Customs broker license revoked for fraudulent exports under duty drawback scheme, failed client verification under CBLR 2018

CESTAT New Delhi upheld revocation of customs broker license for fraudulent exports involving floor covering goods under duty drawback and focus product schemes. The broker failed to verify client IEC codes, GSTIN, and identity as required under CBLR 2018, actively conniving with the main exporter using dummy firms for mis-declaration and undervaluation. The tribunal found mens rea established through the broker's active participation, suggesting export descriptions, charging extra cash payments, and failing to advise authorities despite seeing samples. Security deposit forfeiture and penalty were confirmed for non-compliance with regulatory responsibilities.

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Issues Involved:
1. Legality of the order passed by the Commissioner of Customs revoking the Customs Broker (CB) license, forfeiting the security deposit, and imposing a penalty.
2. Compliance with Know Your Customer (KYC) norms.
3. Alleged misdeclaration and undervaluation of export goods.
4. Time-barred issuance of show cause notices.
5. Mens rea and the proportionality of punishment.

Summary:

1. Legality of the Order:
The appellant challenged the legality of the order passed by the Commissioner of Customs, arguing that it was passed ex-parte without proper appreciation of evidence and compliance with KYC norms. The Tribunal noted that the opportunity for personal hearing was granted, and representatives of the appellant did appear for the hearing. Therefore, the argument that the case was heard ex-parte does not hold water.

2. Compliance with KYC Norms:
The appellant contended that they had complied with KYC norms and that the relevant documents were seized by the Directorate of Revenue Intelligence (DRI). However, the Tribunal found that the appellant did not independently verify the actual Importer Exporter Code (IEC) holders and relied on Shri Kultar Singh for the IEC codes. The Tribunal concluded that the appellant had not verified the correctness of IEC, GSTIN, identity, and functioning of the client at the declared address as required under the Customs Broker Licensing Regulation (CBLR), 2018.

3. Misdeclaration and Undervaluation:
Investigations revealed that the appellant was aware of the misdeclaration and undervaluation of export goods. Statements from various individuals indicated that the appellant had suggested the description of the goods and charged extra fees in cash without issuing bills. The Tribunal found that the appellant had connived with the main player, Shri Kultar Singh, and had not advised the clients correctly nor informed the appropriate authorities.

4. Time-Barred Issuance of Show Cause Notices:
The appellant argued that the revocation of the license was time-barred as the offence was reported in 2014 and 2015, and the show cause notice was issued in 2020. The Tribunal noted that the show cause notice in the instant case was issued within 90 days of the offence report received in October 2019. Hence, the argument of time-bar was not accepted.

5. Mens Rea and Proportionality of Punishment:
The appellant argued that in the absence of mens rea, no penalty should be imposed for a technical breach of the law and that the punishment should be commensurate with the offence. The Tribunal found that the appellant had actively connived in the misdeclaration and undervaluation of goods, thus establishing mens rea. The Tribunal upheld the revocation of the CB license, forfeiture of the security deposit, and imposition of a penalty, finding no error in the adjudicating authority's decision.

Conclusion:
The Tribunal dismissed the appeal, holding that the appellant had failed to comply with the responsibilities under Regulation 10(a), (d), (e), and (n) of the CBLR, 2018, and upheld the revocation of the CB license, forfeiture of the security deposit, and imposition of a penalty.

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