2022 (11) TMI 935 - AT - Customs

Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty for violation of Regulation 10(n) of CBLR 2018 - verification of correctness of Importer Exporter Code (IEC) number and Goods and Services Tax Identification Number (GSTIN) - verification of identity of client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. HELD THAT - On a query from the bench as to how the Customs Broker can be faulted when he relied on the IEC, GST Registration and several documents issued by the Government and if the exporters did not exist at all at the premises how these documents were issued by several Government officer - The officers are not mandated to ensure that the exporter(s) existed and were functioning from these premises but the Customs Broker is so mandated by Regulation 10(n) of the CBLR, 2018 which obligation does not get obliterated or diluted by the fact that officers of various departments have issued the documents. On examination of order in the case of Millenium Express Cargo it is found that, that was a case where the cigarettes were smuggled concealed in a consignment of induction cookers and the Bill of Entry was filed by the CHA whose licence was then revoked for violation of Regulations 13(e) and 13(o) of CHA licensing Regulations, 2004. Of these, 13(o) is pari materia with CBLR 10(n) under consideration in this case. In the case of Millenium express cargo, the CHA has not even ever claimed that it had verified the existence of the importer at the given address - Millenium express Cargo does not support the case of the Revenue since there is nothing on record to show that the exporters did not exist at the premises at the time of export or that the appellants were aware about the non-existence of the exporters when they filed the Shipping Bills. In fact, there is not even an assertion by the Revenue that on the day the Shipping Bills were filed the exporters did not exist at the premises. Documents issued by various Government officers - HELD THAT - It is common knowledge that in designing schemes for issuing registrations, certificates or providing incentives, two conflicting objectives of due diligence and facilitation are balanced. Too many checks can make life difficult for the exporter or the citizen and too much facilitation can open the doors for frauds. Determining the golden mean and where to draw the line is a matter of public policy. The extent of liberalization or tightening may also vary greatly from one system to another and that is also a matter of public policy. The entire system of exports is based heavily on trust and facilitation and very less emphasis on due diligence which enhances trade facilitation but also makes it vulnerable to misuse by fraudsters - the burden of this very liberal, open, scheme and its potential misuse cannot be put at the doorstep of a Customs Broker. Just as the officer s responsibility ends with doing his part of the job (which may be issuing a registration without physical verification or allowing exports without assessing the documents or examining the goods), the Customs Broker s responsibility ends with fulfilling his responsibilities under Regulation 10 of the CBLR, 2018. In dispute in these appeals is CBLR 10(n) which, as we have discussed above, does not require any physical verification of the address of the exporter/importer. Two verification reports in respect of this appellant state that the exporter is not bonafide . The third verification is self contradictory inasmuch as it, on the one hand, states that the exporter does not exist at the place and on the other hand confirms that physical copies of PAN and IEC were provided during verification. It is not clear who has provided these documents if the exporter did not exist at that premises. The reports nowhere state that the exporters never functioned from those premises and the GSTIN were issued by the department to non-existent firms or they ceased to function from those premises after the GSTIN were issued - In fact, it is not even clear what the officers meant that the exporters are not bonafide. If the officers report that some exporters are not bonafide, it does not establish that the Customs Broker had not fulfilled its obligations under Regulation 10(n). The entire case of the Revenue based on which the impugned order was passed was these verification reports which nowhere establish that the Customs Broker had not fulfilled its obligations under Regulation 10(n). The evidence available on record in the form of verification reports relied upon in the SCNs are vague and in some cases, even the name of the exporter who they were enquiring about is not indicated in them - the impugned orders revoking the Customs Brokers licences of the appellants forfeiting their security deposits and further imposing penalty on the appellants cannot be sustained and need to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Revocation of Customs Brokers' licenses under Customs Brokers Licensing Regulations (CBLR), 2018.
2. Forfeiture of security deposits.
3. Imposition of penalties for violating Regulation 10(n) of CBLR, 2018.

Issue-wise Detailed Analysis:

1. Revocation of Customs Brokers' Licenses:
The appellants, Customs Brokers (CB), had their licenses revoked under CBLR, 2018, and security deposits forfeited. The Directorate General of Analytics and Risk Management (DGARM) identified risky exporters involved in frauds who were handled by certain Customs Brokers, including the appellants. Show Cause Notices (SCN) were issued, and after inquiry, it was determined that the appellants violated Regulation 10(n) of CBLR, 2018, which mandates verifying the correctness of Importer Exporter Code (IEC), Goods and Services Tax Identification Number (GSTIN), identity, and functioning of clients at the declared address using reliable, independent, authentic documents, data, or information.

2. Forfeiture of Security Deposits:
The security deposits made by the appellants were forfeited as part of the penalties imposed for the alleged violation of Regulation 10(n) of CBLR, 2018. The appellants argued that their responsibility is fulfilled if they obtain at least two KYC documents and that physical inspection of client premises is not required. The Tribunal examined the extent of responsibility under Regulation 10(n), concluding that the Customs Broker is not required to ensure the correctness of the actions by government officers who issued the IEC and GSTIN.

3. Imposition of Penalties:
Penalties were imposed on the appellants for allegedly failing to verify the functioning of their clients at the declared address. The Tribunal analyzed the obligation under Regulation 10(n), concluding that the Customs Broker's responsibility is to verify the correctness of IEC and GSTIN, identity of the client using reliable documents, and functioning of the client at the declared address using reliable, independent, authentic documents, data, or information. The Tribunal found that the appellants had fulfilled their obligations under Regulation 10(n) and that the negative reports by jurisdictional GST officers did not prove that the exporters never existed at the declared premises when the Shipping Bills were filed.

Judgment:
The Tribunal concluded that the evidence available in the form of verification reports was vague and did not establish that the Customs Brokers had failed to fulfill their obligations under Regulation 10(n). The reports indicated that the exporters did not exist at the premises on the date of verification but did not clarify if they never existed or ceased to operate after the GSTIN and IEC were issued. Consequently, the impugned orders revoking the Customs Brokers' licenses, forfeiting their security deposits, and imposing penalties were set aside, and the appeals were allowed with consequential relief to the appellants.

Order Pronounced:
The impugned orders were set aside, and the appeals were allowed with consequential relief to the appellants.