CESTAT Mumbai quashes Customs Broker licence revocation where broker did not handle impugned transactions

1. Background and procedural history

The dispute in Sun Clearing Agency Vs Commissioner of Customs (General) arose from disciplinary action taken under the Customs Brokers Licensing Regulations, 2018 (CBLR) against M/s Sun Clearing Agency, a licensed Customs Broker, whose proprietor is Shri Kishor Auti. The Commissioner of Customs (General), Mumbai, by Order-in-Original CAO No. 47/CAC/PCC(G)/SJ/CBS Adj dated 07.10.2022, had:

  • Revoked Customs Broker Licence No. 11/2083 of Sun Clearing Agency under Regulation 17(7) of CBLR, 2018,
  • Imposed penalty, and
  • Ordered forfeiture of the entire security deposit furnished by the assessee.

Sun Clearing Agency challenged this order before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai.

The disciplinary proceedings were initiated in the backdrop of an investigation conducted by the Directorate of Revenue Intelligence (DRI), Mumbai Zonal Unit, into alleged smuggling of E-waste (used computers and laptops) imported in the name of M/s AMP Impex and moved under transshipment from Nhava Sheva to ICD Pimpri, Pune.

2. DRI investigation and alleged smuggling modus operandi

(i) Intelligence and live consignment

DRI received specific intelligence that old and used computers and laptops were being brought into India as E-waste from Hong Kong, routed via Dubai, and landed at Nhava Sheva. The modus operandi involved misdeclaring these items as “paper rolls of Corrugation reels”, followed by transshipment to ICD Pimpri, Pune, and illegal diversion en route.

A live consignment in the name of M/s AMP Impex was identified in container No. TRLU 5257576, covered by Import General Manifest (IGM) No. 2237690 dated 26.10.2019. A transshipment permit bearing No. 1826614 dated 02.11.2019 had been issued at Jawaharlal Nehru Custom House (JNCH), Nhava Sheva for movement to ICD Pimpri, Pune.

(ii) Alleged diversion during transshipment

According to the investigation, the scheme involved:

  • Importing E-waste disguised as paper rolls of corrugation reels;
  • Obtaining transshipment permission from Nhava Sheva to ICD Pimpri;
  • Opening the container during transit, removing the undeclared E-waste;
  • Replacing it with goods matching the declared description; and
  • Tampering with the original seals and resealing the container with duplicate seals.

The import of such E-waste was alleged to contravene the Hazardous Waste (Management, Handling and Trans-boundary Movement) Rules, 2016 read with the Foreign Trade Policy 2015-2020.

DRI issued a separate show cause notice bearing F. No. DRI/MZU/NS/ENQ-145/2019 dated 22.09.2020, proposing:

  • Confiscation of the imported E-waste,
  • Confiscation of cover cargo allegedly used to substitute the smuggled goods,
  • Confiscation of the vehicle used for transshipment, and
  • Penalties under Sections 112(a) and 114AA of the Customs Act, 1962 on various persons treated as part of a syndicate.

Those named in the DRI notice included:

  • Shri Manoj Laxman Waghmare, IEC holder and proprietor of M/s AMP Impex;
  • Shri Bhavik Mehta, described as the importer and beneficial owner;
  • Shri Kishor Auti, proprietor of Sun Clearing Agency;
  • Shri Sagar Rohidas Bangar, logistics and clearing facilitator;
  • Central Warehousing Corporation, ICD Pimpri (Customs Cargo Service Provider);
  • Director of Alisan Shipping and Logistics Private Ltd.; and
  • Certain employees of the above entities.

This DRI proceeding under the Customs Act, 1962 was distinct from the CBLR revocation proceedings against Sun Clearing Agency.

3. Basis for Customs Broker disciplinary action

(i) Suspension and continuation of suspension

Relying on the DRI investigation, the Commissioner of Customs (General) formed a prima facie view that Sun Clearing Agency had failed to discharge its obligations under CBLR, 2018. It was alleged that:

  • Shri Kishor Auti, as proprietor of Sun Clearing Agency, was aware that E-waste (used computers and laptops) was being imported in place of declared paper rolls; and
  • He was involved in connecting or introducing key persons in the alleged syndicate.

On this basis, the Commissioner:

  • Suspended the Customs Broker licence by Order No. 37/2021-22 dated 20.01.2022; and
  • After granting post-decisional hearing, continued the suspension through Order No. 43/2021-22 dated 24.03.2022.

(ii) Show cause notice under CBLR, 2018

Subsequently, show cause notice No. 36/2021-22 dated 31.03.2022 was issued to Sun Clearing Agency, alleging contraventions of:

  • Regulation 10(d),
  • Regulation 10(e),
  • Regulation 10(m), and
  • Regulation 10(n)

of the Customs Brokers Licensing Regulations, 2018.

An inquiry was conducted, and the inquiry officer submitted his report on 13.06.2022, holding that all charges under Regulations 10(d), 10(e), 10(m) and 10(n) stood proved against the Customs Broker.

Acting on this report, the Commissioner passed the impugned order dated 07.10.2022, revoking the licence, forfeiting the entire security deposit, and imposing penalty.

4. Assessee’s arguments before CESTAT

(i) Challenge on merits: no role as Customs Broker in the impugned import

The authorised representative for Sun Clearing Agency argued that:

  • The firm did not act as a Customs Broker in relation to the consignment of container No. TRLU 5357576 or the related transshipment from JNCH to ICD Pimpri, Pune;

  • No bill of entry or any customs document for the impugned consignment was filed or processed by Sun Clearing Agency;

  • The transshipment permit and customs formalities were actually handled by:

    • One Shri R.B. Indore of M/s Global Version Clearing Private Limited, and
    • Shri Sagar Rohidas Bangar, who arranged driver, customs duty payments, transportation and clearing logistics;