Tribunal overturns penalties against customs broker due to compliance with regulations and lack of collusion.

The Tribunal set aside the order revoking the customs broker license, forfeiting the security deposit, and imposing a penalty on M/s Sadagati Clearing Services Pvt. Ltd. The Tribunal found that the appellant fulfilled their obligations under the Customs Brokers Licensing Regulations, 2018, and there was no evidence of collusion with the exporters' fraudulent activities. The appeal was allowed, and the appellant's license, security deposit, and penalty were not upheld.

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Issues Involved:
1. Revocation of Customs Broker License
2. Forfeiture of Security Deposit
3. Imposition of Penalty

Summary:

Revocation of Customs Broker License:
M/s Sadagati Clearing Services Pvt. Ltd., the appellant, challenged the order dated 18.06.2021 by the Commissioner of Customs, which revoked their customs broker license. The Directorate General Analytics and Risk Management (DGARM) identified risky exporters involved in IGST refund frauds, with 2,005 exporters untraceable at their registered premises. The appellant was among 62 customs brokers handling consignments for these exporters. A show cause notice dated 29.12.2010 was issued to the appellant, citing possible collusion and malfeasance with the exporters and failure to follow KYC guidelines as per Customs Brokers Licensing Regulations (CBLR), 2018.

Forfeiture of Security Deposit:
The inquiry report concluded that the appellant failed to exercise due diligence in verifying the genuineness of the exporters, justifying the revocation of the license and forfeiture of the security deposit. The Commissioner's order emphasized that the appellant did not verify the correctness of the Importer Exporter Code (IEC), GSTIN, and the functioning of the client at the declared address, as mandated by Regulation 10(n) of CBLR, 2018.

Imposition of Penalty:
The appellant argued that all required documents as per the Circular dated 08.04.2010 were obtained from the exporters, and there was no requirement under Regulation 10(n) for physical verification of addresses. The Tribunal referred to a previous decision in M/s CRM Logistics Private Limited Vs. Commissioner of Customs, which stated that it is not the customs broker's responsibility to physically verify the existence of exporters or ensure the admissibility of ITC. The Tribunal held that the customs broker cannot be blamed for the exporters' fraudulent activities unless there is evidence of collusion, which was not provided in this case.

Conclusion:
The Tribunal found that the appellant had fulfilled their obligations under Regulation 10(n) of CBLR, 2018, and the revocation of the license, forfeiture of the security deposit, and imposition of penalty were not justified. The order dated 18.06.2021 was set aside, and the appeal was allowed.

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