2023 (10) TMI 78 - AT - Customs

Revocation of suspension of the respondent s (Cotoms Broker) licence - irregular availment of IGST drawback and refund by using bogus manufacturing registration - failure to comply with Regulation 10(e) and 10(n) of CBLR, 2018 - HELD THAT - It has come on record that M/s Fine Overseas is a firm existing only on the papers which was created in the name of Shri Sirajul Kallu. The exporter was not existing at the address mentioned in the IEC. The IEC and bank accounts were obtained for facilitating the fraudulent exports to avail ineligible IGST refund / drawbacks. From the RBI remittances report regarding accepted realization of exports by M/s Fine Overseas during the relevant period it has come on record that remittance of Rs. 41,575 USD against one shipping bill was realized as against an amount of Rs. 2,10,14,836/- for 8 shipping bills. To our opinion and in light of the unretracted admission of respondents/ CB s G-card Holder about involvement of CB in this transaction we hold that this is a case of not merely the violation of Regulation 10(n) but a case of fraud committed by CB and fraud vitiates everything. The cardinal principal which is enshrined in section 17 of the Limitation Act is that fraud nullifies everything. This Tribunal in the case of M/S. SWASTIK CARGO AGENCY VERSUS COMMISSIONER CUSTOMS, (AIRPORT GENERAL) , NEW DELHI 2023 (5) TMI 725 - CESTAT NEW DELHI has held that this being a case of facilitating the fraudulent exports carried out and it being duly proved during the enquiry proceedings that the exporter were non-existent. CB is rightly held to have failed to verify the correctness of the document thereby violating its obligation as a customs broker even forfeiture of security deposit has rightly been ordered. In the light of the obligations conferred upon the CB by the Regulations CBLR, 2018 and the proven fraudulent act and conduct of CB on record, we hold that suspension of his licence is quite a proportionate penalty. The order under challenge is upheld to this extent. There is no violation of Regulation 10(e) has been set aside but violation of Regulation 10(n) of CBLR, 2018 by the appellant has been confirmed with confirmation that CB licence, in given circumstances is proportionate penalty - Appeal allowed in part.

Summary

Issues Involved:
1. Violation of Regulation 10(e) of CBLR, 2018.
2. Violation of Regulation 10(n) of CBLR, 2018.
3. Proportionality of punishment for the customs broker.

Summary:

Violation of Regulation 10(e) of CBLR, 2018:
The Tribunal examined whether the customs broker (CB) violated Regulation 10(e), which mandates due diligence in ascertaining the correctness of information imparted to clients. The Tribunal found no evidence that the CB imparted incorrect information to the exporter. The original adjudicating authority also did not find any such evidence. Consequently, the Tribunal confirmed the findings of the order under challenge, stating that there was no violation of Regulation 10(e).

Violation of Regulation 10(n) of CBLR, 2018:
Regulation 10(n) requires the CB to verify the correctness of the Importer Exporter Code (IEC), GSTIN, identity of the client, and the client's functioning at the declared address using reliable, independent, authentic documents. The Tribunal noted that the CB failed to visit the exporter's premises and relied on documents received from an agent, Shri Imran Khan, who never appeared before the authorities. The Tribunal found that the CB did not verify the existence of the exporter and failed to produce evidence of the exporter's business operations. The Tribunal upheld the findings of the Meerut Commissionerate, which reported that the exporter was non-existent at the declared address. Therefore, the Tribunal concluded that there was a violation of Regulation 10(n).

Proportionality of Punishment:
The Tribunal emphasized the role of the customs broker in ensuring compliance with customs regulations and preventing fraudulent activities. The Tribunal referred to various judgments, including those by the Hon'ble Supreme Court and the Hon'ble High Court of Calcutta, highlighting the responsibilities of a customs broker. Given the fraudulent nature of the exports facilitated by the CB, the Tribunal held that the suspension of the CB's license was a proportionate penalty. The Tribunal confirmed the violation of Regulation 10(n) and upheld the suspension of the CB's license.

Conclusion:
The appeal was partly allowed, confirming the violation of Regulation 10(n) and the proportionality of the penalty, while the cross-objections were allowed, leading to the suspension of the CB's license. The Tribunal set aside the finding of no violation of Regulation 10(e).