2024 (4) TMI 1102 - AT - Customs

Imposition Of Penalty - Revocation of the Customs Brokers licence - non-existent entities - violation of regulation 10 (n) of the Customs Brokers Licensing Regulations 2013 - No opportunity to cross examine - violation of the principles of natural justice - HELD THAT - DGARM did some analysis and came to the conclusion that several GST registrants did not exist and did not operate from their business addresses at all. It is undisputed that their registrations were issued by the very department which initiated the investigation. Thus the irresistible conclusion is that if the DGARM is correct then the department issued several benami (pseudonymous) GSTIN registrations to several entities which did not exist at all. Some of these non-existent entities were also filing GST returns with the department. These allegedly non-existent entities were also issued importer exporter codes (IEC) by the DGFT. Thus if the DGARM is correct DGFT had issued benami IECs. Neither of the documents were enclosed to the SCN or provided to the appellant let alone giving the appellant an opportunity to cross examine those who sent them. This is clearly a violation of the principles of natural justice and on this ground alone the impugned order deserves to be set aside. The onus on the Customs Broker cannot therefore extend to verifying that the officers have correctly issued the certificate or registration. Of course if the Customs Broker comes to know that its client has obtained these certificates through fraud or misrepresentation nothing prevents it from bringing such details to the notice of Customs officers for their consideration and action as they deem fit. However the Customs Broker cannot sit in judgment over the certificate or registration issued by a Government officer so long as it is valid. In this case there is no doubt or evidence that the IEC the GSTIN and other documents were issued by the officers. So there is no violation as far as the documents are concerned. Any of the three methods can be employed by the Customs Broker to establish the identity of his client. It is not necessary that it has to only collect information or launch an investigation. So long as it can find some documents which are independent reliable and authentic to establish the identity of his client this obligation is fulfilled. Documents such as GSTIN IEC and PAN card issued etc. certainly qualify as such documents as none of these departments have any interest in the relationship between the client and the Customs Broker and these documents are presumed to be authentic and reliable having been issued by the Government officers. However these are not the only documents the Customs Broker could obtain; documents issued by any other officer of the Government or even private parties (so long as they qualify as independent reliable and authentic) could meet this requirement. While obtaining documents is probably the easiest way of fulfilling this obligation the Customs broker can also as an alternative fulfill this obligation by obtaining data or information. In the factual matrix of this case we are fully satisfied that the appellant has fulfilled this part of the obligation under Regulation 10(n). The fourth and the last obligation under Regulation 10(n) requires the Customs Broker 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 it is 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. Customs formations are only in a few places while exporters or importers could be from any part of the country and they hire the services of the Customs Brokers. In fact the entire verification report is based on the GSTIN. Further IECs issued by the DGFT also show the address. There is nothing on record to show that either of these documents were fake or forged. Therefore they are authentic and reliable and we have no reason to believe that the officers who issued them were not independent and neither has the Customs Broker any reason to believe that they were not independent. The responsibility of the Customs Broker under Regulation 10(n) does not include keeping a continuous surveillance on the client to ensure that he continues to operate from that address and has not changed his operations. Therefore once verification of the address is complete as discussed if the client moves to a new premises and does not inform the authorities or does not get his documents amended such act or omission of the client cannot be held against the Customs Broker. We therefore find that the Customs Broker has not failed in discharging his responsibilities under Regulation 10(n). The impugned order is not correct in concluding that despite obtaining and providing authentic documents issued by various Government officers the Customs Broker has violated Regulation 10(n) because the exporters were found to not exist during subsequent verification by the officers. Thus the appeal is allowed and the impugned order is set aside with consequential relief to the appellant.

Summary

Issues Involved:
1. Violation of Regulation 10(n) of the Customs Brokers Licensing Regulations, 2013.
2. Proportionality of revocation of Customs Broker's licence and imposition of penalty.

Summary:

Issue 1: Violation of Regulation 10(n) of the Customs Brokers Licensing Regulations, 2013

M/s. Shakti Cargo Movers [Importer] appealed against the order revoking their Customs Brokers' licence and imposing a penalty of Rs. 50,000/-. The Commissioner found the appellant in violation of Regulation 10(n), despite the inquiry officer's report suggesting no violations. The appellant argued that the principles of natural justice were violated as no disagreement note was provided, and the DGARM report was not enclosed with the SCN. The appellant contended that they had obtained all necessary documents, including GSTIN, IEC, Aadhar Card, PAN card, etc., to verify the authenticity of M/s. Shree Enterprises, which was alleged to be non-existent. The Tribunal found that the appellant had fulfilled their obligations under Regulation 10(n) by verifying the correctness of IEC and GSTIN, identity, and functioning of the client using reliable documents. The Tribunal emphasized that the Customs Broker is not required to oversee the correctness of actions by Government officers and is only required to verify that documents were indeed issued by the concerned officers.

Issue 2: Proportionality of Revocation and Penalty

The Tribunal noted that the revocation of the licence and the penalty were based on the findings that M/s. Shree Enterprises did not exist at the declared address. However, the Tribunal found that the Customs Broker had fulfilled their obligations under Regulation 10(n) by obtaining and providing authentic documents issued by various Government officers. The Tribunal concluded that the Customs Broker cannot be held responsible for subsequent non-existence of the client if the initial verification was done correctly. Therefore, the Tribunal set aside the impugned order, allowed the appeal, and provided consequential relief to the appellant.

Conclusion:

The appeal was allowed, and the impugned order was set aside with consequential relief to the appellant.

Order Pronounced:

(Order pronounced in open court on 29/04/2024.)