TaxTMI 
TaxTMI 
2020 (12) TMI 649
X X X X Extracts X X X X
X X X X Extracts X X X X
....goods of two firms, namely, M/s Impex Trading 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad also discharged his duty as per the Licensing Regulations. There was no 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 Januar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oard Circular 09/2010 and exercised due diligence by procuring all independent authentic documents in accordance with the 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 m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i) The exporters never responded to the summons and the letters addressed to them returned with a note that the exporters or the firm have not been found at the address; (iv) Proper authorisation was not obtained as 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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ercise such supervision as may be necessary to ensure proper conduct of his employees in the transaction of business and he shall be held responsible for all acts or omissions of his employees during their employment." 12. The Appellant, in his defence referred to a Circular dated April 08, 2010 issued by the Central Board of 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....count. The Summons issued to the said two firms as well summons issued to the stated partners of the said firms were returned undelivered by the postal authorities. Physical verification of the given addresses were also done and it was found that no such firms existed at the said given addresses. No BRC was received against the exports made in the name of the said two firms. 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 oblig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....scertaining the functioning of the clients at the address declared by the clients and in this connection the partnership deed as well as service tax registration, PAN card, Import Export Code, voter card, electricity bill, bank details and mobile number of the partners with email id were also examined. The Commissioner, therefore, committed an illegality in holding that Regulation 10(a) of the Licensing 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... forms of organisations, such as company/trusts and any two of the listed documents mentioned in the Annexure. 23. The Annexure to the Circular, in the case of a partnership firm, requires certain features to be verified and documents to be obtained. The features to be verified are as follows: (i) legal name (ii) Permanent address, in full, complete and correct. (iii) Name of all partners and their addresses in full 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 verific....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e exported. In the absence of such knowledge, there cannot be any mens rea attributed to the appellant or its proprietor. Whatever may be the value of the goods, in the present case, simply because upon inspection of the goods they did not corroborate with what was declared in the shipping bills, cannot be deemed as misdeclaration by the CHA because the said document was filed on the basis of information provided to it by M/s. H.M. Impex, which had already been granted an IE Code by the DGFT. The grant 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 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n has pointed out that for issuance of these documents the following documents are required : S. No. Document Submitted Document required for issuance 1. Service Tax Registration Certificate Self-attested copy of the following documents: 1 Copy of the PAN Card of the proprietor/partners. 2. Photograph and proof of identity (any one out of below list) of the person filling the application : - PAN Card - Passport - Voter Identity Card - Aadhar Card - Driving license - 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 Exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments, most of which are documents issued by the Government of India. 30. The Commissioner was, therefore, not justified in ignoring the documents provided by the Appellant. Reliance placed by the Commissioner on the statement made by Virender Kumar Saraswat is misplaced. As noted above, the verification is required to be undertaken on the basis of the documents and it is not possible to draw any inference from the said statement that he had any serious doubts about the existence of the firms. The findings that the Appellant had not followed the provisions of Regulations 10(d) and 10(e) of the Licensing Regulations is, therefore, erroneous. 10(n) of the Licensing Regulations 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 fea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns of the IO and hold that the CB has violated provisions of the said Regulation 10(n) of CBLR, 2018." (emphasis supplied) 33. The Delhi High Court in Shiva Khurana had an occasion to examine the provisions of Regulation 13(o) of the 2004 Regulations, which Regulation is similar to Regulation 10(n) of the Licensing Regulations, and the relevant observations are as follows : "7. This court is of the opinion that the impugned order is justified in the facts and circumstances of the case. The reference to the verification of "antecedents and correctness of Importer Exporter Code (IEC) Number" and the identity of the concerned exporter/importer, in the opinion of this Court is to be read in the context 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 Importe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e that the provisions of Regulations 13(12) of the Licensing Regulations have not been complied with: "I find that the Inquiry Officer in his report after considering the submissions of the CB observed that the CB has failed to explain in what manner he used to supervise the functioning of this employee. The Inquiry Officer also found from the statement dated 28.01.2017 of Sh. Virender Kumar Saraswat that he had oral understanding with CB firm and all the export papers/shipping bills of CB at Delhi Air Cargo filed by him. He also stated that he was in charate of overall supervision of all the exports made through the firm M/s Perfect Logicare Private Limited. Further, the Inquiry Officer found that he stated that he joined 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 le....