TaxTMI 
TaxTMI 
2020 (12) TMI 649
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....ng and M/s Global Trading, without verifying the existence of the exporters and without even meeting the partners of the said firms and investigation also revealed that the said firms and their partners did not exist at the addresses given in their Import Export Code/ Bank Accounts and that the Bank Realisation Certificates were not received against the exports made by them. The investigation report and copies of the statement of Virdender Kumar Saraswat, a G-Card holder of the Appellant, were forwarded to the office of the Commissioner for action under the provisions of the Customs Brokers Licensing Regulations, 2018 [the Licensing Regulations]. 3. It, therefore, appeared to the Department that the Appellant had failed to comply with the provisions of Regulations 10(a), 10(d), 10(e), 10(n) and 13(12) of the Licensing Regulations and so action could be taken under the Licensing Regulations, including revocation of license, forfeiture of part or whole of security and imposition of penalty. The Deputy Commissioner in the office of the Commissioner of Custom (Airport & General) was appointed as the Inquiry Officer. Thereafter, a show cause notice dated December 03, 2019 was issued to....
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....act or omission on the part of the G-Card holder. (v) There was, therefore, no violation of Regulations 10(a), 10(d), 10(e), 10(n) and 13 (12) of the Licensing Regulations. (vi) Case laws in support of the contentions raised in the reply were referred to. 5. The reply filed by the Appellant, however, did not find favour of the Commissioner, who by order dated June 26, 2020 revoked the Licence of the Appellant by exercising powers under Regulation 14 of the Licensing Regulations. 6. The Appellant has submitted a chart that contains the Regulation of which violation has been alleged, the ingredient of the Regulation, the finding of the Commissioner and the submissions of the Appellant. The same are contained in the following Table: Regulation invoked Ingredient of the Regulation Finding of Commissioner Submissions of the Appellant 10(a) Obtain authorization from the company which has employed the Customs Broker Find it unconceivable that there can be a true authorisation from a firm which does not physically exist. Copies of the authorisation letters dated January 04, 2017 and January 07, 2017 of the two firms were submitted, as is clear from page 56 of the order....
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....Licensing Regulations. 7. Shri Alok Agarwal, learned Counsel for the Appellant made the following submissions: (i) The Appellant was issued the Licence 20 years back. The Department started investigation in 2017 against various exporters of readymade garments and during investigation it was found that five exports pertained to the Appellant. In the show cause notice dated December 3, 2019 issued to the Appellant, it was mentioned that two exporters, namely, M/s Impex Trading and Global Trading were not available at the address provided in the KYC documents. The Department visited the address for physical verification after a long gap of 18 months and it appeared that the exporters in order to avoid the investigation abandoned the given address. (ii) The Appellant had followed all the provisions of the Licensing Regulations and infact had duly carried out the KYC procedure norms provided for in the Licensing Regulations and the Board Circular dated April 08, 2010; (iii) The Appellant had no reason to doubt the veracity of the facts mentioned in the KYC documents as the same had been issued by the Government of India. All these documents were submitted by the Appellant to the ....
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.... per Regulation 10 (a) and so the question of exercising due diligence under Regulation 10(e) and advising the client to adhere to the provisions of the Act and the Regulations, as contemplated under Regulation 10 (d), does not arise; (v) Regulation 10 (n), which requires the Customs Broker to verify the genuineness of documents, has also not been followed; (vi) Regulation 13 (12), which requires the Customs Broker to exercise such supervision as may be necessary to ensure proper conduct of his employees in the transaction of business, has also not been followed; and (vii) In support of the submissions, reliance has been placed on the following decisions: (a) Millenium Express Cargo Pvt Ltd. vs. Commr. of Cus., New Delhi [2017 (346) ELT 471 (Tri.-Del.)]. (b) HLPL Global Logistics Pvt. Ltd. vs. Commr. of Cus. (Airport & Admn.), Kolkata [2019 (370) ELT 501 (Tri.-Del.)] (c) Bhaskar Logistic Services Pvt Ltd. vs. Union of India [2016 (340) ELT 17 (Pat.)]. (d) Multi Wings Clearing & Forwaring P. Ltd. vs. C.C. (General), New Delhi [2019 (369) ELT 820 (Tri.-Del.)]. 9. The submissions advanced by the learned Counsel for the Appellant and the learned Authorised Representative....
