TaxTMI 
TaxTMI 
2023 (2) TMI 145
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....GARM] of the Central Board of Indirect Taxes and Customs [CBIC] analysed the data and identified risky exporters involved in execution of frauds and got verification done by the jurisdictional GST officers and identified exporters who could not be found at all physically at their registered premises. DGARM also found that exports by these exporters were handled by certain Customs Brokers including the appellant herein and reported to the respective Commissionerates including the Respondent herein. The Respondent issued a show cause notice [SCN] to the appellant and appointed an Inquiry officer. After considering the reply to the SCN and the inquiry report, the Commissioner passed impugned order holding that the appellant had violated Regulation 10(n) of the CBLR. This Regulation reads as follows: 10. Obligations of Customs Broker.-A Customs Broker shall- ... (n) verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN),identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information; 4. Since....
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....dentity of the client using reliable, independent, authentic documents, data or information d) Verify the functioning of the client at the declared address using reliable, independent, authentic documents, data or information 7. Of the above, (a) and (b) require verification of the documents which are issued by the Government departments. The IEC number is issued by the Director General of Foreign Trade [DGFT] and the GSTIN is issued by the GST officers under the CBIC under Government of India or officers under the Governments of State or Union territory. The question which arises is whether the Customs broker is required to satisfy itself that these documents or their copies given by the client were, indeed issued by the concerned government officers OR is the Customs Broker also required to ensure that the officers have correctly issued these documents. our considered view, Regulation 10(n) of CBLR cannot be read to mean the latter as it would imply treating the Customs Broker as one who is competent and responsible to oversee and ensure the correctness of the actions by the Government officers. It would also mean that actions by the Customs Broker under t....
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....onerous to expect the CHA to inquire into and verify the genuineness of the IE code given to it by a client for each import/export transaction. When such code is mentioned, there is a presumption that an appropriate background check in this regard i.e., KYC, etc. would have been done by the customs authorities....." (emphasis supplied)." Of course, if the Customs Broker comes to know that its client had obtained these certificates through fraud or misrepresentation, nothing prevents it from bringing such details to the notice of Customs officers for their consideration and action as they deem fit. However, the Customs Broker cannot sit in judgment over the certificate or registration issued by a Government officer so long as it is valid. In these cases, there is no doubt or evidence that the IEC and the GSTIN were issued by the officers. So, there is no violation as far as the documents are concerned. 9. The third obligation under Regulation 10(n) requires the Customs Broker to verify the identity of the client using reliable, independent, authentic documents, data or information. In other words, he should know who the client is and the client cannot be some fictitio....
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....e fact that no such obligation is in Regulation 10(n), it will be extremely difficult, if not, totally impossible, for the Customs Broker to physically visit the premises of each of its clients for verification. For instance, if an importer from a small town in, say, Madhya Pradesh imports goods through ICD Tughlakabad in Delhi, the Customs Broker operating in Delhi cannot be expected to leave his entire business and travel to that town to verify physically if the importer, indeed, is functioning from that address. If Regulation 10(n) is interpreted to burden the Customs Broker with such a responsibility, it will not only be far too onerous to the Customs Broker but it will also make it impossible for anyone in the country to import/export unless he/she can find a Customs Broker willing to travel to his/her town for physical verification. This Regulation cannot be read so as to cause such harassment to the Customs Brokers and to the importers/exporters. This Regulation, in fact, gives the option of verifying using documents, data or information. If there are authentic, independent and reliable documents or data or information to show that the client is functioning at the declared a....
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.... serious offenders. There is nothing in the reports of the jurisdictional officers which were the Relied Upon Documents in the SCN to indicate as to why and how the GST registration was issued when the exporters did not exist at all. We also find that other documents were procured by the appellant which were also issued by various other authorities which have not been alleged to be, let alone, proven to be fake or forged by the Revenue. Evidently, they also must have been issued by concerned officers just as GST Registration was issued by the jurisdictional officers. 15. Unless all these officers of various organisations (including the jurisdictional GST officer who issued the registration in December 2018) either acted fraudulently or carelessly, the above could not have been issued. 16. It is possible that all the authorities who issued the above documents had issued them correctly and thereafter, by efflux of time, when the GST officers went for verification, the situation changed. If so, it is a ground for starting a thorough investigation by the officer and is not a ground to revoke the licence of the Customs Broker who processed the exports. We also fi....
