2020 (1) TMI 946 - AT - Customs

Revocation of CHA license - imposition of penalty - it was alleged that the appellant was having the knowledge about the imported consignment to be mis-declared with respect to its description and value - section 11E of CBLR, 2013 - HELD THAT - The charge against the appellant is that they have not personally verified the existence of the importer and also failed to properly verify IFC Code and the actual person behind this import. Not only that, the appellant has got the two similar consignments in past. The SCN issued to the appellant does not explain as to which of the specific provisions of Section 11E has been violated by the appellant. However, in the SCN it is mentioned that the appellant failed in its duty of customs broker by not advising his client to comply with the provision of the Customs Act and to verify antecedent of importer/exporter and IFC code no., identify his client and there at the declared address by using reliable, independent, authentic document, data information. It is on record that the appellant has obtained all the records required for the verification of KYC documents of M/s Kamal imports at the time of import of their first consignment and on receipt of KYC documents, the appellant has also conducted verification of the address of the importer from KYC details and which was found to be in existence at their declared premises. As per Regulation 11 of the CBLR, 2013 there is no requirement of physical verification of registered premises of importer. The verification is only required to be done on the basis of documents which was done by the appellant, and is not disputed. An identical issue has also been dealt with by Hon ble Delhi High Court in case of COMMISSIONER OF CUSTOMS VERSUS HIM LOGISTICS PVT. LTD. 2017 (1) TMI 747 - DELHI HIGH COURT , where it is held that the CHA required to verify KYC norm, as per the documents submitted to them only. Thus, the customs house agent/customs broker is required to verify the antecedent of importer and based on the existence of IFC code and documents submitted to the CHA and not the basis of physical verification of the premises of the appellant, IE Code required to be verified from the DGFT site and other related documents such as PAN number, service tax, sale tax registration etc. There is no need for physical verification of the registered premises of the appellant for purpose of verification of KYC norm. Accordingly, the appellant has not failed in its duty casted upon him under the CBLR, 2013 as a customs broker. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Legitimacy of revocation of Customs Broker License.
2. Imposition of penalty under Customs Broker Licensing Regulation, 2013 (CBLR, 2013).
3. Compliance with Know Your Customer (KYC) norms.
4. Proper verification of Importer Exporter Code (IEC) and existence of the importer.
5. Allegations of negligence and connivance.

Detailed Analysis:

1. Legitimacy of Revocation of Customs Broker License:
The appellant's Customs Broker License was revoked by the Commissioner of Customs (Preventive) based on allegations of negligence and failure to comply with CBLR, 2013. The inquiry officer's report concluded that the appellant was guilty of unintentional negligence but found no evidence of connivance with the importer. Despite this, the Commissioner revoked the license and imposed a penalty.

2. Imposition of Penalty under CBLR, 2013:
The Commissioner imposed a penalty of ?50,000 on the appellant under Regulation 18, 20, and 22 of CBLR, 2013. The appellant argued that the Commissioner failed to independently appreciate the evidence and did not specify which clauses of Regulation 11 were violated. The Tribunal found that the show cause notice did not clearly explain the specific provisions violated by the appellant.

3. Compliance with Know Your Customer (KYC) Norms:
The appellant was accused of failing to verify the KYC documents of the importer, M/s Kamal Imports. The inquiry officer noted that the appellant did not meet the importer personally and failed to verify the antecedents and correctness of the IEC number. However, the Tribunal found that the appellant had obtained all necessary documents for KYC verification and conducted verification based on these documents, which is in compliance with Regulation 11 of CBLR, 2013.

4. Proper Verification of Importer Exporter Code (IEC) and Existence of the Importer:
The appellant was accused of not verifying the actual holder of the IEC and the existence of the importer at the declared address. The Tribunal noted that there is no requirement for physical verification of the registered premises of the importer under Regulation 11 of CBLR, 2013. The appellant had verified the address based on the documents provided, which was found to be in existence.

5. Allegations of Negligence and Connivance:
The inquiry officer's report stated that the appellant's actions were negligent but not deliberate. The Tribunal referred to several case laws, including Him Logistics Pvt. Ltd. Vs. Commissioner of Cus., New Delhi, which held that there is no stipulation for physical verification of the business premises of the importer. The Tribunal also noted that the Commissioner did not follow various decided cases and arbitrarily confirmed the charges against the appellant.

Conclusion:
The Tribunal set aside the impugned order passed by the Commissioner, finding that the appellant had not failed in its duty under CBLR, 2013. The revocation of the license and imposition of penalty were deemed unsustainable. The appeal was allowed with consequential benefits as per law.