Customs broker license revocation overturned, penalty reduced to Rs.20,000 for inadequate KYC verification under Regulation 10(n)

CESTAT Mumbai-AT partially allowed appeal against revocation of customs broker license. The tribunal found appellants not involved in mis-declaration of imported goods by importers, who falsely declared electronic toys and undeclared cosmetics. While violations of Regulations 10(d) and 10(e) were not established as customs brokers lacked expertise to identify mis-declarations, limited violation of Regulation 10(n) was found for inadequate KYC verification. The tribunal set aside license revocation and security deposit forfeiture, reducing penalty to Rs.20,000 under Regulation 18.

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Issues Involved:

1. Revocation of Customs Broker (CB) license.
2. Imposition of penalty and forfeiture of security deposit.
3. Alleged violations of Regulations 10(d), 10(e), and 10(n) of the Customs Brokers Licensing Regulations, 2018 (CBLR).

Summary:

1. Revocation of Customs Broker (CB) license:
The appellants, M/s M. K. Enterprises, Navi Mumbai, challenged the revocation of their CB license by the Principal Commissioner of Customs (General), Mumbai, under Regulation 17(7) of CBLR, 2018. The revocation followed an investigation by the Central Intelligence Unit (CIU) of Jawaharlal Nehru Custom House (JNCH), which found mis-declared imported goods and non-existent importers. The Tribunal noted that the appellants had filed the Bill of Entry based on documents provided by the importers and were unaware of any concealed cargo. It was concluded that the appellants were not involved in the mis-declaration and thus, the revocation of the CB license was not justified.

2. Imposition of penalty and forfeiture of security deposit:
The Principal Commissioner also imposed a penalty and forfeited the entire security deposit furnished by the appellants. The Tribunal found that the appellants had exercised due diligence as required under Regulation 10(d) and 10(e) by relying on the documents provided by the importers. The Tribunal held that the appellants were not aware of any fraudulent activities by the importers and thus, the penalty and forfeiture of the security deposit were not warranted. However, the Tribunal imposed a reduced penalty of Rs. 20,000 under Regulation 18 for limited non-fulfillment of obligations under Regulation 10(n).

3. Alleged violations of Regulations 10(d), 10(e), and 10(n) of CBLR:
The Tribunal examined the alleged violations of Regulations 10(d), 10(e), and 10(n). It found that the appellants had verified the importers' existence through various documents, including the Importer-Exporter Code, GST Registration Certificate, and other identification documents. The Tribunal referred to the CBIC Circular No. 9/2010-Customs, which outlines the KYC norms for Customs Brokers, and concluded that the appellants had complied with these requirements. The Tribunal cited the case of M/s Kunal Travels (Cargo) vs. Commissioner of Customs, which held that a Customs Broker is not expected to verify the genuineness of every transaction but to act based on the documents provided by the client. Thus, the Tribunal found no violation of Regulations 10(d) and 10(e) and only a limited violation of Regulation 10(n).

Conclusion:
The Tribunal modified the impugned order by setting aside the revocation of the CB license and the forfeiture of the security deposit. It imposed a reduced penalty of Rs. 20,000 on the appellants under Regulation 18 of CBLR, 2018. The Principal Commissioner's conclusions were found to be contrary to the factual position and not legally sustainable.

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