2023 (6) TMI 472 - AT - Customs

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 ... Revocation of Customs Broker License - forfeiture of security deposit - penalty - risky exporters involved in IGST refund frauds - reliane placed on reports of the jurisdictional officer - violation of regulation 10 (n) of the Customs Broker Licensing Regulation 2018 - HELD THAT:- The entire allegation against the appellant is based on the two reports of the jurisdictional officer that the exporters were found to be non-existing at the registered premises and that the Input Tax Credit, ITC was not admissible to the exporters. The aforesaid two reports accept that the two exporters had obtained GST registration in July 2017 and had been filing the returns. It also mentions that they have fraudulently obtained ITC. For fault of the exporters, the appellant cannot be blamed unless there is evidence to establish that the appellant had colluded with the exporters but evidence has not been placed. These two issues were examined at length by a Division Bench of the Tribunal in COMMISSIONER OF CUSTOMS, NEW DELHI (AIRPORT AND GENERAL) COMMISSIONERATE VERSUS M/S CRM LOGISTICS PRIVATE LIMITED (VICE-VERSA) [2021 (12) TMI 253 - CESTAT NEW DELHI] where it was held that The Customs Broker cannot be faulted for trusting the certificates issued by a government officer. It is a different matter if documents were not authentic and were either forged by the Customs Broker or the Customs Broker had reason to believe that the documents submitted to him were forged. After referring to the various documents submitted by the appellant, the Tribunal held that it is not the responsibility of the customs broker to physically go and verify the existence of each exporter at every location, let alone keep track as to whether the exporters shifted their place of business. The Tribunal held that even if the exporter changed his address, action cannot be taken against the customs broker - The show cause notice has relied upon the two relied upon documents and the report of the officer is that the exporters had taken ineligible ITC, which even if correct cannot be a factor for revoking the customs broker license of the appellant. The customs broker is also not required to physically verify the addresses of the exporters. Appeal allowed. Issues Involved:1. Revocation of Customs Broker License2. Forfeiture of Security Deposit3. Imposition of PenaltySummary: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.