Lending Customs Broker Licence & Dongle For Monthly Fee Violates CBLR: Delhi High Court Upholds Licence Revocation In Red Sanders Smuggling Case

"A violation of the obligations under the CBLR, 2018 does not cease to be a violation merely because the Department is unable to establish that the Customs Broker was a participant in the underlying offence." Delhi High Court has held that parting with the use of a Customs Broker licence and digital signature dongle for a fixed monthly consideration constitutes an impermissible transfer under Regulation 1(4) of the Customs Brokers Licensing Regulations, 2018 (CBLR).

A division bench comprising Justice Anil Kshetarpal and Justice Shail Jain observed that a Customs Broker occupies a position of trust and cannot escape disciplinary action for regulatory non-compliance merely because the customs authorities failed to establish prior knowledge or active connivance in the underlying smuggling attempt.

The appellant, a licensed Customs Broker since 1995, challenged an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) which affirmed the revocation of his licence, forfeiture of his ₹75,000 security deposit, and imposition of a ₹50,000 penalty. Disciplinary proceedings were initiated after intelligence led to the interception of an export consignment destined for Sweden declared as "decorative iron material," which upon examination was found to contain 1,158 kilograms of prohibited Red Sanders logs. Investigations revealed that the appellant had lent his licence and credentials to his G-card holder for ₹10,000 per month and filed the Shipping Bill without obtaining any authorization from the named exporter.

The primary questions before the High Court were whether lending a Customs Broker licence and dongle for consideration violates Regulation 1(4) of the CBLR, 2018, and whether the extreme penalty of licence revocation and security forfeiture was disproportionate in the absence of established mens rea in the smuggling attempt.

Parting With Licence And Dongle For Consideration Violates CBLR

The High Court observed that Regulation 1(4) of the CBLR, 2018 explicitly mandates that every licence is granted in favour of the licensee and shall not be sold or otherwise transferred. The bench rejected the appellant's argument that there was no transfer of proprietary title, noting that the admitted receipt of ₹10,000 per month demonstrated an impermissible parting with credentials.

"The distinction, therefore, is between permitting a G-card holder to act on behalf of the Customs Broker and parting with the use of the Customs Broker's licence and dongle for a fixed monetary consideration. The latter conduct is expressly prohibited by Regulation 1(4) of the CBLR, 2018."

Online Verification Of IEC Does Not Substitute Mandatory Authorization

Addressing the contravention of Regulation 10(a) and Regulation 10(n), the court held that a Customs Broker is duty-bound to obtain an express authorization from the exporter and verify its functioning at the declared address. The bench emphasized that merely verifying the existence of an Importer Exporter Code (IEC) or GSTIN on an online portal cannot substitute direct client engagement.

The bench pointed out that the appellant had filed the Shipping Bill at the instance of a third party without ever contacting or seeking authorization from the exporter in whose name the shipment was cleared. The court distinguished its earlier ruling in Kunal Travels (Cargo) v. Commissioner of Customs, noting that the protection granted to brokers who innocently act on client-supplied information does not apply when the broker never obtained client authorization in the first place.

Absence Of Mens Rea Does Not Absolve Broker Of Independent Statutory Duties

The High Court clarified that disciplinary proceedings under the CBLR are distinct from criminal prosecution for customs offenses. The bench ruled that establishing prior knowledge of contraband is not a prerequisite to penalize a broker for serious regulatory breaches.

"The question whether the Appellant had prior knowledge of the prohibited goods is distinct from the question whether he discharged the independent statutory obligations imposed upon him as a Customs Broker."

Lack Of Evidence Under Regulation 10(e) Does Not Dilute Other Grave Breaches

While examining the statutory grounds, the High Court observed that the finding under Regulation 10(e) regarding incorrect information imparted to a client could not be sustained as no specific incorrect advice was identified in the order. However, the bench held that this omission does not vitiate the overall disciplinary action since independent violations under Regulations 1(4), 10(a), 10(d), and 10(n) stood conclusively proved.

Reiterating the Supreme Court's ruling in Commissioner of Customs v. K.M. Ganatra & Co., the bench stressed that a Customs Broker plays a pivotal role in cargo clearance and must adhere strictly to statutory diligence.

Revocation And Penalty Proportionate To Gravity Of Misconduct

On the question of proportionality, the High Court distinguished Nitco Logistics Pvt. Ltd. v. Commissioner of Customs, holding that this was not a case of an rogue employee misusing credentials without authority. Because the appellant knowingly rented out his dongle and filed unauthorized bills for prohibited goods, the court found the revocation and forfeiture fully justified.

"Having regard to the admitted lending of the licence and dongle for consideration, the absence of authorisation from the named exporter, and the use of the Shipping Bill in an attempted export of prohibited goods, the revocation of the licence, forfeiture of the security deposit and imposition of penalty cannot be characterised as shockingly or manifestly disproportionate."

Holding that the findings of the CESTAT suffered from no perversity or error of law, the High Court concluded that no substantial question of law arose under Section 130 of the Customs Act, 1962, and dismissed the appeal.

Date of Decision: 21 August 2026