed on the Customs Broker.

The High Court’s decision turned entirely on whether the denial of cross-examination under Regulation 17(4) rendered the departmental proceedings invalid, thereby making other legal issues raised by the Revenue academic in the facts of the case.

Issues Raised by the Revenue

The Revenue formulated three substantial questions of law in its appeal before the High Court, arising out of the CESTAT’s order:

  1. Question A – Whether CESTAT was right in holding that, once the licence had already been revoked pursuant to an Order-in-Original dated 31.05.2021, a fresh Show Cause Notice dated 27.04.2022 could not be issued for alleged violations of Regulation 10(a), Regulation 10(d) and Regulation 10(n) of CBLR, 2018, and further, whether the concept of “deemed revocation” under CBLR was unsustainable.

  2. Question B – Whether CESTAT failed to appreciate that the Customs Broker did not appear for personal hearings before the Commissioner despite several opportunities being granted on 09.2022, 29.12.2022, 15.02.2023 and 15.03.2023.

  3. Question C – Whether CESTAT was correct in law in holding that revocation of the Customs Broker’s licence was a harsh and disproportionate punishment vis-à-vis the offences alleged.

The High Court analysed each of these questions against the findings recorded by CESTAT and the admitted factual matrix regarding compliance with Regulation 17(4) of CBLR, 2018.

High Court’s View on Question C: No Finding by CESTAT

No foundation in the Tribunal’s order

The Court first addressed Question C and noted that it simply did not arise from the record. On a reading of the CESTAT’s order, the Bench observed that the Tribunal had not given any finding that the penalty of licence revocation was unduly harsh or disproportionate.

Accordingly:

  • There was no express or implied conclusion by CESTAT on proportionality of punishment;
  • Hence, no substantial question of law on that issue could be said to arise from the impugned order.

The Court therefore refused to entertain Question C at the threshold.

Central Issue: Applicability and Breach of Regulation 17(4)

Scope of Regulation 17(4) of CBLR, 2018

The fulcrum of the High Court’s reasoning was the admitted non-compliance with Regulation 17(4) of CBLR, 2018. The Regulation provides that:

  • A Customs Broker is entitled to cross-examine persons examined in support of the grounds forming the basis of the proceedings; and
  • If the Deputy Commissioner or Assistant Commissioner refuses permission to cross-examine any such person on the ground that the evidence is not relevant or material, reasons must be recorded in writing.