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....ectness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage In the present case, there was no question of the appellant being in a position to impart any information to the client as the same was found non-existent. Also the weight of the container for which it filed bill of entry was in excess by 7.280 tonnes over the declared weight (5.051 tonnes) which should have come to the appellant's notice had due diligence been exercised. Thus the allegation of violation of Regulation 13(e) is sustainable. Further Regulation 13(o) ibid states as under: "A Custom House Agent shall verify antecedent, correctness of Importer Exporter Code (IEC) Number, identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. C.B.E. & C. vide Customs Circular No. 9/2008, dated 8- 2-2010 in order to avoid any ambiguity inter alia laid down the following requirements of verification and documents for the "individual category to which the importer belonged being a proprietorship concern as claimed. S.No. For....
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....ne this proposition and if it supports case of the Revenue in these appeals. 22. It is common knowledge that in designing schemes for issuing registrations, certificates or providing incentives, two conflicting objectives of due diligence and facilitation are balanced. Too many checks can make life difficult for the exporter or the citizen and too much facilitation can open the doors for frauds. Determining the 'golden mean' and where to draw the line is a matter of public policy. The extent of liberalization or tightening may also vary greatly from one system to another and that is also a matter of public policy. The entire system of exports is based heavily on trust and facilitation and very less emphasis on due diligence which enhances trade facilitation but also makes it vulnerable to misuse by fraudsters. The IEC is issued by DGFT based only on an online application and a few easy to obtain documents. Similarly, as per the submission of the learned authorized representatives for the Revenue, GSTIN is also issued without any verification at all and through an automated process. So, one cannot rule out the possibility of an IEC and/or GSTIN being issued without the pers....
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....ase: "DGARM Reference No. 21P Commissionerate Code : ZK GSTIN - 07AAACX3158K123 A. Physical Verification of Principal and additional place (s) of business 1. Address of principal place of business : 1191/13, Govidpuri, New Kuku Cable, South Delhi, Delhi - 110 019". "Recommendation about the bonafides of the entity verified : ................................................................................................... ................................................................................................... ......................................................................................................... ......................................................................................................" "Non Existent exporter. NOC is denied. Signature of Deputy/Assistant Commissioner ............................ Name : ............................................................................................... Official Stamp ___________________________________________________________________ ....
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.................................................................................. ....................................................................................................... ....................................................................................................... .................................................................................................... Signature of Pr. Commissioner/Commissioner ........................... Name : ..........................................................................................." "DGARM Reference No. Report 21R Commissionerate Code : CGST Delhi North GSTIN - 07EMRPM6580E1ZI A. Physical Verification of Principal and additional place (s) of business" Recommendation about the bonafides of the entity verified: The Exporter was visited at its registered Principle place of business. The firm is registered at Faiz Road, 945 T/F, Naiwala No. 21N, Galli No. 3-4, Karol Bagh, Near Red Light Faiz Road, Delhi - 110 005. No such firm was found existing at the said premises. There is no inward E Way Bill supplies are bei....
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....using reliable, independent, authentic documents, data or information ; 24.2 I observe that under the mandate of the Regulation 10 (n) of the CBLR 2018, a Customs broker is obliged to verify correctness of IEC, GSTIN, identity and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. I also observe that vide Circular No. 09/2010-Customs dated 08.04.2010 "Know Your Customer (KYC)" guidelines were specifically issued to CHAs (now CBs). In this context, I would like to discuss para 6 of the said CBIC Circular dated 08.04.2010, which states that : "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 CHAs 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 v....
