2025 (2) TMI 29 - AT - Customs

Revocation of the Customs Broker License - forefeiture of security deposit - levy of penalty - failure to comply with the obligations under Regulation 10(d) and Regulation 10(n) of the Customs Brokers Licensing Regulations (CBLR) 2018 - HELD THAT - In the impugned order at page 525 it has been observed that it is expected of a man of prudence to know the exporter or importer and rely on undisputed Government documents available in public domain. However it does not imply that in the stated facts of present case a CB can take such documents from a third party and also aver that compliance under Regulation 10 (d) (n) be taken as complete. If the action of CB in taking documents KYC from third party is justified then it will be contrary to the purpose of CBLR 2018 and also Section 146 and 147 of Customs Act 1962. After taking into consideration the inquiry report the officer concerned while passing the impugned order came to the conclusion that mere reference to documents handed over by Shri Lokesh Bansal and Mr. Tarun Jain without knowing the exporters does not constitute diligence which was required for verification of KYC documents. The officer concerned in the impugned order came to the conclusion that it is evident that Customs Broker failed to act in accordance with their obligation as mentioned in Regulation 10(d) 10 (n) of the Customs Broker Licensing Regulations 2018 as they did not verify the address or verified it and found it to be non-existing but did not report the same. It has been a serious lapse on part of the Customs brokers which resulted in loss of revenue. Inquiry Officer has confirmed the contravention of said regulation by the CB. Thus the CB has contravened the provisions of Regulations 10 (d) and 10 (n) of CBLR 2018. Therefore it is clear that the Additional Commissioner of Customs Nhava Sheva of Order-In-Original dated 29.11.2023 was not having jurisdiction to pass any order regarding violation of relevant provisions of CBLR 2018 by the appellant. Therefore if any observation was made by the Additional Commissioner of Customs Nhava Sheva of Order-In-Original dated 29.11.2023 regarding violation or non-violation of relevant provisions of CBLR it has no effect what so ever being without jurisdiction. Conclusion - It is evident that Customs Broker failed to act in accordance with their obligation as mentioned in Regulation 10(d) 10(n) of the Customs Broker Licensing Regulations 2018 as they did not verify the address or verified it and found it to be non-existing but did not report the same. The impugned order has been passed by the officer concerned after proper analysis of the facts of the present case and after proper appreciation of the relevant provisions of CBLR and therefore the impugned order is liable to be confirmed and the appeal appears to be without any merit and therefore it is liable to be dismissed. Appeal dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the Customs Broker, M/s. Purshotam Chatrabhuj Thackar, failed to comply with the obligations under Regulation 10(d) and Regulation 10(n) of the Customs Brokers Licensing Regulations (CBLR), 2018.
Whether the revocation of the Customs Broker License and the imposition of penalties were justified based on the alleged failures of due diligence.
Whether the findings and conclusions of the Additional Commissioner of Customs in the Order-In-Original dated 29.11.2023, which did not recommend action against the Customs Broker, impact the proceedings under CBLR, 2018.

ISSUE-WISE DETAILED ANALYSIS

Failure to Comply with Regulation 10(d) and 10(n) of CBLR, 2018

Relevant Legal Framework and Precedents: Regulation 10(d) requires a Customs Broker to advise clients to comply with the law and report non-compliance. Regulation 10(n) mandates verifying the Importer Exporter Code (IEC), GSTIN, client identity, and functioning at the declared address using reliable documents.
Court's Interpretation and Reasoning: The Tribunal found that the Customs Broker did not verify the client's identity and functioning at the declared address, dealing instead with third parties who were neither IEC holders nor in any official capacity in the firms.
Key Evidence and Findings: The investigation revealed that the addresses were non-existent and that the Customs Broker relied on documents from third parties without verifying the exporter's identity or address.
Application of Law to Facts: The Tribunal concluded that the Customs Broker's actions did not meet the due diligence requirements of Regulation 10(d) and 10(n), as they failed to verify the client's identity and address.
Treatment of Competing Arguments: The Customs Broker argued that they had complied with due diligence by obtaining necessary documents and that the responsibility for verifying the Factory Stuffing Permission lay with Central Excise officials. The Tribunal dismissed these arguments, emphasizing the broker's obligation to verify client identity and address.
Conclusions: The Tribunal upheld the findings that the Customs Broker failed to comply with the due diligence requirements under CBLR, 2018.

Justification for Revocation and Penalties

Relevant Legal Framework: Regulation 14 and 17 of CBLR, 2018, allow for revocation of licenses and imposition of penalties for non-compliance with regulatory obligations.
Court's Interpretation and Reasoning: The Tribunal found that the Customs Broker's failure to verify the client's identity and address constituted a serious lapse, justifying the revocation of the license and penalties.
Key Evidence and Findings: The inquiry report highlighted gross negligence by the Customs Broker in verifying client details, contributing to fraudulent export activities.
Application of Law to Facts: The Tribunal applied the provisions of CBLR, 2018, to the facts, finding that the broker's actions warranted the penalties imposed.
Treatment of Competing Arguments: The Customs Broker contended that they were not involved in fraudulent activities and that the penalties were unjustified. The Tribunal rejected these arguments, emphasizing the broker's regulatory obligations.
Conclusions: The Tribunal confirmed the revocation of the Customs Broker License and the imposition of penalties as justified under CBLR, 2018.

Impact of the Additional Commissioner's Findings

Relevant Legal Framework: The Additional Commissioner's findings, which did not recommend action against the broker, were considered in light of the CBLR, 2018 proceedings.
Court's Interpretation and Reasoning: The Tribunal noted that the Additional Commissioner did not have jurisdiction over CBLR violations, and his findings did not preclude action under CBLR, 2018.
Key Evidence and Findings: The Tribunal emphasized that the Additional Commissioner refrained from recommending action under CBLR, acknowledging that such matters fell under the jurisdiction of the Principal Commissioner/Commissioner (General).
Application of Law to Facts: The Tribunal determined that the proceedings under CBLR, 2018, were independent of the Additional Commissioner's findings.
Treatment of Competing Arguments: The Customs Broker argued that the Additional Commissioner's findings should preclude further action. The Tribunal dismissed this argument, clarifying the distinct jurisdictional boundaries.
Conclusions: The Tribunal held that the Additional Commissioner's findings did not impact the CBLR proceedings.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed the obligations of Customs Brokers under CBLR, 2018, to exercise due diligence in verifying client identity and address, emphasizing the serious consequences of non-compliance.
Final Determinations on Each Issue: The Tribunal upheld the revocation of the Customs Broker License and the imposition of penalties, dismissing the appeal as without merit.
Verbatim Quotes of Crucial Legal Reasoning: The Tribunal noted, "It is evident that Customs Broker failed to act in accordance with their obligation as mentioned in Regulation 10(d) & 10(n) of the Customs Broker Licensing Regulations, 2018 as they did not verify the address, or verified it and found it to be non-existing but did not report the same."

The appeal was consequently dismissed, with the Tribunal confirming the findings and actions taken under the CBLR, 2018.

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