2024 (9) TMI 781 - AT - Customs

Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - violation of Regulation 10(n) of CBLR - DGFT had issued benami IECs - onus to prove - HELD THAT - The IEC is issued by the Director General of Foreign Trade and the GSTIN is issued by the GST officers under the Central Board of Indirect Taxes and Customs of the Government of India or under the Governments of State or Union territory. The question which arises is has the Customs Broker to satisfy himself that these documents or their copies given by the client were indeed issued by the concerned government officers or does it mean that the Customs Broker has to ensure that the officers had correctly issued these documents. Regulation 10(n) does not place an obligation on the Customs Broker to oversee and ensure the correctness of actions by the Government officers. Such an interpretation would amount to saying that the Regulations under the Customs Act prevail over the actions under the Foreign Trade (Development and Regulation) Act, 1992 under which the IEC is issued by DGFT and the Central Goods and Services Tax Act (or state GST Act) under which the GSTIN is issued by the GST officers. Therefore, the verification of certificates part of the obligation under Regulation 10(n) on the Customs Broker is fully satisfied as long as the Customs Broker satisfies itself that the IEC and the GSTIN were, indeed issued by the concerned officers. The onus on the Customs Broker cannot, therefore, extend to verifying that the officers had correctly issued the certificate or registration. Of course, if the Customs Broker comes to know that its client obtained these certificates through fraud or misrepresentation, nothing prevents it from bringing such details to the notice of Customs officers for their consideration and action as they deem fit. However, the Customs Broker cannot sit in judgment over the certificate or registration issued by a Government officer so long as it is valid. In this case, there is no doubt or evidence that the IEC, the GSTIN and other documents were issued by the officers. So, there is no violation as far as the documents are concerned. The responsibility of the Customs Broker under Regulation 10(n) does not include keeping a continuous surveillance on the client to ensure that he continues to operate from that address and has not changed his operations. Therefore, once verification of the address is complete as discussed in the above paragraph, if the client moves to a new premises and does not inform the authorities or does not get his documents amended, such act or omission of the client cannot be held against the Customs Broker. The Customs Broker did not fail in discharging its responsibilities under Regulation 10(n). The impugned order is not correct in concluding that the appellant had violated Regulation 10(n) because the exporters were found to not exist during subsequent verification by the officers. The impugned order is set aside - Appeal allowed.

Summary

Issues Involved:
1. Violation of Regulation 10(n) of the Customs Brokers Licensing Regulations, 2018.
2. Proportionality of the revocation of the Customs Broker's licence, forfeiture of security deposit, and imposition of penalty.

Issue-wise Detailed Analysis:

1. Violation of Regulation 10(n) of the Customs Brokers Licensing Regulations, 2018:

The appellant, M/s. Jiva Cargo Logistics, was accused of violating Regulation 10(n) of the Customs Brokers Licensing Regulations, 2018. The Directorate General of Analytics and Risk Management (DGARM) identified suspicious GST registrants, some of whom had obtained Importer Exporter Codes (IEC) and actually exported goods. The appellant was one of the Customs Brokers identified as having processed exports for these registrants.

The Commissioner (Airport & General), New Delhi, suspended the appellant's licence and issued a Show Cause Notice (SCN), followed by an inquiry. The inquiry officer's report and subsequent impugned order concluded that the appellant had not fulfilled its obligations under Regulation 10(n).

The appellant contended that:
- The alleged violation was unsupported by facts.
- Verification was done only for five out of 34 suspicious exporters.
- The appellant had verified GSTIN and IEC from the relevant websites and obtained other identification documents from clients.
- The verification reports did not conclusively show that the exporters did not exist at the time of export.

The Tribunal found that:
- The verification reports did not establish that the exporters were non-existent at the time of export.
- The appellant had verified the correctness of IEC and GSTIN, and the identity and functioning of clients using reliable, independent, authentic documents.
- Regulation 10(n) does not require the Customs Broker to oversee the correctness of actions by government officers or to physically verify the client's premises.

2. Proportionality of the Revocation of the Customs Broker's Licence, Forfeiture of Security Deposit, and Imposition of Penalty:

The Tribunal examined whether the penalties imposed were proportionate to the alleged violation. It concluded that:
- The appellant had fulfilled its obligations under Regulation 10(n) by verifying the correctness of IEC and GSTIN and the identity and functioning of clients using reliable documents.
- There was no evidence that the appellant's clients were non-existent at the time of export.
- The Customs Broker is not required to keep continuous surveillance on clients to ensure they continue to operate from the declared address.

Therefore, the Tribunal found that the impugned order was incorrect in concluding that the appellant had violated Regulation 10(n). Consequently, the revocation of the Customs Broker's licence, forfeiture of the security deposit, and imposition of the penalty were deemed disproportionate.

Conclusion:

The appeal was allowed, and the impugned order was set aside with consequential relief to the appellant, as the Customs Broker did not fail in discharging its responsibilities under Regulation 10(n).