Sanchayita Lahkar

The High Court of Delhi, Division Bench of Justices Prathiba M. Singh and Shail Jain held that a Customs House Agent is accountable for the conduct of its employees and must exercise proper supervision and due diligence in its operations. In a case concerning the misuse of an exporter’s Import Export Code by an employee of a customs broker, the Court observed that while such responsibility cannot be avoided, the penalty must remain proportionate to the infraction. Limiting the punishment, the Bench restricted the licence revocation to four years and directed that, upon payment of ₹10 lakh and submission of a compliance framework, the broker’s renewal be considered from January 1, 2026.

The appeal arose from an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which had dismissed Nitco Logistics Pvt. Ltd.’s challenge against the revocation of its Customs Broker Licence. The company, a licensed Customs House Agent since 1989, faced action after the Directorate of Revenue Intelligence, Vijayawada, detected misdeclaration in the export of set-top boxes by one of its clients, M/s Hiba Enterprises, in November 2020. The investigation revealed that Ajay Sharma, Senior Manager and in-charge of Nitco’s Delhi office, facilitated the exports using the IEC of M/s Hiba Enterprises without valid KYC verification.

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The Customs Department issued a show-cause notice in October 2021 and subsequently revoked Nitco’s licence through an order dated July 27, 2022, also forfeiting the company’s security deposit and imposing a penalty of Rs. 50,000. The Tribunal upheld this decision on March 12, 2024. Nitco Logistics appealed, contending that the wrongful conduct was confined to its employee, who had since been dismissed, and that the company had already suffered suspension since 2021.

The Department countered that Nitco had failed in its statutory duty under the Customs Broker Licensing Regulations, 2018 (CBLR), to supervise its staff and ensure proper document verification. It argued that the use of private email for customer KYC communication reflected inadequate internal controls, justifying the revocation under CBLR obligations.

Justice Prathiba M. Singh recorded: “These statements of Mr. Ajay Sharma leave no manner of doubt that the employee concerned had connived and colluded with other parties which led to the Appellant also being implicated.” However, the Court noted that Nitco, as a licensed Customs House Agent, bore responsibility to exercise due diligence and supervision over its staff.

At the same time, the Bench invoked the principle of proportionality, referring to precedent in M/s Ashiana Cargo Services v. Commissioner of Customs (I&G) (2014:DHC:1413-DB). The Court quoted: “The punishment must be proportional to the violation. Given the civil consequences of revocation for the CHA, read in the background of its freedom under Article 19(1)(g), this principle of law is undisputed.” It further referred to the Andhra Pradesh High Court’s view in Commissioner of Customs and Central Excise v. HB Cargo Services that “for minor infraction, or infractions which are not of a serious nature, an order of suspension may suffice... when revocation is directed it has to be only in cases where the infraction is of a serious nature warranting exemplary action.”

The Bench stated: “In order to maintain proportionality and to ensure that the Appellant, which has its own reputation, is not permanently dissuaded from conducting its activities as a CHA, the period of revocation of the license is restricted to four years instead of perpetual revocation.” The Court recorded counsel’s statement that Nitco Logistics was willing to deposit Rs. 10 lakhs as retribution.

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The Bench directed that Rs. 5 lakhs be deposited with the Customs Department, Rs. 2 lakhs with the Delhi High Court Bar Clerk Association, and Rs. 3 lakhs with the Delhi High Court Bar Association. The payment was to be made as a condition for consideration of the company’s pending licence renewal application. The judgment also instructed that Nitco submit a detailed “Due Diligence Document” outlining its future supervisory and verification framework to prevent recurrence of lapses.

The Customs Department was ordered to consider both the renewal application and the due diligence plan before deciding on the restoration of the licence. The Court clarified that “any renewal which may be granted to the Appellant would be with effect from 1st January, 2026.” With this direction, the appeal was disposed of, and all pending applications were closed.

Advocates Representing the Parties

For the Appellant: Mr. Rupesh Kumar, Senior Advocate with Mr. Prem Ranjan Kumar, Advocate.
For the Respondent: Mr. Abhinav Kalia and Mr. Ajit Kumar Kalia, Senior Standing Counsel.

Case Title: Nitco Logistics Pvt. Ltd. v. Commissioner of Customs (Airport and General)
Neutral Citation: 2025: DHC:8952-DB
Case Number: CUSAA 56/2024
Bench: Justice Prathiba M. Singh, Justice Shail Jain