2024 (10) TMI 687 - AT - Customs

Levy of penalty under Regulation 18 of Customs Broker Licensing Regulation, 2018 - mis-declared and prohibited goods, including E-Cigarettes concealed with the declared goods - failure to verify the antecedents of KYC of the actual beneficiary - failure to fulfill its obligations under Regulation 10(n) of the CBLR, 2018 - HELD THAT - Both the inquiry officer and the Adjudicating Authority had recorded the finding that the CB has obtained all the KYC documents of Shri Arun Goel, proprietor of M/s. Aparna Overseas (importer). Even in the show cause notice, it has been noted that the CB had produced the KYC documents along with authorisation from the importer. It has also come on record that the CB contacted the importer and made inquiry about their IEC and KYC details and also verified their address. The provisions of Regulation 10(n) imposes the obligation on the CB only qua their client, which in the present case is the importer, in respect of whom the importer here fulfilled all the responsibility. Thus, the CB complied with the obligations as per Regulation 10(n) and thereby acted with due diligence. Consequently, there is no contravention of the said provisions. Further, from the records of the case, it appears that CB provided the mobile numbers of Ashok Kumar, his wife and son, and also the residential address, Card number and also provided necessary assistance, which enabled the Investigating Authority to trace out Shri Ashok Kumar. The fact that the consignment contained E-Cigarettes revealing mis-declaration of goods was promptly informed by the CB to the departmental officers. The Investigating Authorities were able to examine Dr. Rajesh Kumar and the CB several times. All this is sufficient to show that the CB duly cooperated with the department. Once there is no violation of the provisions of Regulation 10(n), there is no justification to impose any punishment under the provisions of CBLR. It is highly improper to impose a burden on the CB to verify, who is the actual beneficiary in a transaction. The CB cannot be expected to act as an investigating agency and go beyond his obligations of verifying the KYC of his client. Both the Enquiry Officer and the Adjudicating Authority have laid unnecessary emphasis on the statement made by the proprietor of the CB that in his opinion, he is the actual beneficiary of the goods. Mere opinion at a later stage when the goods were found to be mis-declared is not sufficient to bring the contravention of the provisions of Regulation 10(n). The fact that Ashok Kumar was coordinating with the CB, the CB was under the bonafide belief that he was merely a representative of the importer or IEC holder. In the show cause notice the only allegation made against the appellant is the violation of the provisions of Regulation 10(n) of CBLR, 2018 and a finding to that effect has been recorded in favour of the appellant - the impugned order in so far as it imposes the penalty of Rs.50,000 on the CB is unsustainable and is set aside - appeal allowed.

Summary

Issues:
- Imposition of penalty under Regulation 18 of Customs Broker Licensing Regulation, 2018
- Allegations against Customs Broker for failure to verify antecedents of actual beneficiary
- Compliance with Regulation 10(n) of CBLR, 2018 by Customs Broker
- Justification of penalty imposed on Customs Broker

Analysis:
The judgment by the Appellate Tribunal CESTAT New Delhi involved an appeal against the imposition of a penalty of Rs.50,000 under Regulation 18 of Customs Broker Licensing Regulation, 2018. The case stemmed from an investigation initiated by Customs Preventive, New Delhi following an alert regarding mis-declared and prohibited goods in a high-risk import consignment. The Customs Broker, M/s. Mahavir Logistics, was alleged to have failed in verifying the antecedents of the actual beneficiary, Shri Ashok Kumar, who handled the import on behalf of the declared importer, M/s. Aparna Overseas. The Inquiry Officer found the Customs Broker did not conduct due diligence regarding the actual beneficiary, leading to the penalty imposition.

The primary issue revolved around whether the Customs Broker violated Regulation 10(n) of CBLR, 2018. The regulation mandates verifying the correctness of Importer Exporter Code (IEC) number, GSTIN, and client identity. The Tribunal observed that the Customs Broker had fulfilled its obligations by obtaining all KYC documents of the importer, M/s. Aparna Overseas, and verifying their address and credentials. The regulation only imposes obligations on the Customs Broker concerning their client, the importer in this case, which the Customs Broker had diligently fulfilled, leading to a finding of no contravention of Regulation 10(n).

Additionally, the Tribunal noted that the Customs Broker had cooperated with the investigating authorities by providing necessary assistance and information, enabling the tracing of the actual beneficiary, Shri Ashok Kumar. The Tribunal emphasized that the Customs Broker's role was not to act as an investigating agency but to ensure compliance with KYC formalities of their client. The judgment highlighted that the Customs Broker's sincere cooperation and fulfillment of obligations absolved them from any penalty imposition under the CBLR Regulations.

The Tribunal further critiqued the Adjudicating Authority's emphasis on identifying the beneficial owner, noting that the Customs Broker cannot be burdened with verifying the actual beneficiary beyond their client. The judgment underscored that the Customs Broker's belief that Shri Ashok Kumar was a representative of the importer was reasonable, given the information available. Ultimately, the Tribunal found the penalty imposed on the Customs Broker unsustainable and set it aside, allowing the appeal in favor of the Customs Broker.