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.... Excise and Customs, New Delhi. The relevant clarification relating to Know Your Customer (KYC) norms for identification of clients by Customs House Agents in the said Circular is reproduced below: CIRCULAR DATED 08-04-2010 "(iv) Know Your Customer (KYC) norms for identification of clients by CHA's: 6. In the context of increasing number of offences involving various modus-operandi such as misuse of export promotion schemes, fraudulent availment of export incentives and duty evasion by bogus IEC holders etc., it has been decided by the Board to put in place the "Know Your Customer (KYC)" guidelines for CHA‟s so that they are not used intentionally or unintentionally by importers/exporters who indulge in fraudulent activities. Accordingly, Regulation 13 of CHALR, 2004, has been suitably amended to provide that certain obligations on the CHAs to verify the antecedent, correctness of import export code Number, identity of his client and the functioning of his client in the declared address by using reliable, independent, authentic documents, data or information. In this regard, a detailed guideline on the list of documents to be verified and obtained from the client/ custom....
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....I further observed that at no place or time during the course of investigation or in their defense submissions before the Inquiry Officer or in the court of proceedings in this office, the CB has ever asserted that M/s Impex Trading and M/s Global Trading the two firms for whom he has been doing customs clearance do really exist, nor the CB has controverted the allegation of non-existence of the said firms and thus he has admitted the fact on non-existence of the said two firms. Thus, I find that non-existence of the said two firms M/s Impex Trading and M/s Global Trading is a true and is an undisputed fact." (emphasis supplied) 15. Each violation of the Regulation alleged in the show cause notice shall be taken up separately. 10 (a) of the Licensing Regulations 16. Regulation 10(a) deals with obligations of Customs Broker and provides that the Customs Broker shall obtain an authorisation letter from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs. The Commissioner has recorded the following finding....
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....censing Regulations had been violated. 10(d) and 10 (e) of the Licensing Regulations 19. These two Regulations were taken up together by the Commissioner. Regulation 10(d) requires a Customs Broker to advice his client to comply with the provisions of the Act and the Rules and Regulations. Regulation 10(e) requires a Customs Broker to exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage. 20. The Commissioner has placed much emphasis on the statements made by Virender Kumar Saraswat, who is a G-Card holder. The Commissioner noted that he had made a statement that he had never visited the firms nor he had met any of the partners of the said firms and that it was Shashank Sharma who used to meet the G-Card holder on behalf of the two firms to hand over the papers. Emphasis has been also placed on his statement that he had asked Shashank Sharma for verification of the two firms. The Commissioner, therefore, concluded that the Customs Broker and his G-Card holder were conscious of the fact that the two firms, for whom they were making customs clearance, were fictitious o....
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....l and correct. (iv) Telephone, fax number, e-mail address of the firm and partners. 24. The documents to be obtained are as follow: (i) Registration certificate, if registered (ii) Partnership deed (iii) Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf. (iv) Any officially valid document identifying the partners and the person holding the Power of Attorney and their addresses (v) Telephone bill in the name of firm/partners. 25. Out of the documents listed in the Annexure to the Circular, only two documents have to be obtained. The Appellant did obtain two documents. Neither the Circular nor the Annexure requires any physical verification of the premises. It is not the case of the Department that the documents that had been obtained were forged documents. The reply submitted by the Appellant has not been discussed at all nor any reason has been assigned as to why these documents could not be considered. The Commissioner appeared to have been swayed by the fact that the two firms did not exist at the addresses provided and so the documents cannot be relied upon. It needs to be noted that this verification of the addres....
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....rant of the IE Code presupposes a verification of facts etc. made in such application with respect to the concern or entity. If the grant of such IE Code to a non-existent entity at the address WZ-156, Madipur, New Delhi - 63 is in doubt, then for such erroneous grant of the IE Code, the appellant cannot be faulted. The IE Code is the proof of locus standi of the exporter. The CHA is not expected to do a background check of the exporter/client who approaches it for facilitation services in export and imports. Regulation 13(e) of the CHALR, 2004 requires the CHA to : "exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage" (emphasis supplied). The CHAs due diligence is for information that he may give to its client and not necessarily to do a background check of either the client or of the consignment. Documents prepared or filed by a CHA are on the basis of instructions/documents received from its client/importer/exporter. Furnishing of wrong or incorrect information cannot be attributed to the CHA if it was innocently filed in the belief and faith that its client has fu....
