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TMI Blog2023 (9) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Customs (Export), Air Cargo Complex informing the trade that the public notices issued in respect of verification of documents in respect of first time of import of goods is mutatis mutandis applicable to first time export goods also. The appellants CB in this case cannot be held responsible in cases where they have verified the identity of the exporter through prescribed records. Further, in the present case the appellants have also obtained the first time export verification of the exporters conducted by the appropriate customs authorities and a specific approval has been given by the Competent Authority and the same has been communicated by the Deputy Commissioner of Customs, DC, stating that the exporters/Customs Broker is allowed to initiate for the first time import/export through Precious Cargo Customs Clearance Centre having Customs-EDI port code INDPC4. Thus, the conclusion arrived at by the Principal Commissioner in the impugned order to the extent that the appellants have violated in not fulfilling the obligation cast on them under Sub-regulation 10(n) is not legally sustainable. There are no merits in the impugned order passed by the learned Principal Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity is Shri Nikunj. Similarly, in respect of M/s Ganesh Exports the on paper proprietor is shown as Shri Mangi Lal Gurjar, even though the actual owner of the business entity is Shri Punabhai Chandpara. Further, investigation revealed that by procuring non-functional and non-existent addresses and by preparing forged documents, the aforesaid two exporters viz., M/s Swastik Enterprises and M/s Ganesh Exports have illegally exported cut polished diamonds valued at Rs.36.20 crores and Rs. 185.16 crores, respectively, in the past. As the goods involved in such Indian exports are liable for seizure under Section 113(d) 113(i) of the Customs Act, 1962, separate proceedings under CBLR was initiated by jurisdictional Commissioner on the appellants by issue of notice dated 21.04.2022 alleging charges of contravention of Regulations 10(a), 10(d), 10(k) and 10(n) of CBLR, 2018. In deciding these allegations the impugned order has been passed by the learned Principal Commissioner of Customs (General) by invoking the Customs Broker license granted to the appellants besides imposition of penalty of Rs.50,000/- and forfeiture of the entire amount of security deposit furnished to the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellants have processed the shipping bills without proper antecedent verification of exporters by using any reliable means, even after knowing that the export goods belong to a third person, other than the exporter. Hence, he pleaded that the impugned order is sustainable in law. 6. We have heard both sides and have gone through the records of the case. 7. From the perusal of the records and factual matrix of the case, it is seen that the Department had initiated independent action against the appellants under CBLR, 2018 on the basis of SIIB Customs investigation report dated 21.01.2022 about alleged irregular export of cut and polished diamonds by two exporters, for which the appellants have filed Shipping Bills before the Customs authorities, and in respect of which the export goods do not belong to the proprietor of IEC/export entity. During the said investigation it was revealed that the failure to carry out a proper Know Your Customer (KYC) verification by the appellants in the above case, is one of the root cause for the fraudulent exports in violation of Section 50(2) of the Customs Act, 1962 and Foreign Trade (Development and Regulation) Act, 1992 and thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Commissioner of Customs or Assistant Commissioner of Customs, as the case maybe; xxx xxx xxx xxx (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; 9. In respect of Regulations 10(a) ibid, the requirement is that the CB should have a written authorisation for engaging them as Customs Broker in transacting with Customs department in respect of import/export of goods. In this regard, we find from the records of the case that the appellants had obtained written authorisation letter dated 05.09.2020 from the Proprietor of M/s Swastik Enterprises and another letter dated 20.10.2020 from the proprietor of M/s Ganesh Export. In the impugned order, learned Principal Commissioner has agreed with the finding of the Inquiry Officer in holding that the CB has violated Regulation 10(a) ibid, on the ground that the Director of the CB firm Shri Dnyanesh P Walunj, had not met the proprietor of M/s Ganesh Exports i.e., Shri Mangi Lal Gurjar before the detention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the export frauds, we rely on the judgement of the Hon ble Supreme Court in affirming the decision of the Coordinate Bench of this Tribunal in the case of Commissioner of Customs Vs. K.M. Ganatra Co. in Civil Appeal No.2940 of 2008 reported in 2016 (332) E.L.T. 15 (S.C.). The relevant paragraph of the said judgement is extracted below: 15 . In this regard, Ms. Mohana, learned senior counsel for the appellant, has placed reliance on the decision in Noble Agency v. Commissioner of Customs, Mumbai2002 (142) E.L.T. 84 (Tri. - Mumbai) wherein a Division Bench of the CEGAT, West Zonal Bench, Mumbai has observed:- 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 these 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/exporters as well as by the Government Agencies. To ensure appropriate discharge of such t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrespondence with the exporters for maintaining the same as a part of records required under Regulation 10(k). In view of the aforesaid factual position, we are unable to find force in the legality of the conclusion arrived at the impugned order holding that the appellants have violated the Regulation 10(k). 12.1. In respect of the Regulation 10(n), in the impugned order the Principal Commissioner had concluded that the appellants have violated the said Regulation, on the ground that they did not ensure and verify the antecedents of their client by using reliable independent means, and the appellants were working in a negligent manner, as they were aware that the export goods belonged to a third person other than the exporters. In this regard, we find that the requirement of Regulation 10(n) of CBLR, 2018 in the present from, inter alia, has been introduced for the first time in the year 2010, in Custom House Agents Licensing Regulations, 2004 (CHALR) by introduction of new sub-regulation under Regulation 13(o) of CHALR, by issue of Notification No.30/2010-NT dated 08.04.2010. The relevant portion of the said Notification is extracted below: [TO BE PUBLISHED IN THE GAZET ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 guideline 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 authorised signatory in respect of other forms of organizations such as company/ trusts 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 S. No. Forms of organisation Features to be verified Documents to be verified 1 Individual (i) Legal name and any other names used (ii) Present and Permanent address, in full, complete and correct. (i) Passport (ii) PAN card (iii) Voter's Identity card (iv) Drivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier