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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the Customs Broker had knowledge, or was deemed to have knowledge, that the duty scrips used for debiting customs duty were forged and fraudulently re-registered, so as to attract penalty under section 114AA of the Customs Act, 1962.
Analysis: The record showed that the original scrips had already been issued and utilised, but the same numbers were later re-registered in the EDI system without corresponding DGFT endorsement and were used repeatedly through different importers and brokers. The importer and the broker admitted that no physical copies of the scrips were provided to the broker, and the broker nonetheless used the particulars for duty payment. Under Regulation 11 of the Customs Broker Licensing Regulations, 2013 and the conditions in Notification No. 95/2009-Customs, the broker was required to verify the genuineness of the scrips and produce or insist on production of the physical scrip at the time of debit. The failure to seek the documents or verify them from DGFT was held to be a lack of due diligence amounting to conscious facilitation of the fraudulent use.
Conclusion: The penalty under section 114AA was upheld against the Customs Broker; the plea that it lacked knowledge or was itself a victim of the fraud was rejected.
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