Custom, Excise & Service Tax Tribunal
Sagar Shipping Services vs Jodhpur on 27 May, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH -COURT NO. 4
Customs Appeal No. 52154 of 2024
(Arising out of Order-in-Original No. 01/2024(CBLR) dated 30.08.2024 passed by
the Principal Commissioner of Customs, Jodhpur)
M/s Sagar Shipping Services Appellant
121-A, Near Om Gas Godown, Jhalana,
Malviya Nagar, Jaipur,
Rajasthan-302017.
Versus
Commissioner of Customs (Preventive) Respondent
Jodhpur G-105, New Industrial Area, Basni, Near Diesel Shed, Jodhpur, Rajasthan.
New Delhi-110037.
Appearance:
Present for the Appellant: Ms. Kshirja Agarwal, Advocate Present for the Respondent: Shri S.K. Sharma, Authorized Representative CORAM:
Hon'ble Dr. Rachna Gupta, Member (Judicial) Hon'ble Mr. P.V. Subba Rao, Member (Technical) Date of Hearing : 21/02/2025 Date of Decision :27/05/2025 Final Order No. 50782/2025 Dr. Rachna Gupta:
Present appeal is filed to assail the Order-in-Original bearing No. 01/2024 dated 30.08.2024. The facts which culminated into the said order, succinctly, are as follows:
2. M/s Sagar Shipping Services, the appellant, is the Custom House Agent (CHA/CB) having license No. 02/2017 valid up to 27.08.2027. An information was received from Assistant Commissioner of Custom, Custom House, Mundra Port about the 2 C/52154/2024 appellant about receiving an intelligence is received about Bill of Entry (BOE) No. 9892525 dated 13th January 2024 filed for a consignment containing four containers to arrive at Mundra Port from Jebel Ali Port, UAE. In the said BOE, the importer, M/s Digen Traders, had declared the goods, as 99.15 MP of Base Oil under HSN Code no. 27101971,as imported from Stanley Trading LLC, Dubai, UAE. Based on the said information the said consignment was kept on hold and was examined. It was found that there were 738 drums:
i. Only 80 drums were found containing oily liquid (Base Oil) in quantity of 14.383 MT with ascertained value of Rs. 6.17 lakhs. The oil was meant for concealment of the drums containing Areca Nuts ii. Remaining 658 drums were found containing Areca Nuts in split form weighing 83.352 MT with ascertained value of Rs. 5.71 crores
2.1 The consignment was put on hold. During the course of enquiry, it was gathered that the declared premises of the importer firms as per GSTIN and IEC were different and the importer was found non-existent. The goods were accordingly seized. During further enquiry it was gathered that the said BOE was filed by the appellant through F-Card holder Shri Rishi Raj Singh Chauhan. Mr. Chauhan‟s statement was recorded under section 108 of Custom Act, 1962, who acknowledged about filing the said bill of entry however with the mention that he received the reference about the importing firm and all the KYC documents from a freight forwarding 3 C/52154/2024 firm. Based on said statement department formed an opinion that the appellant has failed to take due care and have been negligent in filing the BOE on behalf of a non-existing firm. Thus, the appellant was alleged to have failed to discharge the obligations cast upon him under the Customs Broker Licensing Regulations, 2018.
2.2 During investigation, the CHA/ appellant was found to be the agent of importer. He works on behalf of importer. He also takes authorization to work on behalf of importer. All CHAs are fully aware that omission and commission by the importer affects working image of CHA. It is a business practice that CHA knows on whose behalf they are working, as CHA can face investigation for omission and commission at any time. As per CHA Regulation, a CHA also requires to know the client with proper due diligence which may not require physical inspection but it is the business practice and mandate of regulations that the CHA knows on whose behalf they are working. Based on these allegations of failure to exercise due diligence that a show cause notice bearing no. 633 dated 16.05.2024 was served upon the appellant / CHA proposing the revocation of the appellant‟s license and forfeiture of security furnished by appellant in terms of Regulations 14 of CBLR, 2018 for appellant‟s failure to comply with the provision of Regulations 10
(d), 10 (e) and 10 (n) of CBLR 2018. The penalty was also proposed to be imposed upon the appellant. The proposal was confirmed vide order in original bearing no. 01/2024 dated 13 th of August 2024. The appeal against the said order has been rejected vide the impugned order in appeal bearing no. D-II/2080/2021-22 4 C/52154/2024 dated 30.03.2022. Being aggrieved the appellant is before this Tribunal.
