Delhi High Court Reinstates Customs House Agent's License, Declaring Suspension Order Illegal

Delhi High Court Reinstates Customs House Agent's License, Declaring Suspension Order Illegal

In a recent ruling, the Delhi High Court affirmed the thorough verification conducted by a Customs House Agent (CHA) in validating the authenticity of an Importer-Exporter Code (IEC) and a Goods and Services Tax Identification Number (GSTIN).

Justices Yashwant Varma and Dharmesh Sharma of the Delhi High Court ruled that mere allegations that someone else was importing goods under the names of importers mentioned in the Bills of Entry did not cast doubt on the importers' identities, especially when there appeared to be a mutually agreed-upon arrangement between the importer and the beneficial owner. Under these circumstances, the adjudicating authorities had no basis for issuing the challenged order suspending the CHA's license based on the importers' statements, which were subsequently withdrawn.

The Court emphasised that the importers' statements, which formed the basis for the suspension order, were not corroborated by any independent evidence. Moreover, the Court noted that the CHA had acted in good faith and had no reason to suspect that the importers were not the actual owners of the goods.

During the investigation, the statement of Suresh Kumar Aggarwal, a partner of the respondent/CB/CHA, was recorded on January 15 and 22, 2018. Aggarwal is a key witness in the case, and his testimony could have a significant impact on the outcome.

Despite being aware that Yusuf Pardawala was the true beneficiary or beneficial owner, the assessee, motivated by a commission, processed clearance for certain imported goods without confirming the validity of the IEC numbers used for the imports.

A show cause notice was issued to the assessee, alleging that the clearance of imported goods at the customs ports by the respondent violated various provisions of the Customs Broker License Regulations, 2018. The notice outlined specific instances where the assessee had failed to comply with the regulations, including:

Following a thorough investigation, the show cause notice issued to the assessee was upheld on the grounds of violating regulations 10(a), 10(d), and 10(n) of the Customs Broker License Regulations, 2018 (CBLR). As a result, the respondent's customs broker license was revoked, invoking powers under regulations 14 and 17(7) of the CBLR. Additionally, the security deposit made by the assessee was forfeited, and a penalty was imposed.

The assessee appealed the revocation of their customs broker license to the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). The tribunal upheld the revocation, ruling that the mere suspension of the license under Regulation 16 of the CBLR did not preclude the Commissioner (Appeal) from conducting a full inquiry under Regulations 14 and 17. The tribunal noted that Regulation 16 allows for immediate suspension in cases of serious offences, while Regulation 17 outlines a comprehensive hearing procedure to ensure due process.

Upon careful review of the evidence presented, the CESTAT determined that the appellant's customs broker had not violated regulations 10(a), 10(d), and 10(n) of the CBLR. Consequently, CESTAT set aside the impugned order revoking the customs broker's license and the associated penalty.

The department argued that although direct evidence of the CHA's involvement in undervaluation was lacking, the CHA was still liable for a penalty under Section 114AA. They maintained that the CHA's failure to exercise due diligence in verifying the value of the imported goods constituted negligence, thereby warranting the imposition of a penalty.

The Court, in its judgment dismissing the department's appeal, affirmed CESTAT's decision, concluding that CESTAT had not committed any glaring error of law or made any manifest mistake in evaluating the evidence presented.