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TMI Blog2023 (2) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... t Taxes and Customs [CBIC] analysed the data and identified risky exporters involved in execution of frauds and got verification done by the jurisdictional GST officers and identified exporters who could not be found at all physically at their registered premises. DGARM also found that exports by these exporters were handled by certain Customs Brokers including the appellant herein and reported to the respective Commissionerates including the Respondent herein. The Respondent issued a show cause notice [SCN] to the appellant and appointed an Inquiry officer. After considering the reply to the SCN and the inquiry report, the Commissioner passed impugned order holding that the appellant had violated Regulation 10(n) of the CBLR. This Regulation reads as follows: 10. Obligations of Customs Broker.-A Customs Broker shall- ... (n) verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN),identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information; 4. Since this case requires deciding the scope of Regulation 10(n) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... client at the declared address using reliable, independent, authentic documents, data or information 7. Of the above, (a) and (b) require verification of the documents which are issued by the Government departments. The IEC number is issued by the Director General of Foreign Trade [DGFT] and the GSTIN is issued by the GST officers under the CBIC under Government of India or officers under the Governments of State or Union territory. The question which arises is whether the Customs broker is required to satisfy itself that these documents or their copies given by the client were, indeed issued by the concerned government officers OR is the Customs Broker also required to ensure that the officers have correctly issued these documents. our considered view, Regulation 10(n) of CBLR cannot be read to mean the latter as it would imply treating the Customs Broker as one who is competent and responsible to oversee and ensure the correctness of the actions by the Government officers. It would also mean that actions by the Customs Broker under the CBLR prevail over the actions by officers under the Foreign Trade (Development and Regulation) Act, 1992 (under which the IEC is issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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....." (emphasis supplied)." Of course, if the Customs Broker comes to know that its client had 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 these cases, there is no doubt or evidence that the IEC and the GSTIN were issued by the officers. So, there is no violation as far as the documents are concerned. 9. The third obligation under Regulation 10(n) requires the Customs Broker to verify the identity of the client using reliable, independent, authentic documents, data or information. In other words, he should know who the client is and the client cannot be some fictitious person. As per the Regulation, this identity can be established by independent, reliable, authentic: a) documents; b) data; or c) inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clients for verification. For instance, if an importer from a small town in, say, Madhya Pradesh imports goods through ICD Tughlakabad in Delhi, the Customs Broker operating in Delhi cannot be expected to leave his entire business and travel to that town to verify physically if the importer, indeed, is functioning from that address. If Regulation 10(n) is interpreted to burden the Customs Broker with such a responsibility, it will not only be far too onerous to the Customs Broker but it will also make it impossible for anyone in the country to import/export unless he/she can find a Customs Broker willing to travel to his/her town for physical verification. This Regulation cannot be read so as to cause such harassment to the Customs Brokers and to the importers/exporters. This Regulation, in fact, gives the option of verifying using documents, data or information. If there are authentic, independent and reliable documents or data or information to show that the client is functioning at the declared address, this part of the obligation of the Customs Broker is fulfilled. If there are documents issued by the Government officers which show that the client is functioning at the address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d when the exporters did not exist at all. We also find that other documents were procured by the appellant which were also issued by various other authorities which have not been alleged to be, let alone, proven to be fake or forged by the Revenue. Evidently, they also must have been issued by concerned officers just as GST Registration was issued by the jurisdictional officers. 15. Unless all these officers of various organisations (including the jurisdictional GST officer who issued the registration in December 2018) either acted fraudulently or carelessly, the above could not have been issued. 16. It is possible that all the authorities who issued the above documents had issued them correctly and thereafter, by efflux of time, when the GST officers went for verification, the situation changed. If so, it is a ground for starting a thorough investigation by the officer and is not a ground to revoke the licence of the Customs Broker who processed the exports. We also find that there is nothing in the SCN to prove that the exporters did not exist or operate from the addresses when the Shipping Bills were filed. 