3. We have heard Ms. Kshirja Agarwal, learned Counsel for the appellant and Sh. S.K. Sharma, the Authorized Representative for the department.
4. Learned Counsel for the appellant has submitted that all the obligations as per CBLR 2018 were complied with and were duly fulfilled by the appellant. The action of revoking appellant‟s CB license is harsh punishment which has resulted in loss of livelihood rendering a number of persons also jobless. The Main allegation is that appellant did not verify the KYC documents of the client/ importer. The KYC verification of clients is required to be done on the basis of guidelines prescribed by the Central Board of Excise & Customs through their circular No. 502/2/2008 dated 08.04.2010. As per those instructions, in case of an Individual/ proprietor, any two documents mentioned in the said circular are sufficient for the purpose. It is mentioned that appellant had taken PAN Card and bank account statement from importer M/s Digen Traders which fulfils the criteria mentioned in the circular. 4.1 Learned counsel further mentioned that it was appellant only who requested first check at the time of filling of BOE i.e. 5 days before the DRI put the cargo on hold which proves the innocence of appellant and fair working as a customs broker. The order under challenge wrongly mentions that "The said facts about non- compliance of CBLR obligation were accepted by Shri Rishi Raj Singh Chauhan, the F card holder". The only thing appellant had 5 C/52154/2024 accepted in the statement is that the appellant did not visit the premises of M/s. Digen Traders. This cannot be the contravention of any Regulation under CBLR 2018 as it is the settled legal position that a customs broker is not obligated to physically verify the premises of the client and custom broker cannot be asked to keep a vigil on the location of the client. In this regard, appellant relied on the following case laws -
1. Naman Gupta Versus Commissioner of Customs (Airport and General) decided on 30.01.2024 (2024) 15 Centax 329 (Del.).
2. Kunal Travels (Cargo) Versus CC (I & G), IGI Airport, New Delhi decided on 27.03.2017 - 2017 (354) E.L.T. 447 (Del.)
3. HIM Logistics Pvt. Ltd. [2016 (338) ELT 725 (Tri Delhi)]
4. Shri Pardeep Kumar Singh Seth versus Commissioner of Customs, New Delhi - 2023 (3) TMI 27 - CESTAT New Delhi 4.2 It is further submitted that appellant verified the correctness of the importer‟s document from the respective portal. Section 79 of the Evidence Act, 1872 requires even Courts to presume that every certificate which is purported to be issued by the Government officer to be genuine. Negligence on part of appellant has wrongly been alleged.
5. In view of above submissions, it is submitted that appellant/customs broker has made full compliance of the CBLR 2018 and has acted bona fide by doing following due diligence -
i. Verifying the KYC documents of the importer from the DGFT portal regarding IEC, from GST portal regarding GST registration and whether the person is active and allowed to collect tax.
ii. By filing bill of entry under First Check to invite the customs deptt. to examine the goods before assessing the same to duty and other compliances.
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C/52154/2024 iii. By extending full cooperation to the deptt. During investigation.
iv. By providing full information about the persons who were involved in the import of the goods in question.
6. Hence none of the Regulations viz. 10(d), 10(e), 10(n) of CBLR, 2018, has been violated. The order under challenge is therefore prayed to be set aside and the appeal is prayed to be allowed.
7. While rebutting the submissions made on behalf of the appellant, learned Authorized Representative for the department submitted that the customs broker‟s license of appellant was revoked for violations of Regulations 10 (d), (e), and 10(n) of CBLR, 2018 for the reasons that the appellant failed to conduct due diligence, allowed unauthorized individuals to use their license, and failed to report non-compliance to customs authorities. The license was earlier suspended vide Order No. 01/2024 dated 18.03.2024. The Appellant also failed to verify client‟s/importer‟s credentials and even to have the authorization from the importer at the relevant time. These were the significant lapses.
8. It is further submitted that the customs broker knowingly facilitated fraudulent imports by filing "benami" bills of entry and failed to report the ongoing undervaluation practices. Though the appellant has claimed ignorance but the evidence showed active collusion. Based on these submissions and relying upon the following decisions, learned Authorized Representative has submitted that the court highlighted that even unintentional 7 C/52154/2024 contraventions warrant punitive action to uphold the integrity of customs procedures :
1. M/s Swastik Cargo Agency versus Commissioner of Customs, New Delhi;
2. M/s Falcon India (Customs Broker) versus Commissioner of Customs (Airport & General) New Delhi;
3. M/s Sriaanshu Logistics through Proprietor versus Commissioner of Customs (General);
4. Commissioner of Customs vs K.M. Ganatra & Co;
5. Sri Kamakshi Agency versus Commissioner of Customs, Madras;
6. M/s SKH Freight Logistics Pvt. Ltd. versus Commissioner of Customs, (Airport & General) New Delhi;
7. M/s Ananya Exim versus Commissioner of Customs (Airport & General), New Delhi.
Accordingly, the appeal is prayed to be dismissed.
