2024 (10) TMI 844 - AT - Customs

Revocation of Customs Broker License - forfeiture of its security deposit - imposition of penalty - involvement of customs brokers in aiding and abetting fraudulent export activities by failing to verify documents and identities - misuse of factory stuffing permission - forgery of customs documents with the intention of availing drawback and other incentives fraudulently - inflation of value by manipulation of documents - HELD THAT - In the present case, there is nothing or record to show that the appellant/CHA had a prior knowledge about the exporters mentioned in the IE code to be non-existing person. It is apparent from record that one M/s. Lokesh Bansal, the partner of Aadinath Industries, he only used to manage bank account of M/s. Neminath Industries. The factory stuffing permission is also alleged to have been forged in the name of M/s. Neminath Industries. Though the factory stuffing permission in name of M/s. Aadinath Industries i.e. the exporter of the present appellant is also found forged but It is also an apparent fact mentioned in the show cause notice itself that the export invoice for the containers was signed by the Central Excise Officer which later got forged. Similar had been the modus operandi in case of M/s. Arihant Industries but apparently there is no such allegation vis- -vis M/s. Arihant Industries. In the present case, there is no evidence for the appellant to be the beneficiary of any drawbacks as alleged to have been wrongly received by the exporters. There was no need for any proceedings under CBLR to have been initiated against appellant. Department could not produce any evidence proving violation of 11(d) and 11(n) of CBLR, 2013. Accordingly, the order under challenge confirming said violation is hereby set aside - Appeal allowed.

Issues Involved:
1. Alleged involvement of customs brokers in aiding and abetting fraudulent export activities by failing to verify documents and identities.
2. Revocation of customs broker's license and imposition of penalties under the Customs Brokers Licensing Regulations, 2013 (CBLR, 2013).
3. Examination of obligations under Regulation 11(d) and 11(n) of CBLR, 2013.
4. Evaluation of the customs broker's responsibility in verifying the authenticity of documents and the identity of exporters.

Issue-Wise Detailed Analysis:

1. Alleged Involvement of Customs Brokers:
The case revolves around an investigation into fraudulent export activities by certain companies, where customs brokers, including the appellant, were alleged to have aided and abetted these activities. The customs brokers were accused of filing fabricated export documents and endorsing fake stuffing permissions, despite the absence of factory stuffing permissions. The investigation report identified the involvement of various customs brokers, leading to the issuance of a show cause notice proposing penalties under Section 114(iii) of the Customs Act, 1962, and actions under CBLR, 2013.

2. Revocation of License and Imposition of Penalties:
The appellant's license was revoked, and a penalty was imposed based on the finding that the appellant failed to advise clients on filing authentic documents and verify KYC documents, resulting in mis-declaration of goods. The appellant argued that they filed only four shipping bills for M/s. Arihant Industries, which had factory stuffing permissions. The appellant contended that they were not responsible for verifying the correctness of government-issued documents like GST registration and PAN cards.

3. Obligations under Regulation 11(d) and 11(n) of CBLR, 2013:
The Tribunal examined the obligations under Regulations 11(d) and 11(n) of CBLR, 2013, which require customs brokers to advise clients on compliance and verify the identity and functioning of clients using reliable documents. The Tribunal noted that the appellant filed only four shipping bills for M/s. Arihant Industries, which had the necessary factory stuffing permissions. The Tribunal found that the customs broker's role does not extend to verifying factory stuffing permissions, which are under the purview of Central Excise Officers and customs stations.

4. Responsibility in Verifying Authenticity of Documents:
The Tribunal held that customs brokers are not responsible for verifying the authenticity of documents issued by government authorities. The Tribunal referred to previous decisions, emphasizing that customs brokers are not expected to conduct background checks on clients or verify the genuineness of documents like IEC and PAN. The Tribunal found no evidence that the appellant had prior knowledge of any fraudulent activities or non-existent exporters.

Conclusion:
The Tribunal concluded that there was no evidence of the appellant violating Regulations 11(d) and 11(n) of CBLR, 2013. The customs broker's actions were based on documents provided by the exporters, and there was no requirement for them to verify the physical existence of the exporters. The Tribunal set aside the order revoking the appellant's license and imposing penalties, allowing the appeal. The decision emphasized that customs brokers are not liable for misdeclarations made by exporters when the brokers have acted based on legitimate documents provided by the exporters.

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