Custom House Agent’s Failure To Verify Exporter Jeopardises Genuine Trade: Delhi HC Orders ₹2 Lakh Forfeiture In Duty Drawback Fraud Case
Sanchayita Lahkar
The High Court of Delhi Division Bench of Justice Prathiba M. Singh and Justice Shail Jain ordered that ₹2,00,000 of the ₹5,00,000 security deposit furnished by a customs broker at the time of licensing be forfeited, in view of allegations involving misuse of export documentation to claim undue duty drawback. The Court was hearing an appeal by the customs authorities challenging a tribunal decision that had restored the broker’s licence and removed the earlier forfeiture. Concluding that limited forfeiture and renewal subject to additional deposits would meet the requirements of proportional action under the customs licensing framework, the Court directed renewal of the licence while cautioning that any further irregularities would attract strict consequences.
The appeal was filed under Section 130 of the Customs Act, 1962 challenging the order dated 5 March 2025 of the Customs, Excise and Service Tax Appellate Tribunal restoring the customs broker licence of the respondent while upholding only the monetary penalty. The respondent was a licensed customs broker who had filed shipping documents for export consignments of readymade garments belonging to an exporter. As recorded on page 2, the Special Intelligence and Investigation Branch placed the consignments on hold after receiving information regarding alleged over-valuation for availing higher duty drawback. Details of six consignments, including FOB values, quantities and drawback claimed, are set out in the tabular chart on pages 2–3.
The goods were seized under Section 110 on the ground that they were liable for confiscation. Summons were issued to the exporter and the respondent, but the exporter could not be traced and the respondent did not appear. One individual later appeared to tender a statement on behalf of the exporter, but authorities found that several customs brokers and G-card holders had arranged for the statement despite the individual having no connection with the exporting firm. Random sampling and enquiries from garment sellers revealed significant disparity between declared values and market values.
A show cause notice was issued on 31 August 2022. The Order-in-Original dated 19 January 2023 revoked the respondent’s licence, forfeited the security deposit and imposed penalty, after finding that the exporter did not exist and that the respondent had connived with another individual to facilitate exports for wrongful drawback. CESTAT later held that the respondent violated Regulations 10(a) and 10(q) of the 2018 Regulations but found no violation of Regulations 10(d) and 10(n), setting aside the revocation and forfeiture. The appellant contended before the Court that the respondent failed in mandatory verification obligations. The respondent argued that the licence had already remained suspended for nearly three years and that no substantial question of law arose.
The Court recorded, after examining the materials, that “for the last three years, the licence has remained suspended” and stated that this period itself was “adequate message for the Custom broker not to indulge in such acts in future.” It therefore declined to interfere with the CESTAT’s factual findings on the issue of revocation.
The Court noted from the Order-in-Original and the Tribunal’s record that the respondent’s conduct was detrimental, stating that “It clearly shows that the conduct of the CHA is quite detrimental. If customs brokers indulge in such conduct of conniving and creating fake exporting firms, it jeopardises the incentives to real exporters,”
Referring to the factual findings, the Court recorded that several customs clearing agents appeared involved: “there were various custom clearing agents and CHAs who appeared to be involved in the proposed exports at the time when the same was traced and stopped.”
In evaluating the duties of customs brokers, the Bench relied on its earlier decision in NITCO Logistics Pvt. Ltd. and stated that “the Appellant also had a responsibility being a CHA to exercise supervision and due diligence and could not have completely allowed misuse in this manner.”
The Court then discussed proportionality principles by quoting at length from M/S Ashiana Cargo Services, including the observation that “the punishment must be proportional to the violation” and that revocation, being severe, must depend on aggravating factors. It noted the extract: “For minor infraction… an order of suspension may suffice… revocation has to be only in cases where the infraction is of a serious nature warranting exemplary action.”
Further quoting, the Court recorded: “the proportionality question is of great significance as action is under a fiscal statute, and may ultimately lead to a civil death.” It reproduced the analysis that administrative orders must reflect “an appreciation of the aggravating (or mitigating) circumstances.”
The Bench also referred to its recent judgment in M/s Jaiswal Import Cargo Services Ltd., including the passage that payment of monetary contribution coupled with elapsed suspension may suffice to conclude proceedings.
Upon cumulative consideration, the Court observed that a modified approach was warranted, stating that “the Court modifies the impugned judgment… to the effect that out of the security deposit… a sum of Rs. 2,00,000/- shall stand forfeited.” The Bench further recorded that the licence could be renewed subject to further deposits, while cautioning that “if the Respondent is found indulging in such illegalities, stringent action would be liable to be taken.”
The Court directed that the impugned CESTAT judgment be modified such that “out of the security deposit of Rs. 5,00,000/-, a sum of Rs. 2,00,000/- shall stand forfeited.” The customs broker’s licence “shall be renewed by the Customs Department upon deposit of a further amount of Rs. 2,00,000/- to the Customs Authority.”
The Court also required the respondent to deposit “an amount of Rs. 2,00,000/-” split between the Delhi High Court Staff Welfare Fund and the Delhi High Court Clerk Association in the manner specified in the judgment. “Subject to the above amounts being deposited, let the licence of the Respondent be renewed. It is however, made clear that if the Respondent is found indulging in such illegalities, stringent action would be liable to be taken.”
Advocates Representing The Parties
For the Appellant: Mr. Aakarsh Srivastava, SSC, CBIC
For the Respondent: Mr. Nikhil Gupta, Mr. Rochit Abhishek, Mr. Prince Nagpal, Mr. Devang Dwivedi
Case Title: Commissioner of Customs, New Delhi v. Ravi Dhanwariya
Neutral Citation: 2025: DHC:10029-DB
Case Number: CUSAA 162/2025
Bench: Justice Prathiba M. Singh; Justice Shail Jain
