By Mr. Samir J Shah, Partner, JBS Group of Companies
Section 146 of the Customs Act 1962 reads as “License for Customs Brokers”.
Till 2013 the term Custom House Agent was used and the section was “Custom House Agents to be Licensed”. Effective 2013 the term is Customs Brokers and the section is “License for Customs Brokers”.
Section 146 – is an empowering section, which states that Board will make Regulations for the purpose of carrying out the provisions of this section and lists would be included.
Numerous Regulations have been made for Customs House Agents or Customs Brokers in India – 1960; 1965; 1971; 1984; 2004; 2013 and 2018. The approach is to ensure assistance to both Customs and trade, to have a professional assist them – the changes are a progression to realign with the changing work scenario.
The 2018 regulations extended the role of the Customs Broker to include Audit. A wonderful and well thought of extension.
The language and design of the various regulations have always been positive; respectful; encouraging and easy to comply with.
The conditions laid out for potential candidates wanting to attempt the exam are not too complicated with a relatively easy process of applying and appearing for the examination. The financial limits are not too stringent. The idea was that any one intellectually eligible should be granted a license.
While an individual has to clear the exam, the liberal provision is that the work of Customs brokerage can be undertaken in any desired commercial format – as a proprietor; firm; incorporated body or even an association. The regulations with clarity, permit change of constitution of the entity from / to any format as long as business entity employs a person who has passed the Customs Brokers exam.
The regulations are liberal enough to give existing Customs brokering entities (other than a proprietorship) the facility of continuing Customs clearance for a period of two years (without having an authorised person) by letting a G card holder employed in the entity, undertake the processes. In case of proprietorship concerns there is an added facility that a G card holder of five years who is not a graduate can also be eligible to appear for the exam in the prescribed two years. The liberties in the Regulations cannot be ignored.
A person attempting the Brokers exam is given 6 attempts to clear the exam; a person wanting to pass the G card exam is given 4 attempts and a H card holder permitted to work for 5 years.
The regulations also (with some conditions) permit the License holder to undertake Customs clearance at any Customs station nationwide. The Regulations provide for intimation only. At all locations he is also permitted to authorise a G card holder working with him to do all functions of filing and clearance that can be undertaken by the authorised person himself.
With a recent amendment the License has no renewal processes.
The regulations permit the license holder to employ as many personnel as he deems fit. This provides multiple employment and great entrepreneurship facilities to the License holder. The Licensee – a qualified professional – is free to be as entrepreneurial as he can manage.
The last few releases of the regulations have respected free enterprise. Earlier conditions of the Commissioner / Collector of Customs approving a schedule of rates to be charged has been done away with.
The 1960; 1965 and 1971 regulations not being available in full I cannot comment on the obligations laid down in those regulations. The 1984 regulations had 16 obligations; 2004 had 15; 2013 had 15 – albeit different and 2018 has 17 regulations. All the regulations are easy to comply.
Even in the unfortunate situation that there is a suspected misdemeanour the regulations provide for a show cause notice; delivery of reports to the Customs Broker; cross examination; personal hearing and a time bound disposal. A clear appeal mechanism is also laid out.
In such positive regulations what could go wrong?
It is noticed that field officers of the department use these regulations to threaten the Customs Broker with suspension or revocation. There is little regard for an important principle of Customs working i.e., proper officer. Every officer believes he is the proper officer for suspension or revocation. Unfortunately, the compliant Customs Broker who feels obligated towards the department for having Licensed him, accepts such threats and does what is expected out of him by the officer and not by the compliance mechanism established.
Both forget that the License was not given as a favour but as a result of the applicant passing a written and oral examination conducted by the department, the syllabus is humungous and open ended. The oral interview has always been conducted by a panel of very senior; learned; experienced Customs officials. It has always been a difficult exam and often the pass percentage is less than 5%. A lot of effort has been put in by the person who has passed the exam. There is no “favour” here.