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....half (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 4. Trusts, Foundations (i) Name of trustees, settlers, beneficiaries and signatories (ii) Name and address of the founder, the managers, Directors and the beneficiaries, in full, complete and correct. (iii) Telephone and fax number, e-mail address of the trust, founder and trustees. (i) Certificate of Registration, if registered (ii) Power of Attorney granted to transact business on its behalf (iii) Any officially valid document to identify the trustees, settlers, beneficiaries and those holding the Power of Attorney, founders/ managers/directors and their addresses. (iv) Resolution of the managing body of the foundation/ association (v) Telephone Bill 24.3 The CB in their written as well oral submissions has inter-alia submitted that before accepting the contextual customs clearance assignments of 133 Shipping Bills during the period 2018-2019 they duly procured all the KY....
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....rried out during the period of the pandemic, the exporter's officers might have been temporarily closed, or dormant, cannot be ruled out. 24.4 However, in the above annexure to the Circular No. 09/2010Customs dated 08.04.2010, detailed guidelines on the lsit of documents to be verified and obtained from the client/customer have been provided. But on going through the documents submitted by CB, it has been observed that CB has not fully complied with the provisions of Circular No. 09/2010 and has failed to verify identity of his clients and functioning of his clients at the declared address by using reliable, independent, authentic documents, data or information. On going through the documents submitted by CB, it has been observed that CB has complied with the provisions of Circular No. 09/2010 in cases of 01 exporter only and has failed to obtain mandated documents in case of other 29 exporters. Further, I find that in cases of 03 exporters M/s Cuthbert Fashion Industrt (P) Ltd., M/s KK Tradelinks and M/s Golden Impex, even the address mentioned in the documents submitted does not match with the address in GSTIN. Further, the said Circular specifically states that "It woul....
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....- 110 086 whereas address on GST Registration Certificate is 2nd Floor, House No. 174, Village Pooth Kalan, Near Bal Vidhya Mandir Model School, Delhi - 110 086". (ix) In case of Golden Impex, WZ-62, Shop No. 03, Ground Floor, Possangipur Village, Janak Puri, New Delhi, having proprietor as Anand Kumar Gupta, the BSES Electricity bill taken as KYC document is issued in the name of Mr. Virender Kumar. (x) In case of Cuthbert Fashion Industry Private Limited, the declared address on IEC is A-6/1, Ground Floor, Gali No. 5, East Krishna Nagar, Delhi - 110 051 where address on GST is 305, B-Block, 3rd Floor, NDM-1, Netaji Subhash Place, Pitampura, New Delhi. (xi) In case of M/s Shukra Enterprises having declared address on IEC as well as GST registration certificate as Flat No. 22, F/F, Janta Flats Pocket B, Sector-16B, Dwarka, New Delhi, the address on Electricity Bill is same, however, in the address certificate dated 22nd June 2018, the address of the proprietorship concern in bank records is A-1/16, Laxmi Vihar, Mohan Garden, Uttam Nagar, New Delhi. (xii) Many of the documents submitted by the Noticee are illegible. 24.7 Accordingly....
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....Customs dated 08.04.2010" 28. It appears from the verification reports that the officers enquired not giving the names of the exporters but enquired if an exporter with a particular GSTIN existed in that address. People and businesses are remembered by their names and not by their GSTIN or PAN or Voter ID Card number. If anyone goes to an area and enquires, for instance, if a person with a particular PAN lives hardly anyone will be able to confirm. 29. Further, we find that the conclusion in the verification reports are 'Non-existent exporter', 'NOC denied' and 'No such firm was found existing at the said premises and therefore, IGST Refund claims made by the exporter are bogus and may be rejected.' None of them state that the exporter never operated from that premises and the officer has issued GSTIN to a non-existent firm or at the time of verification, the firm was not operating from the premises but it may or may not have existed at the time of export. If the former is the case, it is also not clear why and how the officer who conducted the verification or his predecessor issued the GSTIN to a non-existent exporter. 30. As far as the remark 'NOC denie....