17. Learned Departmental Representative subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impart any information to the client as the same was found non-existent. Also the weight of the container for which it filed bill of entry was in excess by 7.280 tonnes over the declared weight (5.051 tonnes) which should have come to the appellant's notice had due diligence been exercised. Thus the allegation of violation of Regulation 13(e) is sustainable. Further Regulation 13(o) ibid states as under: "A Custom House Agent shall verify antecedent, correctness of Importer Exporter Code (IEC) Number, identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. C.B.E. & C. vide Customs Circular No. 9/2008, dated 8- 2-2010 in order to avoid any ambiguity inter alia laid down the following requirements of verification and documents for the "individual category to which the importer belonged being a proprietorship concern as claimed. S.No. Form of organisation Features to be verified Documents to be obtained 1. Individual (i) Legal name and (i) Passport any other names (ii) PAN card used (iii) Voter's identity card (ii) Present and Permanent address (iv) Driving licence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alanced. Too many checks can make life difficult for the exporter or the citizen and too much facilitation can open the doors for frauds. Determining the 'golden mean' and where to draw the line is a matter of public policy. The extent of liberalization or tightening may also vary greatly from one system to another and that is also a matter of public policy. The entire system of exports is based heavily on trust and facilitation and very less emphasis on due diligence which enhances trade facilitation but also makes it vulnerable to misuse by fraudsters. The IEC is issued by DGFT based only on an online application and a few easy to obtain documents. Similarly, as per the submission of the learned authorized representatives for the Revenue, GSTIN is also issued without any verification at all and through an automated process. So, one cannot rule out the possibility of an IEC and/or GSTIN being issued without the person even operating its business from the address. The IEC forms the foundation for the entire system of controls over imports and exports and, in turn, is the basis for issue of various licences and scrips by the DGFT and is also the basis for Customs allowing exports. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 110 019". "Recommendation about the bonafides of the entity verified : ................................................................................................... ................................................................................................... ......................................................................................................... ......................................................................................................" "Non Existent exporter. NOC is denied. Signature of Deputy/Assistant Commissioner ............................ Name : ............................................................................................... Official Stamp ___________________________________________________________________ Recommendation about the bonafides of the entity verified : ..................................................................................................... Non-Existent Exporter .................................................................................................... ................................................................................................ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 21R Commissionerate Code : CGST Delhi North GSTIN - 07EMRPM6580E1ZI A. Physical Verification of Principal and additional place (s) of business" Recommendation about the bonafides of the entity verified: The Exporter was visited at its registered Principle place of business. The firm is registered at Faiz Road, 945 T/F, Naiwala No. 21N, Galli No. 3-4, Karol Bagh, Near Red Light Faiz Road, Delhi - 110 005. No such firm was found existing at the said premises. There is no inward E Way Bill supplies are being reflecting in E way Bill Portal. Therefore, it is recommended that the IGST Refund Claims made by the exporter are bogus and may be rejected. Signature of Deputy/Assistant Commissioner ............................ Name : ............................................................................................ Official Stamp __________________________________________________________________ Recommendation about the bonafides of the entity verified : ................................................................................................... Not recommended for reasons stated above. ................................................. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t incentives and duty evasion by bogus IEC holders etc., it has been decided by the Board to put in place the "Know Your Customer (KYC)" guidelines for CHAs so that they are not used intentionally or unintentionally by importers/exporters who indulge in fraudulent activities. Accordingly, Regulation 13 of CHALR, 2004, has been suitably amended to provide that certain obligations on the CHAs to verify the antecedent, correctness of Import Export Code (IEC) Number, identity of his client and the functioning of his client in the declared address by using reliable, independent, authentic documents, data or information. In this regard, a detailed guidelines on the list of documents to be verified and obtained from the client/customer is enclosed in the Annexure. It would also be obligatory for the client/customer to furnish to the CHA, a photograph of himself/herself in the case of an individual and those of the authorized signatory in respect of other forms of organizations such as company/trust etc., and any two of the listed documents in the annexure". Annexure Client/Customer Identification Procedure Features to be verified and documents to be obtained from clients/customers Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance assignments of 133 Shipping Bills during the period 2018-2019 they duly procured all the KYC documents pertaining to each and every exporter as per Regulation 10 (n) of CBLR, 2018 and CBIC Circular No. 09/2010 dated 08.04.2010 and thoroughly conducted verification of their identity and functioning in terms of Regulation 10 (n) of CBLR, 2018; that neither Regulation 10 (n) of CBLR, 2018 nor Board's Circular dated 08.04.2010 mandate physical verification of the exporter's place of business through personal visit by the Customs Broker; that even otherwise Circular No. 09/2010-Cus dated 08.04.2010 mandate physical verification of the exporter's place of business through personal visit by the Customs Broker; that even otherwise Circular No. 09/2010Cus dated 08.04.2010 is not relevant to the instant case as the same was introduced for implementation of Customs House Agent Licencing Regulations (CHALR), 2004 which has since been rescinded and superseded by CBLR, 2018 however the said circular has not been made applicable to CBLR, 2018; that the said Circular itself prescribes PAN as a document to be obtained from the exporter and Regulation 10 (n) of CBLR, 2018 prescribes that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t match with the address in GSTIN. Further, the said Circular specifically states that "It would also be obligatory for the client/customer to furnish to the CHA, a photograph of himself/herself in the case of an individual and those of the authorized signatory in respect of other forms of organizations such as company/trusts etc., and any two of the listed documents in the annexure". However, on going through the documents submitted it was also observed that in many of the cases, the CB has failed to collect photograph of the authorized signatory. 24.5 Further, it was found that in most of the cases, the CB has procured some other documents viz. KYC form, IEC, GST Registration, Aadhar, Electricity Bill, Rent Agreement, AD code letter from bank, etc. Which are not prescribed under the Circular 09/2010-Cutoms dated 08.04.2010 to establish address & identity proof and in my view CB has failed to fulfil his obligation cast upon him in terms of provisions laid down under Regulation 10 (n) o CBLR, 2018 read with the said Circular. 24.6 I also note that an examination of the documents in respect of some of the exporters submitted by the CB along with their submissions dated 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.7 Accordingly, I find that violation of Regulation 10 (n) stands established and the defence arguments do not hold good and from the above stated facts, it is evident that contravention of Regulation 10 (n) of CBLR 2018 {erstwhile Regulation 11 (n) of CBLR 2013} stands established. 25. I also note that the CB has relied some judgments in their favour. However, I find that the judgments relied upon by the CB are distinguished on the facts and circumstances of each case. Rather reliance is placed on the decision of Division Bench of Hon'ble Supreme Court of India who in its judgement dated 14.01.2016 in Commissioner of Customs versus K.M. Gantra & Co. In Civil Appeal No. 2940 of 2008 inter alia observed that "The CHA occupies a very important position in the Customs House. The Customs procedures are complicated. The importers have to deal with a multiplicity of agencies viz. Carriers, custodians like BPT as well as the Customs. The importer would find it impossible to clear his goods through agencies without wasting valuable energy and time. The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, it is presumed NOC refers to a No Objection Certificate. Neither the exporter nor the Customs Broker require such a certificate from the officer and it does not appear that such a certificate was sought either. 31. As far as the recommendation to deny the IGST refund is concerned, it has nothing to do with the appellant processing the exports by the exporter, let alone come to the support the finding in the impugned order that the appellant had not conducted the verification as required under Regulation 10(n). 32. Thus, none of these three RUDs make out any case to show that the Customs Broker had not fulfilled its obligation under Regulation 10(n) of CBLR 2018. 33. Even if it is presumed that the officers had conducted the enquiries properly indicating the names of the exporters and found that the exporters had not existed on the day of verification, it is not clear if the exporter never operated from that premises and the GSTIN and the IEC were wrongly issued by the officers without verification or it had shifted or closed after the GSTIN or IEC were issued. If so, it is not clear if the exporter had existed or not on the day the appellant obtained the KYC docume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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