Customs have been oscillating between being a regulator and a facilitating regulator – they cannot be facilitators. They are regulators and this role cannot be denied. How to implement the regulations is their choice. The Board understands the urgent; not negotiable need for trust and facilitation in all activities. However, the junior adjudicators are hesitant in taking action since they fear, that their actions may be viewed, such that they were taken with a motive. This results in no fair decision or action being taken. This percolates to the executive also. This results in holding everyone responsible even if no nexus can be established. The approach is let the senior decide without considering the hardships that are faced by others. Indian law of “innocent unless proved guilty” is never applied and the onus is on one to prove their innocence.
There is also an unexplained resistance against all the facilitation undertaken in the recent years. Even the users are surprisingly uncomfortable.
When a Licensee wants to operate at another Customs station the regulations provide for an intimation. Over the years the department has converted intimation into permission. This “permission” is granted as a discretionary favour.
The obligation 10 (n) is very unambiguously worded as verify correctness of ——– using reliable, independent, authentic documents, data or information; Ambiguity is introduced by officers thru questions like – did you meet the client / did you visit his place of work etc. Unnecessary stretching of a clear obligation. Many Customs brokers have suffered due to this approach and in almost all cases CESTAT has stated that there is no such requirement. In spite of so many decisions the departmental officers continue to take action with such reasoning. This remains the most used, misused, abused provision of the Regulation which time and again has been decided in favour of CBs. Authenticating a certificate issued by a Department of the Government by a private business entity is unnecessary.
The incidence of charging Customs Brokers under many of the sub regulations of regulation 10 remains rampant.
It does not stop here and the enthusiasm to charge the Customs Broker extends to any other law for the time being in force.
Many years ago, the Calcutta High Court delivered a judgement, that a Customs House Agent now Customs Broker ceases to be an agent once the cargo is cleared and delivered. A decision not challenged by the Department and not set aside. The present scenario is that for any and every omission or commission the first target is the Customs Broker.
The regulations provide for Prohibition, in case of doubt and a reasonable 30 days is given to complete the proposed investigation. Prohibition is rarely exercised and 30 days never respected.
Even the process to be followed for revocation of suspension is filled with coercion; delay and harassment. The appreciation that the Customs Broker is Licensed by the department, to support the department, in Customs clearance, is clearly missing and the licensee is viewed as a criminal. A departmental licensee is viewed as a criminal!!!!! The verdict is pronounced before the case is heard.
Intervention by Customs officers in the RMS era, both recorded and oral is very high. One can assume that Customs played an active role in the clearance. It is a mystery then, that only the Customs Broker is held as a co-noticee. One arm of Customs goes free and the other is pursued, accused and hounded.
Trade needs a face while dealing with Customs. The Customs Broker is the face of the department. If the department views the broker with so much suspicion, would it be correct to assume that they suspect their own face. The licensees are an extension of the department and the officers must view them as colleagues and not adversaries.
The licensees know the region where they operate; they are aware of so many cases and issues that happened before the officer was posted to a location. The wealth of information they possess is not captured by any automation. The Indian Customs Broker is as concerned about compliance; correctness of processes; safety; security and sovereignty of our great nation. The quality and quantum of nationwide submissions is a true testimony.
A sensitisation on the incomparable role of the Customs Broker is needed within the department.
The liability cast on lawyers when they represent cases is way too limited, as it should be for the Licensed Customs Broker – a professional – representing someone else.
There is an urgent need for the Department to ensure clarity amongst the field officers on why the regulations are made and the benefits of having over 11,000 qualified agencies employing around 1,00,000 persons supporting the clearances across India’s borders.
True facilitation would be that, Customs as a Department, recognise the role of Customs Brokers and accord them self-regulating procedures, process and practices. The Customs Brokers are a mature community fully capable of managing themselves. It is time that the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs entrusts the responsibility of regulating CBs to their national body in line with what the Government has done with Charted Accountants by an Act of Parliament in 1949.
