Customs broker due diligence defeats penalty where authorisation, KYC and client verification were obtained and misuse was unproven.

A customs broker is not liable for penalty merely because an importer's IEC may have been used by another person, where the broker obtained authorisation and KYC documents, verified client particulars and checked earlier imports before filing the bill of entry. The absence of proof that the broker knew of any misuse of the IEC, or that the importer shown in the documents was not the real owner, meant that no deliberate omission or failure to exercise prescribed due diligence was established. On those facts, alleged breaches of the Customs Brokers Licensing Regulations, 2018 were not made out and the penalty could not be sustained.

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Issues: Whether the Customs broker violated the obligations under Regulation 10(a), Regulation 10(n) and Regulation 10(o) of the Customs Brokers Licensing Regulations, 2018 so as to justify imposition of penalty.

Analysis: The Customs broker had obtained authorisation and KYC documents, verified the client particulars and checked earlier imports before filing the bill of entry. The goods were imported in the name of an IEC holder, and the record did not establish that the broker knew that the IEC had been used by another person or that the importer shown in the documents was not the real owner. The address issue also did not establish any false or fictitious declaration, as the address relied upon was that of the power of attorney holder. In the absence of proof of deliberate omission or failure to exercise the prescribed diligence, the alleged breaches of the broker regulations were not made out.

Conclusion: No violation of Regulation 10(a), Regulation 10(n) or Regulation 10(o) was established, and the penalty could not be sustained.

Final Conclusion: The impugned penalty order was set aside and the appeal was allowed with consequential reliefs.

Ratio Decidendi: A customs broker is not liable for penalty merely because an importer's IEC may have been used by another person, if the broker has obtained the required authorisation and KYC documents and there is no proof of knowledge or failure to exercise prescribed due diligence.

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