2024 (7) TMI 1174 - HC - Customs

Fraudulent availment of Integrated Goods and Services Tax (IGST) refund as well as drawback benefits - infarction of Regulation 10 (n) of CBLR - CESTAT observed that suspension of the license of the appellant was a proportionate penalty - HELD THAT - The CESTAT has clearly committed a patent illegality in construing suspension to be a penalty which is otherwise contemplated under the CBLR 2018. It is pertinent to note that suspension is a measure which can be adopted by the respondents in situations where they be of the opinion that immediate action is required to be taken against a CB pending investigation and inquiry as is contemplated under Regulation 16 - the CESTAT has in effect handed down an order as a result of which an order of suspension would continue in perpetuity. The impugned is thus rendered unsustainable on this score alone. A reading of Regulation 10 (n) reveals that the CB would not be in violation of its obligations if he has relied on reliable, independent, authentic documents, data or information such as the IEC and GSTIN which are issued by the Director General of Foreign Trade DGFT and GST Officers respectively. Furthermore, Regulation 10 (n) does not necessitate a physical verification of the veracity of the exporter. There are merit in the contention of the appellant that the CESTAT committed a manifest illegality in holding that the appellant was guilty of having failed to discharge the obligation placed in terms of Regulation 10 (n) of CBLR 2018 - It is thus apparent that the judgment handed down by the CESTAT is patently erroneous and cannot be sustained. The order of the CESTAT dated 03 October 2023 is set aside - appeal allowed.

Summary

Issues:
1. Impugning final order passed by CESTAT
2. Allegations of fraudulent exports and violation of CBLR 2018
3. Suspension of Customs Broker license
4. Interpretation of penalty and suspension under CBLR 2018
5. Violation of Regulation 10 (n) of CBLR 2018

Analysis:

1. The appellant challenged the final order passed by the Customs, Excise And Service Tax Appellate Tribunal [CESTAT] dated 03 October 2023, which upheld the suspension of the Customs Broker's license due to alleged fraudulent exports by the appellant.

2. The appellant, a Customs Broker, faced allegations of facilitating fraudulent exports leading to the withdrawal of permission and suspension of the license by the Principal Commissioner of Customs under Regulations 10 (e) and 10 (n) of Customs Brokers Licensing Regulations, 2018 [CBLR 2018].

3. The Commissioner of Customs suspended the CB License held by the appellant, which was later revoked, prompting the respondent to appeal to CESTAT, resulting in the suspension being upheld.

4. The High Court found that CESTAT erred in considering suspension as a penalty under CBLR 2018, highlighting that suspension is a temporary measure pending investigation, while penalties are specifically outlined in the regulations.

5. The Court examined the alleged violation of Regulation 10 (n) by the appellant, focusing on the statement of the authorized representative of M/s Fine Overseas and the obligations of a Customs Broker to verify client information using reliable documents, data, or information.

6. The Court concluded that CESTAT's judgment was erroneous as the appellant did not violate Regulation 10 (n) by relying on authentic documents like IEC and GSTIN, leading to the appeal being allowed and the CESTAT's order dated 03 October 2023 being set aside.