9. Having heard the rival contentions of the parties and perusing the record of the appeal memo, we observe as follows:
The appellant was granted a Custom Broker License which was valid upto 27.08.2027. That one, Mr. G.S. Meena, working with a freight forwarder Company, M/s Transglobe, approached the appellant to facilitate the import of a consignment (Base Oil) of M/s Digen Traders, the Importer, from Jebel Ali Port, UAE to Mundra Port, Gujrat, India.
The Appellant agreed to facilitate the import. The consignment of M/s Digen Traders was inward. However, the Appellant was not having the signed copy of the Authority letter therefore did not file the Bill of Entry. Appellant after receiving 8 C/52154/2024 signed copy of the Authority Letter filed BOE bearing No . 9892525 on a "First Check" basis.
10. We observe that a bill of entry is filed under the "First Check"
procedure when the Customs Broker is uncertain about the classification, description or applicable duty rate of the goods. This process serves as a voluntary request to Customs Authorities to examine the goods and then proceed to assess everything as per law.
11. After noticing mis-declaration in the consignment under impugned BOE, the goods were seized under the provisions of the Customs Act, 1962. Appellant‟s statement was recorded wherein he stated that he filed the BOE No. 9892525 without directly contacting the Importer but being directed by M/s Transglobe, the freight forwarder.
12. Accordingly, vide letter I/1803686/2024 dated 05.03.2024 an action against the appellant was directed. Pursuant to the letter dated 05.03.2024 the Respondent, issued order No. 1/JDR/Suspension/2024 dated 18.03.2024 wherein the Appellant was directed to surrender the original Custom Broker License along with all the F/G/H cards issued to him. Additionally, an opportunity was given to him to appear before the Commissioner for a post- decisional hearing on 27.03.2024.
Suspension of license got confirmed vide the impugned Order-in- Original No. 01/2024 dated 30.08.2024 vide which the license got revoked and the security amount was forfeited. Penalty of Rs. 50,000/- has also been imposed upon the appellant thereby 9 C/52154/2024 confirming the allegations in show cause notice about violation of provisions of Regulation 10(d), 10(e ) and 10(n) of CBLR.
13. We have perused three of these provisions which read as follows:
10(d) advise his client to comply with the provisions of the Act and in case of non compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be;
10(e) exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage;
10(n) verify correctness of Importer Exporter Code (IEC) number, Goods and Service Tax Identification Number (GSTIN), identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information; and
14. It is proven fact on record that the goods imported declared as 738 drums containing „Base Oil‟. However, on examination only 80 drums were found containing base oil. Remaining 658 drums were found container Arica Nuts. This fact itself is sufficient to reveal that the appellant/custom broker has failed to ascertain the correctness of actual declaration of the goods and has failed to advise the importer that he is bound to declare the actual classification. Following facts are also apparent on record :
(i) Registered premises of the importer M/s Digen Traders (IEC-
AAUYPN7857L) as per IEC - B-2/12, JJ Colny, Near B-2 Block- Raghubir Nagar, New Delhi had not been located by the officers of DRI;
(ii) Registered premises of the importer M/s. Digen Traders (IEC AUYPN7857L) as per GSTIN -1803/12, GD Colony, New Delhi also f have not be located by the officers of DRI.
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C/52154/2024
(iii) As per import documents, the mobile number of M/s Digen Traders was mentioned as 8527941274 and according to subscriber details of the said mobile, the subscriber is Sh Ramesh Thapalia having address House No. 372, Rohini Sector-2, Rohini North, west Delhi. Pocker-6, New Delhi but during the search, no such person was found;
(iv) As per statement of Sh Digen Neog, Assam he has never been to Delhi, he has never applied for IEC nor GST registration under his PAN card. The picture pasted on the GST documents is also not his, he has never opened any bank account in RBL bank and the mobile number also does not belong to him;
(v) Shri Ajay Kumar Gupta is key person and mastermind who had created the said firm using the credentials of Sh Digen Neog without his knowledge or consent. Sh. Ajay Kumar Gupta lives in Dubai and never responded to the summons issued by DRI officers.
