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TMI Blog2021 (2) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... expect a Customs House Agent to inquire into what is stated in the documents when there is a presumption that an appropriate background check is done by the Customs Authorities. In fact, the grant of Importer/Exporter Code Number is a proof regarding verification of facts and if the grant of such a code number to an entity at the address mentioned is in doubt, then for such erroneous grant of the Importer/Exporter Code Number, the appellant cannot be faulted. The basic requirement of Regulation 10 (n) is that the Customs Broker should verify the identity of the client and functioning of the client at the declared address by using, reliable, independent, authentic documents, data or information. For this purpose, a detailed guideline on the list of documents to be verified and obtained from the client is contained in the Annexure to the Circular dated April 8, 2010. It has also been mentioned in the aforesaid Circular that any of the two listed documents in the Annexure would suffice. The finding recorded by the Commissioner that the required documents were not submitted is, therefore, factually incorrect - the KYC documents were submitted by the appellant and the verification was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rra Traders Pvt. Ltd. [ Encanterra Traders ] had imported the said goods by filing two bills of entry at Chennai Seaport in which the goods were declared as popcorn variety of maize corn and thus DFIA benefit was availed to the tune of ₹ 42,56,540/-. It was further noticed that Encanterra Traders had also imported the goods at ICD, Tughlakabad and at Nhava Sheva Port and thus claimed benefits of ₹ 65,67,614/- and ₹ 26,11,520/- respectively. The goods at these two ports were also declared as popcorn variety of maize corn under Customs Notification dated April 01, 2015. 4. During the scrutiny it was also found that Encanterra Traders had exported protein concentrate pop-corn gluten under DFIA from ICD Tughlakabad through six Shipping Bills and the customs clearance work of export was facilitated by a Customs Broker called M/s Transpeed Logistics International Private Limited, which is the appellant in this appeal. 5. The dispute in this appeal is restricted to these six export Shipping Bills. 6. A statement of Lal Chand Sharma, F-card holder of the appellant was recorded on September 04, 2018 under section 108 of the Customs Act, 1962, wherein he interalia stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er documents required to meet the requirement of KYC. Further, no means rea has been alleged against the Appellant nor there is any finding regarding illegal gain made against the CHA. Further, Shri Lal Chand Sharma of the CHA company have retracted his statement particularly answer given to Question No. 1 and 2 in the statement recorded on September 04, 2018 at the first opportunity by letter dated September 10, 2018, addressed to the Deputy Director, DRI, Delhi, stating there that the answer to the said questions were dictated by the officer threatening him of harassment, if he does not toe their line. It was further clarified that the Appellant undertook work after proper authorization. Further, we find that the subsequent non availability of the said M/s Encanterra Traders Private Limite at their address or its Directors at their earlier residential address does not lead to any conclusion that the said M/s Encanterra Traders Private Limited is a fictitious company. We further find that it is nowhere alleged, in what way the Appellant did any irregularity in handling export consignment, for which they have filed the Bill of Entry on behalf of the said M/s Encanterra Traders Priv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Government of India. All these documents were submitted by the appellant to the Investigation Agency; (iii) There was no violation of regulations 10(a), 10(d), 10 (e) and 10(n) of the 2018 Regulations. Copies of the authorisation letters had been submitted as also the Importer Exporter Code number and GST number. The identity of clients was established by the KYC documents. Due diligence as per the practice was undertaken by the appellant. There was also no act or omission on the part of the F-Card holder since he acted in accordance with the Board Circular and exercised due diligence by procuring all the documents in accordance with the 2018 Regulations; (iv) The duty of a Customs Broker is confined to obtaining the relevant KYC documents and he cannot be held responsible for not physically verifying the address of the exporter, as has been observed by the Tribunal in various decisions; and (v) In support of the submissions, learned counsel for the appellant placed reliance on the following decisions: (a) Kunal Travels (Cargo) vs. CC (I G), IGI Airport, New Delhi [2017 (354) ELT 447 (Del.) ]. (b) Commissioner of Customs vs. Shiva Khurana [2019 (267) ELT 550 (Del.) ]. (c) Nim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly accepted and elaborated the dummy nature of Encanterra Traders in their voluntary statements which have never been retracted. 