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2022 (1) TMI 115 - AT - CustomsRevocation of Customs Broker License - forfeiture of security deposit - levy of penalty - three exporters finding to be non-existent - document to support the allegation that the other exporters existed or not - case of the Revenue is that since these firms were found to be not functioning from the registered premises when physically verified by the Departmental officers, they never existed in the first place and it was the obligation of the appellant as a Customs Broker to verify correctness of Importer Exporter Code (IEC) number - CBIC Circular no. 9/2010-Customs dated 8.4.2010 - HELD THAT - The Customs Broker is not Omniscient and Omnipotent. The responsibility of the Customs Broker under Regulation 10(n) does not extend to ensuring that all the documents issued by various officers of various departments are issued correctly. The Customs Broker is not an overseeing authority to ensure that all these documents were correctly issued by various authorities. If they were wrongly issued, the fault does not lie at the doorstep of the Customs Broker and it is not up to the Customs Broker to doubt the documents issued by the authorities and he cannot be faulted for believing them to be correct. As far as the documents issued by various Government officers are concerned the submission of the learned departmental representative is interesting and needs a deeper examination. It is his submission that the documents were neither issued fraudulently nor issued carelessly but were issued within the mandate of the officers who issued them and this mandate does not include physical verification - It is common knowledge that in designing schemes for issuing registrations, certificates or providing incentives, two conflicting objectives of due diligence and facilitation are balanced. Too many checks can make life difficult for the exporter or the citizen and too much facilitation can open the doors for frauds. Determining the golden mean and where to draw the line is a matter of public policy. The extent of liberalization or tightening may also vary greatly from one system to another and that is also a matter of public policy. The entire system of exports is based heavily on trust and facilitation and very less emphasis on due diligence which enhances trade facilitation but also makes it vulnerable to misuse by fraudsters. The IEC is issued by DGFT based only on an online application and a few easy to obtain documents. So, one cannot rule out the possibility of an IEC being issued without the person even operating its business from the address. The IEC forms the foundation for the entire system of controls and, in turn, is the basis for issue of various licences and scrips by the DGFT and is also the basis for Customs allowing exports. In view of the customs RMS letting 80% to 95% of the exports without either assessing the documents or examining the records, there is a very high probability of any fraudster successfully exporting the goods (or even empty containers) and claiming the export incentives and profiting from it. Both the financial gain to an individual and the aggregate financial impact on the budget are large but the policy and schemes are not designed mainly to facilitate the good guys and genuine exporters and not to keep the crooks out - Just as the officer s responsibility ends with doing his part of the job (which may be issuing a registration without physical verification or allowing exports without assessing the documents or examining the goods), the Customs Broker s responsibility ends with fulfilling his responsibilities under Regulation 10 of the CBLR, 2018. In dispute in this case is CBLR 10(n) which, as we have discussed above, does not require any physical verification of the address of the exporter/importer and the appellant has fully met his obligations under Regulation 10(n). The only allegation against the appellant in the impugned order is that it violated Regulation 10 (n) which is not true - in the factual matrix of the case and evidence available on record, the Commissioner was not correct in holding that the appellant Customs Broker has violated Regulation 10(n) of CBLR, 2018. Appeal allowed - decided in favor of appellant.
Issues Involved
1. Violation of Regulation 10(n) of Customs Brokers Licensing Regulations (CBLR), 2018 by the Customs Broker (CB). 2. Revocation of the CB's license. 3. Forfeiture of the security deposit. 4. Imposition of a penalty of ?50,000. Detailed Analysis 1. Violation of Regulation 10(n) of CBLR, 2018 The primary issue is whether the Customs Broker (CB) violated Regulation 10(n) of CBLR, 2018, which requires the CB to verify the correctness of the Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN), identity of the client, and functioning of the client at the declared address using reliable, independent, authentic documents, data, or information. Factual Background: The Directorate General of Analytics and Risk Management (DGARM) identified risky exporters who were not found at their registered premises. The CB handled exports for these exporters, leading to a Show Cause Notice (SCN) and an inquiry. The Inquiry Report and the Commissioner’s order concluded that the CB violated Regulation 10(n). Findings: - The CB obtained various documents such as GST Registration, IEC Registration, PAN cards, and other documents which were issued by government authorities. - The Commissioner held that these documents were not sufficient to fulfill the obligations under Regulation 10(n), citing a need for physical verification. - The Tribunal found that the CB had fulfilled its obligations by obtaining reliable, independent, and authentic documents. The CB is not required to verify the correctness of the issuance of these documents by government officers. Conclusion: The Tribunal concluded that the CB did not violate Regulation 10(n) as it had obtained all necessary documents from reliable sources, fulfilling its obligations. 2. Revocation of the CB's License The revocation of the CB’s license was based on the alleged violation of Regulation 10(n). Findings: - The Tribunal found that the CB had not violated Regulation 10(n). - The CB had relied on documents issued by government authorities, which were presumed to be genuine under Section 79 of the Evidence Act, 1872. Conclusion: Since the CB did not violate Regulation 10(n), the revocation of the license was not justified. 3. Forfeiture of the Security Deposit The forfeiture of the security deposit of ?50,000 was also based on the alleged violation of Regulation 10(n). Findings: - The Tribunal found no violation of Regulation 10(n) by the CB. - The CB had fulfilled its obligations by verifying the documents as required. Conclusion: The forfeiture of the security deposit was not justified as there was no violation of Regulation 10(n). 4. Imposition of a Penalty of ?50,000 The penalty of ?50,000 was imposed on the CB for the alleged violation of Regulation 10(n). Findings: - The Tribunal found that the CB had complied with Regulation 10(n). - The CB had obtained all necessary documents from reliable and authentic sources. Conclusion: The imposition of the penalty was not justified as there was no violation of Regulation 10(n). Final Judgment The Tribunal set aside the impugned order, including the revocation of the CB’s license, forfeiture of the security deposit, and imposition of the penalty. The appeal was allowed with consequential relief.
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