CESTAT Sets Aside Licence Revocation Of Customs Broker After Finding No Evidence Of Violations Under CBLR, 2018
Pranav B Prem
In a significant ruling delineating the scope of due-diligence obligations under the Customs Brokers Licensing Regulations, 2018 (CBLR), the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside an order revoking the licence of M/s ATR Logistics India Pvt. Ltd., which had been accused of facilitating exports for firms later found non-existent at their registered premises. The Tribunal found that the Commissioner had failed to establish any violation of Regulations 10(d), 10(e) or 10(n) and that the conclusions drawn in the revocation order lacked evidentiary support. The appeal was adjudicated by a Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member). The impugned order, dated 12 March 2025, had revoked the customs broker’s licence, ordered forfeiture of security deposit and imposed a penalty of ₹50,000.
The case originated from a report by the Directorate General of Analytics and Risk Management (DGARM), which had identified certain exporters as “risky” based on data analytics related to suspected fraudulent export practices. Upon physical verification by jurisdictional GST authorities, two exporters for whom the broker had filed shipping bills—M/s MJ Expo Trade India and M/s Roomwell Tradex Pvt. Ltd.—were reported as not functioning at their declared premises. Based on this, a show-cause notice was issued alleging that the customs broker failed to fulfil the verification obligations mandated by CBLR.
An inquiry was initiated under Regulation 17, though the customs broker did not appear before the inquiry officer. A written reply was nevertheless submitted, followed by representation before the Commissioner during the personal hearing. The Commissioner concluded that the customs broker failed to advise clients in compliance with Regulation 10(d), failed to exercise due diligence under Regulation 10(e), and did not properly verify the exporters’ functioning at their declared addresses under Regulation 10(n). This led to the revocation of the licence and related penal consequences.
The Tribunal, however, examined each alleged violation in detail and rejected the Commissioner’s reasoning. With respect to Regulations 10(d) and 10(e), the Bench held that mere non-participation in inquiry proceedings cannot substitute for evidence of failure to advise clients or evidence of providing incorrect information. The Tribunal observed that nothing in the record suggested that the customs broker had failed to advise exporters about statutory compliance or that any incorrect information had been imparted to them. It noted, “There is not an iota of evidence to suggest that the appellant had violated Regulation 10(d),” adding that there was similarly no material indicating violation of Regulation 10(e).
The core allegation pertained to Regulation 10(n), which requires customs brokers to verify IEC, GSTIN, identity, and functioning of clients at the declared address based on reliable and authentic documents or information. The Tribunal found that the customs broker had obtained KYC documents including IEC, GSTIN, PAN, and other credentials from the exporters. These documents were issued by government authorities and, unless proven otherwise, must be treated as reliable and authentic. The Bench held that the regulation does not require physical verification of business premises and that relying on government-issued documents satisfies the requirement of verification.
In a pointed observation reflecting the seriousness of the Commissioner’s inference, the Tribunal stated that treating IEC and GST registrations issued by DGFT or GST officers as unreliable without evidence casts “serious and unwarranted aspersions” on the officers who issued them. The Tribunal reaffirmed that a customs broker is not required to investigate the actions of government officers or oversee the issuance of such documents. It relied on the Delhi High Court’s decision in Kunal Travels, which held that a customs broker is not an inspector tasked with verifying the genuineness of transactions beyond reasonable document-based checks.
The Tribunal further clarified that Regulation 10(n) does not require continuous monitoring of clients. Once a customs broker verifies identity and address through authentic documents, any subsequent change of address unreported by the client cannot be attributed to the broker. It also noted that the GST registration certificates themselves carried the address relied upon for verification, and there was no allegation that these were forged or fraudulent. The Tribunal emphasised that if GST officers themselves issued registrations to non-existent firms, responsibility for that lapse cannot be shifted onto the customs broker.
Summarising its findings, the Tribunal held that there was no evidence of violation of Regulations 10(d), 10(e), or 10(n). It found the Commissioner’s reasoning unsustainable, particularly given that the show-cause notice did not establish that the exporters were non-existent at the time the shipping bills were filed.
Holding that the revocation order lacked an evidentiary foundation, the CESTAT set aside the Commissioner’s order in its entirety. The Tribunal allowed the appeal with consequential relief and directed that the customs broker’s licence be restored forthwith upon production of the Tribunal’s order before the Commissioner.
Appearance
Counsel For Petitioner: Amit Atri and Shri Nikhil Singh, Advocates
Counsel For Respondent: Girijesh Kumar
Cause Title: M/S Atr Logistics India Pvt Ltd Versus Commissioner Of Customs Airport & General-New Delhi
Case No: Customs Appeal No. 50858 Of 2025
Coram: Justice Dilip Gupta (President), P.V. Subba Rao (Technical Member)