16. The submissions advanced by the learned Counsel for the appellant and the learned Authorised Representative of the Department have been considered. 17. The show cause notice alleges violation of regulations 10 (a), (d), (e) and (n) of the 2018 Regulations. They are reproduced: 10. Obligations of Customs Broker .-A Customs Broker shall- (a) obtain an authorisation from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commission of Customs, as the case may be; (d) advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in case of non-compliance, shall being the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be; (e) exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and the same is issued nine months prior to the date of invoices which raised a doubt on the authenticity of the authorization. The ownership of M/s Encanterra Traders is doubtful and the CB could not produce any documents as to who signed the authorization for custom purposes. Copies of the KYC and authorisation letter dated 19.09.2016 of Encanterra Traders were submitted vide letter dated 10.09.2018, as is clear from paragraph I at page 36 of the inquiry report dated 11.04.2019. The KYC was also submitted and the same is an admitted fact as per statement dated 04.09.2018 mentioned at paragraph 18 of impugned order. 10(d) AND 10(e) Advicethe client to comply with the provisions of the Act and the Regulations AND Exercise due diligence to ascertain the correctness of any information which he imparts to a client. The firm in question was proved to be non-existing and, therefore, there is no question of advising his client to comply with provisions of the Act. Customs Broker has failed to exercise due diligence to ascertain the correctness of the information which he furnished for the said firm since he never visited the two firms nor met any of the partners. Due diligence does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to avail undue benefits of DFIA. This fact has to be kept in mind in relation to the allegations made against Encanterra Traders because so far as the appellant is concerned, allegations have to be examined only in relation to the six export Shipping Bills. The appellant also claims that there is nothing on the record to substantiate that the appellant was aware about the ill-intention of Encanterra Traders in relation to import of goods since the appellant only undertook the clearance of export consignments and the export was under DFIA application. For this purpose, the appellant undertook a proper enquiry and all the KYC documents obtained from Encanterra Traders were submitted to the office of the Director of Revenue Intelligence through a letter dated September 10, 2018. The appellant claims that Encanterra Traders cannot be said to be a fictitious firm as the appellant sought verification from the Registrar of Companies and Director General of Foreign Trade who had provided the certificate as well as the IEC. The appellant also claims copies of the Aadhar Card, IEC, Pan Card, Certificate of Incorporation of the Company, Memorandum of Association and Article of Association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export consignments their relation with M/s ETPL. 38. The CB had helped M/s ETPL clear their six export consignments vide Shipping Bill Nos. 1173130 dated 21.09.2016, 7732664, 7732665, 7732730, 7732720 7732671 all dated 01.08.2017 from ICD-Tughlakabad which implies that the CB was in touch with the operators of M/s ETPL at least for the period of September, 2016 to October, 2017 . ********* 39. I find that Shri Lal Chand Sharma, F-card holder of the CB in his statements has admitted their fault that they did not verify antecedents of M/s ETPL in terms of Customs Broker Licensing Regulations and that they never met any of the directors of M/s ETPL. The Inquiry Officer in his report also has stated that the CB could not produce authorization from M/s ETPL. In their representation dated 22.04.2019 mentioned supra, the CB has stated that the statement of Sh. Lal Chand Sharma was recorded on 04.09.2018 but the answers of question number 1 and 2 were made to write under threat and coercion. The CB vide their letter dated 01.11.2018 (received in the office of the Commissioner of Customs (Airport General), NCH, New Delhi on 01.11.2018) have submitted copy of a letter dated 10.09.2018 addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n asked for providing the authorization from the Director of the company for clearing customs cargo as per Customs Broker Licensing Regulations, he could not provide the same. The Inquiry Officer in his report dated 11.04.2019 also talks about non-submission of authorization. The CB along with their letter dated 01.11.2018 (received in the office of the Commissioner of Customs (Airport General), NCH, New Delhi on 01.11.2018) have submitted copy of an authorization said to be issued by M/s. ETPL addressed to The Deputy Commissioner of Customs, ICD/TKD, New Delhi which is signed by some unnamed authorized signatory and the said letter does not bear any acknowledgement whatsoever. I find from the said authorization letter that the same pertains to five export invoices no ENC/0011/17-18 dated 26.06.2017 and ENC/0012/17-18 to ENC/0015/17-18 dated 28.06.2017. However, the date mentioned on the said authorization is 19.09.2016 (meaning thereby that the authorization has been issued more than 9 months prior to the date of invoices, that too for next financial year) this certainly raises questions on the authenticity of the so called authorization. Moreover, as discussed above ownership of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the eleven documents, the document at serial number. 