2025 (4) TMI 576 - AT - Customs

Revocation of Customs Broker License - forefeiture of security deposit - levy of penalty - mis-declaratin of quantity and value of the goods in order to avail higher amount of drawback and other incidental export benefits - violation of provisions of Regulation 10(a) 10(d) and 10(n) of the CBLR 2018. Violation of of Regulation 10(a) - HELD THAT - The adjudicating authority has held that even though the appellant had procured the authorisation letters of the exporters they were not obtained from the exporters directly by the appellant. It has been accepted by the Ld Counsel that the appellant did not meet the exporter but the documents were received through Sh. Ram Pratap who was the appellant s friend and acquainted with one of the exporters. Rule 10(a) does not cast any responsibility on the appellant CB to obtain the authorisation from the exporter directly. It only requires the appellant to have the authorisation from the firm/company etc which was available with the appellant. Therefore the violation of 10(a) cannot be upheld. Violation of of Regulation 10(d) - HELD THAT - The appellant CB cannot be held responsible for the actions of the exporters. It is an admitted fact that the goods were found to be less in quantity as well as they were valued much higher than its cost. This was clearly an attempt by the exporters to defraud the Government by claiming higher drawback but the actions were purely of the exporters. The department has not been able to lead any evidence of any active collusion by the appellant or any evidence of the appellant CB having advised the exporters or assisted them in then activity. Consequently the conclusions reached by the adjudicating authority cannot be agreed upon. Violation of of Regulation 10(n) - HELD THAT - There is no evidence that the appellant CB did not undertake verification of the KYC documents. It is noted that IEC and Aadhar/PAN card are issued by the Government departments. Therefore any verification would be based on the copies of these documents submitted by the client/exporter which can be verified independently online in the respective portals. The Department cannot expect the appellant/CB to be responsible to ensure the correctness of the actions of the Government Department which have issued these certificates. Consequently verification of certificates as part of the obligation under Regulation 10(n) on the Customs Broker stands satisfied as long as it satisfies itself that the IEC and the Aadhar were issued by the concerned officers. Levy of penalty - HELD THAT - Once the goods were seized by the Department the said exporters did not come forward to claim the goods. It is a matter of concern is that when the goods were seized no one came forward to claim the said goods clearly evidencing the attempt of the exporters to defraud the government. This should have been a warning to the appellant CB that the export goods obviously did not belong to the exporters on paper. Though there is no collusion of the appellant CB in the attempt of the exporters to defraud the Government the appellant CB plays a crucial role in international trade. The CB has an obligation as the appointed agent to transact Customs formalities and is responsible for their clients. Therefore the appellant is liable for penalty. Conclusion - i) The revocation of CB license is set aside. ii) The forfeiture of security deposit is set aside. iii) The penalty of Rs 50, 000/- imposed on the appellant is reduced to Rs 25 000/-. Appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment were:

• Whether the revocation of the Customs Broker (CB) license of the appellant was justified under the Customs Broker Licensing Regulation (CBLR), 2018.
• Whether the appellant violated specific provisions of Regulation 10(a), 10(d), and 10(n) of the CBLR, 2018.
• Whether the penalty imposed on the appellant was appropriate given the circumstances of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Violation of Regulation 10(a):

• Relevant legal framework and precedents: Regulation 10(a) requires a Customs Broker to obtain authorization from the exporter and produce it when required.
• Court's interpretation and reasoning: The Tribunal found that Regulation 10(a) does not mandate that the authorization must be obtained directly from the exporter. The appellant had the necessary authorization, albeit obtained through an intermediary, Ram Pratap.
• Conclusion: The Tribunal held that there was no violation of Regulation 10(a) by the appellant.

Violation of Regulation 10(d):

• Relevant legal framework and precedents: Regulation 10(d) obliges the Customs Broker to advise clients to comply with customs laws and report non-compliance to authorities.
• Court's interpretation and reasoning: The Tribunal noted that the appellant could not be held responsible for the exporters' actions, as there was no evidence of collusion or advice given by the appellant to commit fraud.
• Conclusion: The Tribunal disagreed with the adjudicating authority's conclusion and held that the appellant did not violate Regulation 10(d).

Violation of Regulation 10(n):

• Relevant legal framework and precedents: Regulation 10(n) requires the verification of the client's identity and functioning using reliable, independent, and authentic documents.
• Court's interpretation and reasoning: The Tribunal emphasized that the appellant fulfilled his obligations by verifying documents such as IEC, GSTIN, and PAN, which are issued by government departments. The Tribunal referenced previous judgments that supported this interpretation.
• Conclusion: The Tribunal found no violation of Regulation 10(n) as the appellant had verified the necessary documents.

Penalty Imposition:

• Relevant legal framework and precedents: The penalty was imposed due to the appellant's role in the transaction where fraudulent declarations were made by exporters.
• Court's interpretation and reasoning: The Tribunal acknowledged the appellant's role as a Customs Broker and the importance of diligence. Although no collusion was found, the appellant was deemed responsible for the oversight.
• Conclusion: The Tribunal reduced the penalty from Rs 50,000 to Rs 25,000, acknowledging the appellant's lack of collusion but emphasizing the need for vigilance.

3. SIGNIFICANT HOLDINGS

• Core principles established: The Tribunal clarified the scope of responsibilities under Regulations 10(a), 10(d), and 10(n) of the CBLR, 2018, emphasizing that a Customs Broker's obligations do not extend to verifying the correctness of government-issued documents beyond their authenticity.
• Final determinations on each issue:
• The revocation of the CB license was set aside.
• The forfeiture of the security deposit was set aside.
• The penalty was reduced from Rs 50,000 to Rs 25,000.

The Tribunal's decision reflects a nuanced understanding of the responsibilities of a Customs Broker, balancing the need for compliance with the recognition of the limitations of a broker's role in verifying client information. The judgment underscores the importance of due diligence while acknowledging the practical limits of a Customs Broker's obligations.