2024 (12) TMI 1318 - AT - Customs

Revocation of the Customs Broker License - forfeiture of security deposit - Levy of penalty - attempt to export Red Sanders, illegally - failure to exercise due diligence in verifying KYC of the exporter and the correctness of the goods to be exported has required under regulation 10(e) and 10(n) of CBLR, 2018. Violation of Regulation 10 (e) of CBLR 2018 - HELD THAT - It is an admitted fact that the exporter had produced the KYC documents, and the appellant verified the documents, online. Thus, the allegation regarding violation of Regulation 10 (e) of CBLR 2018 is unsustainable. Violation of Regulation 10 (n) of CBLR 2018 - HELD THAT - There was an act of negligence on the part of appellant to accept the documents through the representative of the exporters without considering the authorization of such representative. Since the appellant verified the documents through online and filed the shipping bill in good faith, it cannot be construed that they have actively involved themselves in the illegal attempt to export prohibited goods. Conclusion - The revocation of license and forfeiture of the security deposit set aside as the allegation regarding violation of Regulation 10 (e) of CBLR 2018 is unsustainable. However, considering the violation of Regulation 10 (n) of CBLR 2018, it is found that the penalty of Rs.50,000/- imposed on the Appellant under CBLR, 2018 is reasonable and tenable. The impugned order is modified - Appeal allowed in part.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the revocation of the Customs Broker License, forfeiture of security deposit, and imposition of penalty on the Customs Broker (CB) were justified under the Customs Broker Licensing Regulations (CBLR), 2018.
Whether the Customs Broker violated Regulation 10(e) and 10(n) of CBLR, 2018 by failing to exercise due diligence in verifying the Know Your Customer (KYC) documents and the authenticity of the goods being exported.
Whether the Customs Broker had any involvement or mens rea in the illegal export of prohibited goods, specifically Red Sanders.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Revocation, Forfeiture, and Penalty

Relevant legal framework and precedents: The case revolves around the interpretation of CBLR, 2018, particularly Regulations 10(e) and 10(n), which pertain to the obligations of Customs Brokers in verifying the authenticity of exporters and the goods being exported.
Court's interpretation and reasoning: The Tribunal found that while the Customs Broker verified KYC documents online and acted in good faith, there was negligence in accepting documents from a representative without proper authorization.
Key evidence and findings: The Customs Broker had verified the KYC documents online, and there was no evidence of active involvement in the illegal export attempt.
Application of law to facts: The Tribunal applied the principle that absence of mens rea or conscious knowledge is necessary to penalize a Customs Broker, as established in previous cases like M/s. Trinetra Impex Pvt. Ltd. and M/s. Hera Shipping Solutions Pvt. Ltd.
Treatment of competing arguments: The Tribunal considered the Revenue's argument regarding the interception of prohibited goods but found that the Customs Broker's role did not extend to verifying the physical goods, which is a statutory function of Customs.
Conclusions: The Tribunal concluded that the revocation of the license and forfeiture of the security deposit were not justified, but the penalty of Rs. 50,000/- was upheld due to negligence under Regulation 10(n).

Issue 2: Violation of Regulation 10(e) and 10(n) of CBLR, 2018

Relevant legal framework and precedents: Regulation 10(e) requires Customs Brokers to exercise due diligence in verifying the authenticity of the exporter, while Regulation 10(n) pertains to the verification of the correctness of the goods.
Court's interpretation and reasoning: The Tribunal found that the Customs Broker had complied with Regulation 10(e) by verifying KYC documents online. However, there was a lapse under Regulation 10(n) due to acceptance of documents from a representative without proper authorization.
Key evidence and findings: The Customs Broker's premises were not searched, and they were not arrested, indicating no substantial involvement in the illegal export scheme.
Application of law to facts: The Tribunal applied the legal principle that the Customs Broker's duty is to verify the genuineness of the exporter/importer and not the goods themselves.
Treatment of competing arguments: The Tribunal agreed with the Customs Broker's argument that physical verification of the exporter is not a legal requirement, as supported by precedents like M/s. HIM Logistics Pvt. Ltd.
Conclusions: The Tribunal concluded that the Customs Broker did not violate Regulation 10(e) but found negligence under Regulation 10(n), warranting a penalty.

3. SIGNIFICANT HOLDINGS

Verbatim quotes of crucial legal reasoning: "I agree with the Customs Broker's submission that they are not supposed to physically verify the address of the importer/exporter as the same is not a legal obligation on the part of the CB to fulfil."
Core principles established: The Tribunal reaffirmed that the absence of mens rea or conscious knowledge is crucial for penalizing a Customs Broker. The duty of a Customs Broker is to verify the genuineness of the exporter/importer and not the goods.
Final determinations on each issue: The Tribunal set aside the revocation of the Customs Broker License and forfeiture of the security deposit but upheld the penalty of Rs. 50,000/- for negligence under Regulation 10(n) of CBLR, 2018.

The appeal was partly allowed, modifying the impugned order to set aside the revocation of the license and forfeiture of the security deposit, while maintaining the penalty imposed.

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