4 is the Shipper s authorization letter. The same is reproduced below: The Deputy Commissioner of Customs ICD/TKD, New Delhi Subject : Authorization for Customs Clearance Respected Sir, We here by Authorize M/S. Transpeed LOGISTICS PVT LTD Address PLOT NO 47. SECOND FLOOR, KHESRA NO. 325/1/2 NATIONAL HIGHWAY-8, RANGPURI, NEW DELHI 110037. INDIA for Customs Clearance of our export shipment to our Dubai Buyer. Detail as under. Invoice number ENC/001/16-17 Dated 19.09.2016 Original KYC document handed over to CHA. Request you to kindly accept acknowledge the same. Thanking You M/S. ENCANTERRA TRADERS PVT. LTD. Rakesh Kumar (SD) Auth. Signatory 28. The Commissioner has ignored this letter for the reason that the authorization letter is signed by some unnamed authorized signatory. A perusal of the said letter clearly shows that it is signed by Rakesh Kumar, who is the Director of the Company. The Commissioner has also ignored this authorisation letter for the reason that it is dated September 19, 2016 and, therefore, has been submitted nine months prior to the date of invoices, which creates doubts about the authenticity of the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile Regulation 11(d) of CBLR, 2013] and Regulation 10(e) of CBLR, 2018 [erstwhile Regulation 11(e) of CBLR, 2013]. (emphasis supplied) 31. Learned Counsel for the appellant submitted that due diligence does not mean actual physical verification. In fact, the practice always has been to verify the correctness of the information provided by examining the KYC documents prescribed in the Circular dated April 08, 2010. 32. Paragraph 6 of the Circular provides for certain obligations on the Customs Broker to verify the correctness of Import/Export Code Number, identity and functioning of the client at the declared address by using reliable, independent, authentic documents, data or information. For this purpose, detailed guidelines on the features to be verified and obtained from the clients have been provided in the Annexure to the Circular. It has also been mentioned in the Circular that it would be obligatory for the client/customer to furnish a photograph in the case of an individual and those of the authorised signatory in respect of other forms of organisations, such as company/trusts and any two of the listed documents mentioned in the Annexure. 33. Out of the documents listed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is that the IE Code of the exporter M/s. H.M. Impex was mentioned in the shipping bills, this itself reflects that before the grant of said IE Code, the background check of the said importer/exporter had been undertaken by the customs authorities, therefore, there was no doubt about the identity of the said exporter. It would be far too onerous to expect the CHA to inquire into and verify the genuineness of the IE Code given to it by a client for each import/export transaction. When such code is mentioned, there is a presumption that an appropriate background check in this regard i.e. KYC etc. would have been done by the customs authorities. There is nothing on record to show that the Appellant had knowledge that the goods mentioned in the shipping bills did not reflect the truth of the consignment sought to be exported. In the absence of such knowledge, there cannot be any mens rea attributed to the Appellant or its proprietor. Whatever may be the value of the goods, in the present case, simply because upon inspection of the goods they did not corroborate with what was declared in the shipping bills, cannot be deemed as misdeclaration by the CHA because the said document was fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /exporter is undertaken by the Customs Authority, there should be no doubt about the identity of the said exporter. It would be too onerous to expect a Customs House Agent to inquire into what is stated in the documents when there is a presumption that an appropriate background check is done by the Customs Authorities. In fact, the grant of Importer/Exporter Code Number is a proof regarding verification of facts and if the grant of such a code number to an entity at the address mentioned is in doubt, then for such erroneous grant of the Importer/Exporter Code Number, the appellant cannot be faulted. 36. It transpires that for issuance of the aforesaid documents, a person has to make available number of authentic documents, most of which are documents issued by the Government of India. 