regulation 13(o) had been modified by adding the Goods and Service Tax Identification Number (GSTIN) as one more particular for verification by the Customs Broker with the advent of introduction of GST in 2017. On careful perusal of the above details, it transpires that the Regulations and the Board s circular provide that certain specific features of an importer/ exporter needs to be verified in terms of specified documents mentioned in Annexure to the said Circular dated 08.04.2010, in order to fulfill the obligations by a Customs Broker. In the present case, it is also on record that the export entities being proprietorship firms, the particulars regarding the legal name of the exporter firms and their addresses have been verified by the CB on the basis of specified documents. In this regard, we also refer to the Public Notice No.26/2019 dated 14.10.2019 issued by the Commissioner of Customs (Export), Air Cargo Complex informing the trade that the public notices issued in respect of verification of documents in respect of first time of import of goods is mutatis mutandis applicable to first time export goods also. We also find that in compliance with these instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation d) Verify the functioning of the 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 or by officers of the Government of India or 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. In 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 .. (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 ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey hire the services of the Customs Brokers. Besides the fact that no such obligation is in Regulation 10(n), it will be extremely difficult, if not, totally impossible, for the Customs Broker to physically visit the premises of each of its 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffence and the officers who issued them must be more serious offenders. There is nothing in the reports of the jurisdictional officers which were the Relied Upon Documents in the SCN to indicate as to why and how the GST registration was issued 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verified the existence of the importer at the given address . Paragraph 5 of this order is reproduced below: 5. We have considered the contentions of both sides. It is an admitted fact that the appellant had dealt with the importer M/s. Nikhaar Associates. It is also a fact that the importer was found to be non-existent. CHA Regulation 13(e) state that a CHA shall 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 cargo or baggage . In the present case, there was no question of the appellant being in a position to 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 functionin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were filed the exporters did not exist at the premises. 21. As far as the documents issued by various Government officers are concerned the submission of the learned departmental representatives is interesting and needs a deeper examination. It is their submission that the documents were neither issued fraudulently nor issued carelessly but were issued within the mandate of the officers who issued them and this mandate does not include physical verification. In other words, the submission is that the system designed by the Government for issue of these certificates itself is such that they can be issued even to persons who do not exist at all at the declared premises. We proceed to examine this proposition and if it supports case of the Revenue in these appeals. 22. It is common knowledge that in designing schemes for issuing registrations, certificates or providing incentives, two conflicting objectives of due diligence and facilitation are balanced. 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 polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able, authentic, documents, data or information. Secondly, this decision of the coordinate bench in Baraskar brothers is contrary to the decision of the jurisdictional Delhi High Court in Kunal Travels which is binding on us. 25. We now proceed to examine details of these cases: Appeal C/51658/2021- Bright clearing Carrier Pvt. Ltd. 26. Show cause notice dated 23.12.2020 alleged that the appellant processed exports in respect of 31 non-existent exporters but verification was done only in respect of the following 3 exporters which form the basis of the entire case: (i) M/s Nipun Enterprises (07ABJGPG4747J1ZF)- RUD-2: The report of the jurisdictional officer does not indicate the name of the exporter but indicates in the first table against S.No. 1 Found to be existing (Yes/No) NO and against S.No. 2 Rental/owned Rented. Against the column titled Recommendation about the bonafides of the entity verified: Non-existent exporter. NOC denied and in the Recommendation about the bonafides of the entity verified, the jurisdictional Commissioner wrote Non-existent exporter . (ii)M/s Sunrise Impex (07AHNPN6921F1Z5)- RUD-3: The report of the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort in respect of Nipun Enterprises states NOC (No objection Certificate) denied. The report in respect of Sunrise Impex indicates Not recommended and the report in respect of P K Exim states ITC (input tax credit under GST) not admissible. There is also nothing in the CBLR requiring the Customs Broker to seek, let alone, obtain any NOC from any officer to process exports of any exporter. Similarly, nothing in the CBLR requires any recommendation from any officer for a Customs Broker to process exports. Similarly, the admissibility of ITC under GST is to be examined by the jurisdictional officers and the Customs Broker has neither any power nor any duty to decide if the ITC is admissible. 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. 31. Even if it is presumed that the officers had conducted the enquiry 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 exporters never operated from that premises and the GSTIN and the IEC were wrongly issued by the officers without verification or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the exporters never functioned from those premises and the GSTIN were issued by the department to non-existent firms or they ceased to function from those premises after the GSTIN were issued. So far as the reports of the officers that the exporters were not bonafide is concerned, nothing in Regulation 10(n) of the CBLR, 2018 requires the Customs Broker to obtain a certificate from any officer that the exporter is bonafide. In fact, it is not even clear what the officers meant that the exporters are not bonafide. If the officers report that some exporters are not bonafide, it does not establish that the Customs Broker had not fulfilled its obligations under Regulation 10(n). The entire case of the Revenue based on which the impugned order was passed was these verification reports which nowhere establish that the Customs Broker had not fulfilled its obligations under Regulation 10(n). 12.5. From the above detailed analysis made in the above case law, it is clear that the appellants CB in this case cannot be held responsible in cases where they have verified the identity of the exporter through prescribed records. Further, in the present case the appellants have also obtaine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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