• Dated 07^th October, 2025

SC: Revocation of Customs Broker’s License Too Harsh in Misclassification of Imported Goods

BRIEF FACTS:

The petitioner, a Customs Broker, who filed a Bill of Entry on behalf of an importer for clearance of blank firing guns. These goods were classified under Customs Tariff Heading 9503 (toys), thereby avoiding the mandatory requirement of an import license under the Foreign Trade Policy and an arms license under the Arms Act, 1959. Customs authorities alleged that the broker aided and abetted the importer in mis declaring the goods to circumvent the law. While the adjudicating authority revoked the broker's license, the CESTAT later held that it was a matter of misclassification rather than misdeclaration, since the Customs officers themselves examined the goods and classified them under Heading 9503. The issue ultimately reached the Supreme Court after the Bombay High Court upheld CESTAT's order but incorrectly observed that CESTAT had accepted the finding of misdeclaration.

ASSESSEE'S CONTENTION:

The Assessee, argued that the issue was one of misclassification of goods and not misdeclaration, since the blank firing guns were physically examined and tested by Customs officers, who themselves concluded that the goods were classifiable under Heading 9503. The broker contended that it had acted on the basis of the importer's description and in good faith, exercising due diligence as required under the Customs Brokers Licensing Regulations. It further submitted that the allegation of advising the importer to mis declare the goods was baseless, as the only evidence relied upon was a retracted statement obtained under duress. The Assessee maintained that if Customs authorities had insisted on the requisite DGFT/Arms license before clearance, the situation would not have arisen. Therefore, revocation of the Customs Broker's license was an excessively harsh penalty, disproportionate to the alleged lapse, and at most, forfeiture of the security deposit could be justified.

DEPARTMENT'S CONTENTION:

The Department contended that a licensed Customs Broker, had a statutory duty under the Customs Brokers Licensing Regulations, 2013 to advise its clients to comply with all provisions of law and to exercise due diligence in clearance of goods. Instead, the broker allegedly aided and abetted the importer by misclassifying blank firing guns under CTH 9503 (toys) to circumvent mandatory requirements of a DGFT import license and an arms license under the Arms Act, 1959. The Department argued that the broker had knowledge of the sensitive nature of the goods, which could be converted into lethal weapons, and still failed to insist on the necessary certificates before clearance. It stressed that the broker's conduct amounted to abetment of misdeclaration, thereby justifying the revocation of its license to safeguard national security and ensure strict compliance with customs and arms regulations.

DECISION:

The Authority held that the Customs Broker, had aided the importer in mis declaring blank firing guns under CTH 9503 to evade the requirement of import and arms licenses, and therefore revoked its license while also forfeiting the security deposit. On appeal, the CESTAT modified the order, holding that the matter involved misclassification rather than misdeclaration, as the goods were examined and classified by Customs officers themselves. It found revocation of the license to be too harsh a punishment, though it upheld forfeiture of the security deposit given the sensitive nature of the goods. The Bombay High Court affirmed the CESTAT's order but mistakenly observed that the Tribunal had accepted the finding of misdeclaration. Finally, the Supreme Court corrected this error, clarifying that CESTAT had treated the case as misclassification and not misdeclaration, and upheld the view that revocation of license was excessive, with forfeiture of the security deposit being the appropriate penalty.

BTA's COMMENT:

In conclusion, the aforesaid judicial pronouncement highlights the delicate balance between strict compliance with customs and arms regulations and protecting the rights of licensed Customs Brokers. While the Department sought to penalize the broker harshly by revoking its license on allegations of abetment in misdeclaration, both CESTAT and the Supreme Court took a more nuanced view, recognizing that Customs officers themselves had examined and classified the goods, making it a case of misclassification rather than deliberate misdeclaration. The Supreme Court's correction of the High Court's erroneous observation reinforces the principle that findings of fact must be accurately appreciated at every judicial stage. The decision underscores that while Customs Brokers must exercise due diligence, disproportionate punishment such as license revocation should be avoided where the lapse is not intentional or solely attributable to the broker, especially when regulatory authorities also share responsibility.

Case Reference: M/s Bruce Logistics Pvt. Ltd. v. Union of India [Supreme Court of India (2025) 34 Centax 2 (S.C.)] Date- 21.08.2025

Author: Madhurima Bose

Edited by: Shaily Gupta