2023 (8) TMI 1056 - AT - Customs

Tribunal Overturns Customs Broker Suspension; Affirms No Duty to Physically Verify Exporters' Premises.

M/s. Baid International Services Ltd. Versus Commr. of Customs (Airport & Air Cargo Complex, Commissionerate), Kolkata.

The Tribunal set aside the suspension of the Customs Broker's license, dismissing charges of violating Regulation 10(n) of the CBLR, 2018. It concluded ... Revocation of Customs Broker License - appellants contend that the offence committed by the various exporters was extraneous to their (the appellant) functions as a Customs Brokers - violation of Regulation 10(n) of CBLR or not - HELD THAT:- The Ld. Adjudicating Authority arrived at a finding that there is no reason to disagree with the Inquiry Report received on 28.12. 2021 and therefore ordered, the revocation of the Customs Brokers License. Regulation 10(n) merely requires the Customs Broker to verify the correctness of Importer Exporter Code, (IEC) number, Goods and Service Tax Identification number at the declared address by using reliable independent authentic documents, data or information. Obviously, this responsibility does not extend to physically going to verify the premises of each of the exporters to ensure that they are functioning at the premises. When a Government Officer issues the certificate bearing registration number with an address, it is not for the Customs Broker to sit in judgement over such a certificate. The Customs Broker cannot be faulted for trusting the certificates issued by the various government bodies/department. It is a different matter, if the documents are not authentic and are forged by the Customs Broker or the Customs Broker had reason to believe that the said documents were not truthful and their veracity was in doubt. The Customs Broker is only a processing agent of documents with respect to a document submitted to him. The Customs Broker is neither omniscient nor omnipotent. The Customs broker is not concerned with to ensure that the documents issued by the various organisations were issued correctly. If they were issued wrongly, the fault lies with the authorities issuing such certificate, and registrations, and not with the Custom Broker. It is not for the Custom Broker to needlessly doubt the government issued IDs and registration numbers. The broker cannot be faulted for believing in them. The Customer Broker in terms of regulation 10(n) of the CBLR, is obligated to verify the correctness of the IEC number, GSTIN, identity of his client and functioning of his client at the declared address by using reliable independent authentic documents, data or information. It merely cannot be pleaded that the IEC code which is issued by the DGFT, the GST number, the PAN which is issued by the Department of Revenue, CBIC & CBDT respectively, have all been done with collusion and for enabling the exports. The fault for any wrong doing revenue loss thus does not befall upon the Customs Broker. Thus, in terms of Regulation 10(n), any of the three methods viz. document, data or information can be employed by the Customs Broker to establish the identity of their client. It is not necessary that the Customs Broker are required to collect information or launch an investigation. So long as there are documents which are independent, reliable and authentic to establish the identity of the client, this obligation is fulfilled. Documents such as GSTIN, IEC and PAN card are all such documents as prescribed. The responsibility of the Customs Broker as held by judicial bodies does not require then to maintain vigil and continuous surveillance on the client to ensure that they continue to operate from the address as given in the various KYC documents and in case of change as such get the documents amended - none of the documents entertained by the Customs Broker obtained for KYC, have been indicated to be fictitious and not genuine, it is found that the Customer Broker has not violated Regulation 10(n) of CBLR with regard to the said fifteen exporters. Thus, Customs Broker has not failed in discharging his responsibilities under Regulation 10(n) of CBLR, 2018 Under the circumstances, the Customs Broker cannot be held responsible for the exporters found to not exist during subsequent verification undertaken, by the officers or there has been unrealized IGST, availed of by the untraceable exporters. The Ld. Commissioner’s Order cannot be sustained and is required to be set aside - Appeal allowed. Issues Involved:1. Suspension of Customs Broker License2. Alleged Violation of Regulation 10(n) of CBLR, 20183. Verification of Exporters' Identity and Functioning4. KYC Compliance by Customs Broker5. Responsibility for IGST Refund FraudSummary:1. Suspension of Customs Broker License:The appellants, Baid International Services, a licensed Customs Broker, challenged the suspension of their license by the Principal Commissioner of Customs (A & A), Kolkata, under Regulation 16(1) of the Customs Brokers Licensing Regulations (CBLR), 2018. The suspension was based on an offence report alleging involvement in export-related frauds by 15 exporters, facilitated by the appellants.2. Alleged Violation of Regulation 10(n) of CBLR, 2018:A Show Cause Notice was issued under Regulation 17(1) of CBLR for the revocation of the license, alleging that the appellants violated Regulation 10(n) by not verifying the correctness of the Importer Exporter Code (IEC) number, GST Identification Number (GSTIN), and the identity and functioning of their clients at the declared address using reliable, independent, authentic documents, data, or information.3. Verification of Exporters' Identity and Functioning:The appellants contended that they verified the antecedents of their clients by taking bank-verified documents and conducting physical verification visits. However, the enquiry officer found that the appellants failed to provide documentary evidence of such verifications and concluded that the appellants violated Regulation 10(n) of CBLR, 2018.4. KYC Compliance by Customs Broker:The appellants submitted KYC documents, including IEC numbers, GSTIN numbers, PAN numbers, AD Code numbers, and addresses, for the 15 exporters. The adjudicating authority acknowledged that the appellants possessed the requisite KYC documents but held that they failed to verify the existence of the exporters over the phone or mail, and thus concluded that the appellants violated their duties under Regulation 10(n).5. Responsibility for IGST Refund Fraud:The adjudicating authority held the appellants responsible for the loss of Rs. 8.04 crore due to fraudulent IGST refunds, asserting that the appellants facilitated the exporters without verifying KYC, causing a huge loss to the Department. However, the Tribunal observed that the Customs Broker is not responsible for ensuring the realization of IGST and that the burden of verifying the existence of exporters lies with the government authorities issuing the certificates.Conclusion:The Tribunal found that the Customs Broker had complied with the KYC requirements by submitting the necessary documents issued by government authorities. The Tribunal held that the Customs Broker is not responsible for physically verifying the premises of exporters and that the responsibility for any wrongdoing lies with the authorities issuing the certificates. Consequently, the Tribunal set aside the order of the lower authority, dismissed the charges against the Customs Broker, and allowed the appeal with consequential relief/benefits.