Finding that the Customs Broker’s employee had facilitated unauthorized exports, the Delhi High Court ruled that the broker (appellant) is duty-bound to exercise due diligence & supervise his own staff. However, emphasizing that a perpetual revocation of license is disproportionately heavy punishment, the Court imposed a cost of Rs. 10 lacs as retributive payment, out of which Rs 5 lacs to the Customs Department, Rs 2 lacs to the Delhi High Court Bar Clerk Association, and Rs 3 lacs to the Delhi High Court Bar Association.
Additionally, the Court directed the Customs Department to consider the appellant’s pending renewal application, along with a due diligence report outlining future employee supervision measures. Any renewed licence, if granted, will be effective from January 01, 2026.
The Division Bench comprising Justice Prathiba M Singh and Justice Shail Jain observed from the voluntary statement of the manager of the appellant-customs broker, that he admitted to unauthorized exports using the IEC of M/s Hiba Enterprises and to concealing activities from the management, though he also implicated the Managing Director in pressuring him to enhance business.
The Bench noted that while the manager of the appellant was complicit in the misconduct, the appellant, as a Customs Housing Agent (CHA), had a duty to exercise due diligence and supervise its staff. However, applying the principle of proportionality as laid down in Ashiana Cargo Services vs. Commissioner of Customs (I&G) [2014: DHC: 1413-DB], the Bench held that the perpetual revocation of the Customs Broker licence is excessive, and restricted it to 4 years.
Briefly, in this case, the appellant, a licensed Custom Broker since 1989, came under scrutiny after DRI, Vijayawada, suspected misdeclaration in consignments exported by one of its clients, M/s Hiba Enterprises, involving the export of Set Top Boxes. Pursuant to the investigation, statements of various employees, including the Senior Manager of the Delhi office, were recorded, who admitted to facilitating exports using the IEC of M/s Hiba Enterprises without proper KYC compliance and to having misused company resources under pressure to boost business.
Even though the appellant terminated the manager, a show-cause notice was issued. Later, the Customs Department revoked the appellant’s customs broker licence, forfeited its security deposit, and imposed a penalty of Rs. 50,000. This order was upheld by CESTAT.
Case Relied On:
Ashiana Cargo Services vs. Commissioner of Customs (I&G) – 2014: DHC: 1413-DB
Appearances:
Senior Advocate Rupesh Kumar and Advocate Prem Ranjan Kumar, for the Appellant/ Taxpayer
Advocates Abhinav Kalia and Ajit Kumar Kalia, for the Respondent/ Revenue
