Emphasising that not every regulatory lapse justifies licence revocation, the Delhi High Court has left intact the CESTAT’s decision retaining a Rs. 50,000 penalties while setting aside security forfeiture, finding no error or perversity in its assessment of proportionality. While upholding the broker’s failure to comply with its licensing obligations, the Court clarified that its interference concerned the quantum of punishment, not the finding of violation.
The investigation attributed the active role to the broker’s employee and Pushpraj Yadav. The broker nevertheless failed to verify the authority letter and the exporter’s address. However, the absence of established involvement, immediate termination of the employee and steps to lodge an FIR supported the assessment that a lesser punishment would suffice, added the Court.
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Briefly, Freight Logistics, a customs broker, filed a shipping bill naming M/s Ala Foodstuff Pvt Ltd. as the exporter and declaring the goods as “pouch packing material”. On examination, the goods were found to be non-woven fabric used for manufacturing masks, which was prohibited for export. The goods were seized, and the exporter denied having issued the shipping bill. Proceedings were initiated against the broker for failing to obtain the exporter’s authorisation and verify the KYC documents, alleging violations of Rules 10(a), (e) and (n) of the Customs Broker Licensing Regulations, 2018 (CBLR).
The Commissioner of Customs did not revoke the licence but forfeited the security deposit and imposed a Rs. 50,000 penalties. On appeals by both sides, the CESTAT rejected the Department’s request for revocation, set aside the forfeiture of security and retained the penalty.
The Division Bench comprising Justice Avneesh Jhingan and Justice Shail Jain noted that the investigation attributed the active role in the attempted prohibited export to the broker’s employee and Pushpraj Yadav. Although the broker failed to verify the authority letter and the exporter’s address, its own involvement did not emerge during the investigation. It also took immediate steps to terminate the employee’s services and lodge an FIR.
The Court noted that blaming the employee did not completely absolve the broker of its obligations. However, the Tribunal had considered the broker’s role, conduct and the investigation findings while holding that revocation and forfeiture would be disproportionate, and that the Rs. 50,000 penalty was sufficient.
The Court asserted that every violation of the CBLR does not warrant revocation of a customs broker’s licence, and the punishment must be proportionate to the nature of the violation and the broker’s role and conduct. Here, the finding of regulatory breach was not disturbed, and the dispute concerned the quantum of punishment. Given the absence of an active role by the broker and the factual findings supporting a lesser penalty, the Tribunal’s proportionality assessment disclosed no factual or legal error, much less perversity.
