Customs broker due diligence requires reasonable verification of client credentials, not proof of government registration correctness.

A Customs Broker's obligations under Regulations 10(d), 10(e) and 10(n) of the Customs Brokers Licensing Regulations 2018 are satisfied by reasonable verification and credible client advice; the department must prove a specific breach with evidence. On Regulation 10(d), no material showed that advice to comply with law was not given, and no prescribed form of proof was required. On Regulation 10(e), the record identified no specific incorrect information attributed to the broker, so breach was not established. On Regulation 10(n), verification of IEC, GSTIN, identity and KYC documents was sufficient absent evidence of fraud or actual knowledge of falsity. The findings of breach, licence revocation, forfeiture and penalty were set aside.

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Issues: (i) Whether the Customs Broker violated Regulation 10(d) of the Customs Brokers Licensing Regulations 2018 by failing to advise the exporter to comply with the law. (ii) Whether the Customs Broker violated Regulation 10(e) of the Customs Brokers Licensing Regulations 2018 by failing to exercise due diligence as to the correctness of information imparted to the client. (iii) Whether the Customs Broker violated Regulation 10(n) of the Customs Brokers Licensing Regulations 2018 by failing to verify the IEC, GSTIN, identity of the client and functioning at the declared address.

Issue (i): Whether the Customs Broker violated Regulation 10(d) of the Customs Brokers Licensing Regulations 2018 by failing to advise the exporter to comply with the law.

Analysis: Regulation 10(d) requires advice to the client to comply with the law, and a failure to do so must be supported by credible evidence. The record contained no evidence that the Customs Broker did not advise the exporter. The exporter's letter stated that advice had been given, and there was no statutory requirement for the broker to produce any particular form of proof or for the advice to be documented in the manner demanded in the order.

Conclusion: The alleged violation of Regulation 10(d) was not established and the finding was unsustainable.

Issue (ii): Whether the Customs Broker violated Regulation 10(e) of the Customs Brokers Licensing Regulations 2018 by failing to exercise due diligence as to the correctness of information imparted to the client.

Analysis: Regulation 10(e) obliges the broker to exercise due diligence in relation to the correctness of information imparted to the client for clearance work. Neither the show cause notice nor the order identified any specific incorrect or inaccurate information said to have been supplied by the broker. In the absence of particulars or proof of such misinformation, the conclusion of breach rested on no factual foundation.

Conclusion: The alleged violation of Regulation 10(e) was not proved and the finding was set aside.

Issue (iii): Whether the Customs Broker violated Regulation 10(n) of the Customs Brokers Licensing Regulations 2018 by failing to verify the IEC, GSTIN, identity of the client and functioning at the declared address.

Analysis: Regulation 10(n) requires verification of the correctness of IEC and GSTIN, the identity of the client, and the client's functioning at the declared address through reliable, independent and authentic documents, data or information. The obligation does not require the Customs Broker to oversee the correctness of governmental issuance of IEC or GSTIN, to physically surveil the client continuously, or to investigate beyond reasonable verification. Where valid government-issued documents exist, the broker may rely on them unless there is knowledge of fraud or falsity. The record showed verification of IEC, GSTIN and supporting KYC documents, and there was no evidence that the broker had actual knowledge of any fraud.

Conclusion: The alleged violation of Regulation 10(n) was not established and the finding was unsustainable.

Final Conclusion: The findings of breach under all three regulations were set aside, and the revocation of the Customs Broker licence, forfeiture of security deposit and penalty could not stand.

Ratio Decidendi: A Customs Broker satisfies its regulatory obligation by reasonable verification of client credentials and declared address through reliable documents, data or information; it is not required to investigate the correctness of government-issued registrations or to prove advice in a prescribed form unless the department establishes a specific breach with evidence.

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