(vi) M/s Sagar Shipping Services had received reference of the said importer M/s Digen Traders through Sh Ghanshyam Meena who was handling a forwarding firm M/s Transglobe Shipping Services, Gandhidham. From the above, it is clear that M/s Sagar Shipping Services had filed a Bill of Entry without any due diligence, as required by them as per the CBLR, 2018 as a condition of the licence.
The above observed facts unrebutted, on record it becomes clear that appellant services received reference of the said importer through Shri Ghanshyam Meena who was handling a freight forwarding firm M/s Transglobe Shipping Services, 11 C/52154/2024 Gandhidham never contacted the importer directly as they had received the work from a freight forwarder. They received all the documents of the importer through e-mail from M/s Transglobe Shipping services without even been signed by the importer Authority cum appointment letter dated 30.01.2024. These observations are sufficient for us to hold that the appellant has failed to fulfill the obligation of 10(d) and 10(e).
15. Though, learned counsel for appellant has relied upon the decision of this Tribunal Kolkata Bench in the case of M/s Ayushi Logistic Company (supra), wherein it was held that once the customs broker has filed the bills of entry on the basis of documents given by the importer, he is not expected to ascertain the correctness of declaration made by the importer before filing of bills of entries. However, we observe that irrespective of the said settled position under the statute as well as vide the several decisions, in case there is evidence showing that the Customs Broker was aware of the mis-declaration of the goods in the documents submitted and/or if there is cogent evidence about absence of due diligence on part of the importer before filing of bills of entries, the said case law will not be applicable to such cases. In the present case also, we observe that the appellant was handling the first consignment of the importer of M/s Digen Traders. Admittedly, the appellant was not contacted by the importer himself. There was no authorization of the importer in favour of appellant till he filed the impugned bill of entry. Above all, the appellant itself has sought clearance on first check basis which means that the appellant himself was not sure about the 12 C/52154/2024 declaration given by the importer in the documents to be filed along with the bill of entry. These admitted facts clearly distinguish the present case from all the decisions, as have been relied upon by the appellant.
16. All the admitted facts as observed above, sufficiently proves the lack of due diligence on part of the appellant while verifying of the credentials of the importer. No doubt vide Circular No. 502/2008 dated 8.4.2010 only two out of six documents as mentioned in the said circular should be available with the CHA for its satisfaction about the credentials of the importer/exporter. But we observe that the said circular in para 5.2 (iv) describes the Know Your Customers (KYC norms) to be followed by the Custom House Agents. It provides that to identify its client and the functioning of its client in the declared address, the CHA is required to use the reliable, independent, authentic documents, data or information. It has also been clarified that it should be obligatory for the client/customer to furnish to CHA, a photograph of himself/herself in case of an individual and those of authorized signatory in respect of other firms of organizations such as companies/trust etc. However, we observe appellant/CHA in his statement recorded under Section 108 of Customs Act, 1962 has admitted that he had not met the importer ever. The documents for processing the clearance of impugned consignments were hand over to him by the freight forwarders M/s Transglobe. The CHA was acting at the instance of said freight forwarder only.
17. It is the settled law of evidence that admissions need no further proof till those are retracted or otherwise proved in 13 C/52154/2024 voluntary. In the present case, the appellant has not denied the said statement at any stage of the present proceedings. Resultantly, it stands proved that the most important obligation under CBLR, 2018, as fastened on the CHA, has not been fulfilled by the appellant. The appellant was the first time CHA for M/s Digen Traders, the importer still he has not opted to meet the importer in person.
(In the light of these discussion, we have no reason to differ from the findings arrived at by the adjudicating authority holding that the appellant has failed to exercise due diligence.)
