2022 (6) TMI 15 - AT - Customs

Revocation of Customs Broker License - Forfeiture of security deposit - levy of penalty - licence of CB has been revoked for the reason that the exporters have fraudulently availed excess ITC, by receiving the goods at inflated prices from their supplier - HELD THAT - The role of CB is limited to facilitation of the imports and exports by filing the documents after due verification. Is the role beyond that envisaged in terms of any regulation under CBLR. The fraudulent credit if availed is a matter for investigation by the concerned Central/ State Tax Authorities. How can a CB be responsible for not advising the client, exporter in that respect?. How in case of exports when the exporter has been registered on the GSTN, after due verification and diligence by the GST authorities, the availability of the said GSTIN on the Export Invoices and the shipping documents be not enough to verify the identity of the exporter. In any case without GSTIN will it be possible to claim the IGST Refund in any circumstances. There are no merits in any of the findings recorded by the Principal Commissioner, in respect of any of the charges framed against the appellant under regulation 10 (a), (d), (e), (m) (n), whereas the findings recorded by the enquiry officer are more justifiable and logical. The enquiry officer has more reasonably concluded in the matter, and the appellant CB can at the most be held guilty for contravention of the Regulation 10 (n). Various High Courts have held that punishment for the offences should be proportionate to the gravity of offence. In the present it is not found that appellant was in any way responsible for any act of misconduct but is vicariously responsible for the acts of their employees, hence the punishment of revocation of licence is much harsh and disproportionate to the offences committed. The order of revocation of the license of CB and forfeiture of the security deposit is set aside - penalty is reduced from Rs 50,000/- to Rs 25,000/- - appeal allowed in part.

Issues Involved:
1. Violation of Regulation 10(a) of the CBLR, 2018.
2. Violation of Regulation 10(d) of the CBLR, 2018.
3. Violation of Regulation 10(e) of the CBLR, 2018.
4. Violation of Regulation 10(m) of the CBLR, 2018.
5. Violation of Regulation 10(n) of the CBLR, 2018.

Detailed Analysis:

1. Violation of Regulation 10(a) of the CBLR, 2018:
The Principal Commissioner alleged that the Customs Broker (CB) failed to obtain proper authorization from the exporter directly. The CB argued that they obtained detailed authorization duly signed by the exporters and submitted original copies to the Customs Preventive officers. The Inquiry Officer found that the CB obtained authorization through a representative, and the exporters did not deny the authorization. Hence, the charge was not proved. However, the Principal Commissioner disagreed, stating that the CB accepted documents from a person not an employee of the exporter and did not verify the genuineness and antecedents of the exporters, thus failing to fulfill the obligation of Regulation 10(a).

2. Violation of Regulation 10(d) of the CBLR, 2018:
The charge was that the CB failed to advise their clients to comply with the Customs Act, leading to fraudulent IGST credit claims. The CB contended that they advised the exporters to comply with all provisions and promptly provided information to customs officers. The Inquiry Officer found no evidence of the CB advising exporters to non-comply with legal provisions. The Principal Commissioner, however, concluded that the CB did not interact with the actual IEC holders, thus failing to advise them properly, leading to fraudulent IGST claims, and violating Regulation 10(d).

3. Violation of Regulation 10(e) of the CBLR, 2018:
The CB was accused of not exercising due diligence to ascertain the correctness of information imparted to clients. The CB argued that they cooperated with customs officers during investigations and ensured the presence of the exporters' representative. The Inquiry Officer found no evidence of the CB imparting incorrect information. The Principal Commissioner, however, held that the CB failed to exercise due diligence, accepted documents from an unauthorized person, and facilitated fraudulent exports, thus violating Regulation 10(e).

4. Violation of Regulation 10(m) of the CBLR, 2018:
The charge was that the CB failed to discharge duties efficiently, acting negligently in clearing consignments with different signatures on documents. The CB argued that they promptly informed exporters' representatives and provided required documents to customs officers without delay. The Inquiry Officer found no delay on the CB's part. The Principal Commissioner, however, found that the CB's inefficiency led to revenue loss and violated Regulation 10(m).

5. Violation of Regulation 10(n) of the CBLR, 2018:
The CB was charged with failing to verify the identity and functioning of their clients at the declared address. The CB argued that they verified KYC documents through government websites and that physical verification was not mandated. The Inquiry Officer found that the CB failed to verify the authenticity of authorization letters and did not communicate directly with exporters. The Principal Commissioner agreed, stating that the CB's failure to verify the business functioning of exporters and accepting documents from an unauthorized person proved the CB's contravention of Regulation 10(n).

Conclusion:
The Tribunal found the Principal Commissioner's findings less justifiable compared to the Inquiry Officer's logical conclusions. It held that the CB's license revocation was harsh and disproportionate to the offenses. The Tribunal modified the impugned order by setting aside the license revocation and forfeiture of the security deposit, reducing the penalty to Rs. 25,000, and restoring all licenses and cards to the CB. The appeal was partly allowed.

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