2024 (2) TMI 738 - AT - Customs

Revocation of Customs Broker license - forfeiture of security deposit - levy of penalty - involvement in fraudulent IGST refunds, who were not traceable, along with the details Customs Brokers involved in the clearance of the alleged risky consignments - violation of Regulation 10(n) of CBLR 2018 - HELD THAT - Regulation 10(n) requires the Customs Broker to verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN),identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. This obligation essentially involves two step verification viz., the correctness of IEC number and the correctness of GSTIN and in addition, verify the identity and functioning of the client using reliable, independent, authentic documents, data or information. It is noted that IEC and GSTIN are issued by the Government departments. Therefore, any verification would be based on the copies of these documents submitted by the client/exporter, which can be verified independently online in DGFT/GSTN portals. The Department cannot expect the appellant/CB to be responsible to ensure the correctness of the actions of the Government Department which have issued these certificates. Consequently, verification of certificates as part of the obligation under Regulation 10(n) on the Customs Broker stands satisfied as long as it satisfies itself that the IEC and the GSTIN were issued by the concerned officers. Under Regulation 10(n) the Customs Broker is required to verify the functioning of the client at the declared address using reliable, independent, authentic documents, data or information. This responsibility, again, can be fulfilled using documents or data or information so long as they are reliable, independent and authentic. Nothing in this clause requires the Customs Broker to physically go to the premises of the client to ensure that they are functioning at the premises. It is found that both the GSTIN as well as the IEC indicates the address of the client. This in itself is independent data to verify the correctness of the identity/address of the client. It is also noted that there is nothing on record to show that either of these documents were fake or forged. Therefore, once verification of the address is complete, the responsibility cast on the appellant under Regulation 10(n) stands fulfilled. The impugned order revoking the Customs Brokers license of the appellant, forfeiting their security deposit and further imposing penalty on the appellant cannot be sustained and are set aside - appeal allowed.

Summary

Issues Involved:
1. Violation of Customs Brokers Licensing Regulations (CBLR), 2018.
2. Principles of natural justice.
3. Verification obligations under Regulation 10(n) of CBLR, 2018.
4. Applicability of Board's circular under previous regulations.

Summary:

1. Violation of Customs Brokers Licensing Regulations (CBLR), 2018:
The appellant, M/s World Line Cargo Movers, faced revocation of their Customs Broker license, forfeiture of their security deposit, and a penalty of Rs. 50,000/- due to alleged violations of the CBLR, 2018. The jurisdictional Commissioner alleged that the appellant violated the provisions of CBLR, 2018 by not following the KYC guidelines, as they handled consignments of 48 risky exporters involved in fraudulent IGST refunds, whose premises were untraceable.

2. Principles of natural justice:
The appellant contended that no relied upon documents, such as the DGARM report, were shared with them, violating the principles of natural justice. They argued that the non-traceability of exporters alone is insufficient to assume fraudulent exports and ineligibility for IGST refunds. They also pointed out that there was no evidence in the Show Cause Notice, Inquiry report, or the impugned order to substantiate that the exports were incorrect or illegal.

3. Verification obligations under Regulation 10(n) of CBLR, 2018:
The appellant argued that they had complied with Regulation 10(n) by verifying the identity and functioning of the exporters using reliable, independent, authentic documents. The Tribunal agreed, noting that the Customs Broker's responsibility is fulfilled if they obtain at least two KYC documents and verify the correctness of the IEC and GSTIN issued by the Government departments. The Tribunal emphasized that the Customs Broker is not required to physically inspect the premises of each client and that the verification of certificates stands satisfied as long as the IEC and GSTIN were issued by the concerned officers.

4. Applicability of Board's circular under previous regulations:
The appellant argued that the Board's circular cited by the department was issued under the earlier Custom House Agents Licensing Regulations, 2004, and is no longer valid after the promulgation of CBLR, 2018. The Tribunal noted that the Customs Broker is not required to physically verify the client's premises and that the verification of the client's identity and functioning can be done through reliable, independent, authentic documents, data, or information.

Conclusion:
The Tribunal concluded that the appellant had not violated Regulation 10(n) of CBLR, 2018, as they had verified the identity and functioning of the exporters using reliable documents. The impugned order revoking the Customs Broker's license, forfeiting the security deposit, and imposing a penalty was set aside. The appeal was allowed with consequential relief.