18. The CBLR 2018 also defined a Custom Broker. Regulation 2(c) thereof defines customs broker as a person licensed under these regulations to act as an agent for the transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any custom stations. Regulation 10 thereof provides for various obligations to be met with by the said customs broker. Hon‟ble Apex Court has appreciated the status of the customs broker in the case of CC Vs. KM Ganatra - 2016 (332) ELT 15 (SC), wherein it was held as follows:
"The CHA occupies a very important position in the Customs House. The Customs procedures are complicated. The importers have to deal with a multiplicity of agencies viz. carriers, custodians like BPT as well as the Customs. The importer would find it impossible to clear his goods through these agencies without wasting valuable energy and time. The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/ exporters as well as by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed. Regulation 14 of the CHA Licensing Regulations lists out obligations of the CHA. Any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulations......"14
C/52154/2024
19. The said decision has been followed by this Tribunal Mumbai Bench in Noble Agency Vs. Commissioner of Customs, Mumbai - 2002 (142) ELT 84, the Tribunal‟s Principal Bench in the case of M/s Falcon India (Customs Broker) Vs. Commissioner of Customs (Airport and General), New Delhi in Customs Appeal No. 50934 of 2021, it has been observed:
"33. The above decisions lay down that the Customs Broker (or Custom House Agent) is a very important person in the transactions in the Custom House and it is appointed as an accredited broker as per the Regulations and is expected to discharge all its responsibilities under them. Violations even without intent are sufficient to take action against the appellant. While it is true, as has been decided in a number of cases, that the Customs Broker is not expected to do the impossible and is not expected to physically verify the premises of the importer or doubt the documents issued by various Governmental authorities for KYC, it is equally true that the Customs Broker is expected to act with great sense of responsibility and take care of the interests of both the client and the Revenue. It is expected to advise the client to follow the laws and if the client is not complying, it is obligated under the Regulations to report to the Assistant Commissioner or Deputy Commissioner. Fulfilling such obligations is a necessary condition for the CB licence and it cannot be termed as "spying for the department" as argued by the appellant before us. It has also been argued that if it spies for the department, it will lose its business. It is evident from the facts of this case, that the appellant was not only aware of the benami Bills of Entry but has actually filed them with the full knowledge that they were benami and they were filed by Anil after a case of undervaluation has been booked by DRI against him. It is afraid of losing business because it has built its business model on violators who, it does not want to upset by reporting to the department. Therefore, we find no reason to show any leniency towards the appellant. At any rate, once violation is noticed, it is not for the Tribunal to interfere with the punishment meted out by the disciplinary authority, viz., the Commissioner unless it shocks our conscience. In this case, it does not."
20. We have perused the order suspending the appellant‟s license, it was observed that :
"It has been admitted by Shri Rishi Raj Singh Chauhan the F card holder of M/s Sagar Shipping Services that the Bill of Entry 9892525 dated 30.01.2024 was filed under his CHA code ALRPC8469PCH002 without verifying the authenticity of the KYC documents and existence of Importer.15
C/52154/2024 We have also perused inquiry report subsequent to the order of suspension of appellant‟s license. It was found as follows:
1. Violation of Regulation 10(d):
Appellant did not inform the Customs Department about non- compliance or discrepancies in the importer‟s documentation.
No proactive steps taken to verify the mis-declaration of goods.
Hence, it was concluded that: "The Customs Broker, by failing to highlight discrepancies in the importer‟s documents, has breached Regulation 10(d). The lack of initiative to report or rectify the mis- declaration undermines compliance with the Customs Act."
2. Violation of Regulation 10(e):
Failure to exercise due diligence in verifying the correctness of information provided by the importer. Relied solely on documents submitted by the freight forwarder without further verification.
Hence it was concluded that : "Under Regulation 10 (e ), a Customs Broker is expected to ensure the accuracy of information supplied to the client. The appellant‟s failure to verify discrepancies in the KYC documentation constitutes negligence."
3. Violation of Regulation 10(n) Did not physically verify the functioning of the importer at the declared address.
No evidence provided by the appellant to demonstrate verification of premises.
Based on these observations, it was concluded that :
"Regulation 10(n) mandates that a Custom Broker must verify the client‟s operational status at the declared address using reliable and independent methods. The appellant‟s reliance solely on GSTIN and IEC documents without physical verification is insufficient."
4. Negligence Highlighted are:
Lack of physical verification and failure to detect discrepancies in documents.
Principal Commissioner attributed negligence in fulfilling obligations under CBLR, 2018.
Accordingly, inquiry officer reported that : "The Customs Broker‟s omissions in due diligence and document verification amount to gross negligence, warranting disciplinary action."16
C/52154/2024 Based on the said inquiry report only, the adjudicating authority below has passed the following order :
Customs Broker License revoked.
Security deposit of INR 5,00,000 forfeited. Penalty of INR 50,000 imposed.
21. In view of the entire above discussion with respect to the regulations as are alleged to have been violated by the appellant:
with respect to the conduct of appellant itself proving the said violations and also the conclusion of the enquiry report against the appellant and the various decisions as discussed above, we find no reason to differ from the findings arrived at by the adjudicating authority. Hence we hold that the appellant has violated the Regulations (CBLR), 2018. Finding no infirmity in the order under challenge, same is hereby upheld. Consequently, the appeal is dismissed.
(Pronounced in open Court on 27.05.2025) (Dr. Rachna Gupta) Member (Judicial) (P.V. Subba Rao) Member (Technical) RM