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.... - Any other Photo-identity card issued by the Central Government, State Government. 3. Document to establish possession of the premises to be registered such as proof of ownership, lease or rent agreement, allotment letter from Government, or No Objection Certificate from the legal owner. 4. Details of the main Bank Account 5. Memorandum/Articles of Association/List of Directors 6. Authorisation by the Board of Directors/Partners/Proprietor for the person filing the application. 7. Business transaction numbers obtained from other Government departments or agencies such as Customs Registration No. (BIN No.), Import Export Code (IEC) number, State Sales Tax Number (VAT), Central Sales Tax Number, Company Index Number (CIN) which have been issued prior to the filing of the service tax registration application. 2. PAN Card of Partners/Partnership Firm 1 Copy of certificate of registration issued by Registrar of firms of Copy of Partnership Deed duly notarized by Notary in India which works as proof of the firm‟s existence along with PAN Card from 49A. 2 Address Proof of firm - If the registered office place is rented, rent agreement andone utili....
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....31. Regulation 10(n) requires the Customs Broker to verify the correctness of Importer/Exporter Code Number, Service Tax Identification Number, identity card of the client and functioning of the client at the declared address by using reliable, independent, authentic documents, data or information. 32. The Commissioner, after referring to the Board Circular dated April 08, 2010 and its Annexure, observed as follows: "In this regard, the Inquiry Officer observed that to verify above said feature of partnership firm any two of the above said documents had to be obtained. In the instant case, CB has provided partnership deed. But CB has failed to provide any other document i.e. either registration certificate of partnership firm or Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf or any officially valid document identifying the partners and the person holding the Power of Attorney and their addresses or Telephone bill in the name of firm/ Partners. Further, the Inquiry Officer found from the statement recorded on two occasions of Shri Virender Kumar Saraswat that he did not specifically mentioned that he obtained partnership deed ....
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....xt of the CHA's duty as a mere agent rather than as a Revenue official who is empowered to investigate and enquire into the veracity of the statement made orally or in a document. If one interprets Regulation 13(o) reasonably in the light of what the CHA is expected to do, in the normal course, the duty cast is merely to satisfy itself as to whether the importer or exporter in fact is reflected in the list of the authorized exporters or importers and possesses the Importer Exporter Code (IEC) Number. As to whether in reality, such exporters in the given case exist or have shifted or are irregular in their dealings in any manner (in relation to the particular transaction of export), can hardly be the subject matter of "due diligence" expected of such agent unless there are any factors which ought to have alerted it to make further inquiry. There is nothing in the Regulations nor in the Customs Act which can cast such a higher responsibility as are sought to be urged by the Revenue. In other words, in the absence of any indication that the CHA concerned was complicit in the facts of a particular case, it cannot ordinarily be held liable." 34. The basic requirement of Regulation ....
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....ined CB firm in 2008 and till now he had been working with the CB firm. The Inquiry Officer rightly observed from the statement of Sh. Virender Kumar Saraswar that he is overall in charge of the CB firm at Delhi. CB has failed to explain in what manner he used to supervise the functioning of his G-Card employee. It was the responsibility of CB to ascertain from his G-Card holder that nature of documents that he obtained from his clients for KYC purpose are legally valid. But the CB has failed to do the same. Had the CB exercised his proper supervision on the functioning of his G-Card employee, the fictitious exporting firms would have not succeeded in exporting the overvalued goods with intention to avail ineligible drawback. The Inquiry Officer found no merit in the contentions of CB and concluded that CB has contravened the provisions of Regulation 13(12) of CBLR, 2018 {read with erstwhile regulation 17(9) of CBLR, 2013} In view of the above, I concur with the observations of the IO and hold that the CB has violated provisions of the said Regulation 13(12) of CBLR, 2018 {read with erstwhile regulation 17(9) of CBLR, 2013}." (emphasis supplied) 38. The contention of the appell....