2024 (1) TMI 685 - AT - Customs

Customs broker's security deposit forfeited and Rs.50,000 penalty imposed for KYC verification failures under Regulation 10(n) CBLR 2013

CESTAT upheld forfeiture of customs broker's security deposit and Rs.50,000 penalty for violating KYC verification requirements under Regulation 10(n) of ... Revocation of Customs Broker License - Forfeiture of security deposit - levy of penalty - no fresh material on record and no substantial evidence against him to establish the contravention of the provisions of the Regulations - HELD THAT:- In terms of the aforesaid provisions of regulation 10(n) it is an admitted position that KYC norms were not verified before filing the bill of entry. Shri Shashikant Maruti Pol also admitted that he did not know the IEC holder of M/s. Pacific Imports as the work of import clearances were accepted from Shri Mehul Shah without even knowing him. Therefore, there is a clear violation by the Customs broker to know the antecedents, correctness of the IEC number, the identity and functioning of his client at the declared address as per the obligation cast on him under regulation 10(n). Even at the time of revocation of the suspension order, the Commissioner had also observed that there is prima-facie contravention of the provisions of Regulation 11(n) of CBLR, 2013. The appellant along with his representation dated 22.02.2017, had supplied copies of documents, KYC, reflecting the identity and antecedents of the importer, procured by the client and some of the documents such as authorisation letter dated 1.11.2016 for appointment of CHA, by the importer, M/s Pacific Imports, IEC copy of the importer, TIN, registration of the importer (State), TIN registration of the importer(Central) and proprietor’s PAN was submitted at the time of personal hearing on 1.06.2019. The issue of submitting the KYC documents belatedly has been dealt in Multi Wings Clearing & Forwarding P.Ltd Vs. C.C. (General),New Delhi [2019 (4) TMI 1189 - CESTAT NEW DELHI], which was also a case of misuse of CB license in imports claiming to be the employee of the assessee and submission of KYC documents belatedly, the Tribunal observed, the fact that the appellant produced the required KYC to the Department at the later stage to the licensing issuing authority and not to the investigating agency suggests that the necessary KYC documents were actually not present with the appellant when the investigating agency visited and asked them to produce the KYC documents of the importer firm. It is an admitted position that the entire work of handling the import clearances was done by Shri Shashikant Maruti Pol, the employee of the appellant, and hence he is responsible for his conduct in not complying with the provisions of the regulations which cast special obligations on the Customs broker. The appellant has miserably failed to supervise the working and the conduct of his employee in terms of Regulation 13(12) and is therefore liable for all the acts and omissions of his employee. Penalty - HELD THAT:- The regulations provide for various penalties which can be imposed on the customs broker for violation of the provisions thereof. Regulation 17 provides for revocation of the license of a customs broker and for forfeiture of whole or part of the security. Regulation 18 provides for imposing penalty on the customs broker not exceeding Rs.50,000/-. The punishment of revocation of license has been held to be a very harsh punishment as it takes away the livelihood of a person on absolute basis. The Commissioner in the impugned order has taken a very fair and balanced view in refraining to order for revocation of licence and merely ordered for forfeiture of the security amount and imposing penalty of Rs.50,000/-, which would act as a deterrent to the appellant to be more cautious and diligent in executing his work. The impugned order does not call for any interference and deserves to be upheld - Appeal dismissed. Issues Involved:1. Forfeiture of Security Deposit and Imposition of Penalty2. Compliance with Principles of Natural Justice3. Examination of Fresh Material and Evidence4. Verification of Importer Details and KYC Norms5. Due Diligence and Compliance with Customs RegulationsSummary:1. Forfeiture of Security Deposit and Imposition of Penalty:The appellant, a Customs Broker, challenged the Order-in-Original dated 13.09.2019, which ordered the forfeiture of a security deposit of Rs.75,000 under Regulation 14(b) of CBLR 2018 and imposed a penalty of Rs.50,000 under Regulation 18(1) of CBLR 2018. The Commissioner of Customs found that the appellant filed documents without verifying the credentials of the importer, knowing that the IEC Code did not belong to the actual importer.2. Compliance with Principles of Natural Justice:The appellant argued that the order violated principles of natural justice. However, the Tribunal found that sufficient opportunities were granted to the appellant at all stages, including personal hearings and the submission of detailed representations. The Tribunal concluded that the principles of natural justice were followed, and the findings were justified based on the material on record.3. Examination of Fresh Material and Evidence:The appellant contended that there was no fresh material or substantial evidence to establish contravention of the regulations after the earlier order dated 9.03.2017, which revoked the suspension of his license. The Tribunal noted that the Commissioner had observed a prima facie contravention of Regulation 11(n) of CBLR 2013, equivalent to Regulation 10(n) of CBLR 2018. The Tribunal held that further action was maintainable based on the inquiry report and the detailed investigation provided under the regulations.4. Verification of Importer Details and KYC Norms:The Inquiry Officer found that the appellant violated provisions of CBLR 2018, including failing to verify the antecedents, identity, and functioning of the client, M/s Pacific Imports, as required under Regulation 10(n). The appellant's employee admitted to filing the Bill of Entry without verifying KYC norms and receiving documents through courier without proper checks. The Tribunal upheld the findings that the appellant failed to comply with the obligation to verify the importer's details.5. Due Diligence and Compliance with Customs Regulations:The Tribunal examined the appellant's failure to exercise due diligence under Regulation 10(e) of CBLR 2018. The appellant did not check the documents or tally the weight, leading to mis-declaration of goods. The Tribunal cited previous decisions emphasizing the importance of verifying the correctness of information and fulfilling obligations as a Customs Broker. The appellant's failure to supervise his employee's conduct further violated Regulation 13(12) of CBLR 2018.Conclusion:The Tribunal upheld the impugned order, finding no violation of principles of natural justice and sufficient evidence of regulatory violations. The decision to forfeit the security deposit and impose a penalty was deemed fair and balanced, acting as a deterrent for future compliance. The appeal was dismissed.