37. Learned Authorized Representative of the Department has however submitted that at the time of issuance of IEC, the Director General of Foreign Trade only conducts a limited ten percent physical verification of IEC holders and it is not the policy of the Government to physically verify the address of the IEC holders at the time of issuance of IEC and, therefore, it is the duty of a Customs Broker t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 22 have got prolonged to an extent. The respondents are directed to complete the enquiry proceeding after giving two opportunities to the appellant in accordance with the provisions of Regulations and other provisions of law and pass final order at the earliest preferably within 3 months from today. The appellant had not taken this point of time bar before the High Court and therefore by the doctrine of constructive res judicata is prevented from raising this point in respect of the current proceedings which are in compliance of the direction of the Hon ble High Court. 41. The appeal filed by Millennium Express Cargo before the Delhi High Court was admitted only on this time limit and the following question of law was framed: The following question of law arises for consideration: Did the CESTAT fell into error in rejecting the appellant s contention that in the circumstances of the case the revocation was not sustainable in law for exceeding the time limit stipulated for commencement of proceeding? 42. The Delhi High Court found no fault in the order passed by the Tribunal on this issue and the relevant portion of the order of Delhi High Court is reproduced below: 17. The main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement of defence and also to specify in the said statement whether the Customs House Agent desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs. 21. It is, therefore, clear that Regulation 20 provides for suspension or revocation of licence and Regulation 22 deals with the procedure there for. At the time when the Court passed its order dated 25th February, 2015 an SCN had already been issued for the revocation of the appellant s licence. Therefore, this fact was present in the minds of both the counsel for the appellant as well as the respondent and naturally of the Court as well. The only thing that remained to be done was to complete the enquiry pursuant to such SCN. The direction issued obviously related to the enquiry that was required to be undertaken for revocation of the appellant s licence. It is for that purpose that the Court then granted more time. When it used the words final orders , it obviously meant the final revocation order. There can be no manner of doubt, therefore, that in para 2 of the order 25th February, 2015, the Court contemplated completion of the enquiry proceedings pursuant to the SCN issued for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the appellant had not followed the provisions of Regulations 10(d) and 10(e) of the Licensing Regulations are, therefore, erroneous. 10(n) of the Licensing Regulations 46. Regulation 10(n) requires the Customs Broker to verify the correctness of Importer/Exporter Code Number, Service Tax Identification Number, identity card of the client and functioning of the client at the declared address by using reliable, independent, authentic documents, data or information. 47. The Commissioner, made the following observations in regard to this regulation: 41.3 ************ From the preceding paras, I find that the CB indulged themselves in the clearance of impugned export consignment without verifying the antecedents of exporter and without verifying the KYC of exporter because the exporter M/s ETPL was a factitious firm which existed only on paper and its ownership was doubtful too. Sh. Lal Chand Sharma, F-card holder of M/s Transpeed Logistics Private Limited vide his voluntary statement dated 04.09.2018 recorded under Section 108 of the Customs Act, 1962, inter alia stated that they did not verify the address and other antecedents of the said exporting company. Thus, I find that the CB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Circular that any of the two listed documents in the Annexure would suffice. The finding recorded by the Commissioner that the required documents were not submitted is, therefore, factually incorrect. 50. As noticed above, the KYC documents were submitted by the appellant and the verification was undertaken by Anil, an employee who had made the Directors. The communications with the Encanterra Traders was also done through mail. The self attested Pan Card, Aadhar Card of the Director and Pan Card of the Company had been submitted by letter dated September 10, 2018. A physical verification of the premises, as noticed above, was not necessary to be carried out. The Commissioner, therefore, committed an error in holding that the appellant failed to ensure due compliance of the provisions of Regulations 10(n) of the 2018 Regulations. 51. The decision of the Tribunal in HLPL Global Logistics Pvt. Ltd. vs. Commissioner of Customs, (Airport Admn.), Kolkata [ 2019 (370) ELT 501 (Tri.-Del) ] would not be applicable in the present case since this decision relates to violation of the provisions section 114 of the Customs Act, 1962 and not the Licensing Regulations. The decision of the Patna ..... 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