TaxTMI 
TaxTMI 
2023 (4) TMI 324
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....n it was alleged that on analysing data for 2710 adversely reported cases, DGARM has identified 2005 risky-exporters involved in IGST refund fraud and it was revealed that total 62 Customs Brokers (CBs in short) had handled the consignments of such risky exporters. It was also alleged therein that such 62 CBs have violated KYC guidelines under CBLR, 2018 read with Board's Circular No. 09/2010-Cus dated 08.04.2010 and accordingly, a request was made to initiate an inquiry for violation of KYC guidelines under CBLR, 2018. A list consisting details of 10 exporters where the present appellants acted as CB was enclosed to the said alleged offence Report of DGARM. 2. An Assistant Commissioner of Customs, Airport & ACC Commissionerate was appointed as Inquiry Officer in the said SCN. The appellants under their letter dated 15.12.2020 before the Ld. Inquiry Officer submitted reply to the said SCN and contended, inter alia, that they were having in their possession all the KYC documents for all the exporters and accordingly, they prayed for dropping of the proceeding. 3. Under letter dated 12.04.2021, the Ld. Assistant Commissioner of Customs, CB Section, Customs House, Kolkata ....
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....lants CB had verified IEC, GSTIN, PAN, Aadhar etc. of all the exporters under question from the respective official websites of the respective Governmental Authorities and had also verified the identity & functioning of each exporter from respective acknowledgment letters of Nationalized Banks confirming the signature and functioning of the respective exporter and hence, there cannot be any violation of Regulation 10(n) of CBLR, 2018 on the part of the appellants. 7. The Appellant further contented that the Ld. Pr. Commissioner has failed to appreciate that if the Government or Banks with all their men and machinery while issuing IEC/GSTIN/PAN/Aadhar etc. to any person did not question the existence of the said person/ exporter, the CB cannot be held responsible for subsequent non-existence of such person/ exporter. 8. The Appellant also contented that in terms of Regulation 17(7) of CBLR, 2018, the Principal Commissioner of Customs was under the obligation to pass his Final Order within ninety days from the date of submission of such Report by the Inquiry Officer which expired on 16.06.2021, in this case. He also argued that no order was passed by the Ld. Principal Commissio....
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....triction should be placed on the number of CHAs operating in the Custom Houses and the market forces should govern the number of proficient and qualified persons required to carry out the job of CHA commensurate with the volume of import / export cargo. The Board also did not find any justification in prescribing a turnover based criteria for ascertainment of the number of CHA licenses required to be issued at a particular Custom House / Station, in as much as the practice of undertaking CHA services on the basis of Form 'C' intimation was already in vogue and would render such exercise meaningless. The Board, therefore, has decided against fixing a numeric criterion governing the number of CHA licenses being issued. Board has also decided that the examination under Regulation 8 shall be conducted on an annual basis instead of twice a year, by suitably amending the sub-regulation (1) to Regulation 8. (ii) Employment of person by a CHA: 4. In the present scheme of CHALR, 2004 under regulation 19(1), the Custom House Agent may employ any person who shall have a minimum educational qualification of 10+2 School education. However, appointment of such person sh....
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....f such CHAs, who are found to have violated any provision of the CHALR, 2004 at any customs station, it is clarified that the suspension action against CHA's operations may be taken by the Commissioner of Customs at the station who issued the CHA license and such action would either be limited to a particular customs station where a violation has been noticed or action against the CHA in general, applicable at all customs stations where the CHA operates, depending upon the gravity and seriousness of the violation. Where the CHA licence is suspended, all 'G' and 'H' cards issued in respect of that licence would become non-operational. 5.2. Further, it is also clarified that the Commissioner of Customs at a customs station who had authorised a CHA to operate on 'C' form intimation, should inform the details of violations to the Commissioner of Customs at the customs station from where the CHA licence was issued for such CHA, so that necessary action for suspension or revocation of CHA licence, could be initiated by him. This would avoid duplication and ensure uniformity in adjudication of a case against a CHA in suspension or revocation proceeding....
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....er by the Commissioner of Customs. Suitable changes have been made in the present time limit of forty five days for reply by CHA to the notice of suspension, sixty days time for representation against the report of AC/DC on the grounds not accepted by CHA, by reducing the time to thirty days in both the cases under the Regulations. 7.2. In cases where immediate suspension action against a CHA is required to be taken by a Commissioner of Customs under regulation 20(2), there is no need for following the procedure prescribed under Regulation 22 since such an action is taken immediately and only in justified cases depending upon the seriousness or gravity of offence. However, it has been decided by the Board that a 'post-decisional hearing' should be given in all such cases so that errors apparent, if any, can be corrected and an opportunity for personal hearing is given to the aggrieved party. Further, Board has also prescribed certain time limits in cases warranting immediate suspension under Regulation 20(2). Accordingly, the investigating authority shall furnish its report to the Commissioner of Customs who had issued the CHA license (Licensing authority), w....
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.... 8.2. Board also took note of the fact that these candidates had passed the CHA examination held under CHALR, 1984 based on the qualification prevailing at that relevant point of time, and that a precedent existed wherein a dispensation was prescribed vide Board's Circular No.48/2000-Customs dated 22.5.2000 for a specific period. Accordingly it was also decided by the Board that in case of Regulation 9 examination passed candidates under the CHALR, 1984, the relaxation provided in respect of educational qualifications vide Board's Circular No. 48/2000-Customs shall be extended on similar basis. 9. The aforesaid decisions of the Board involving change in the CHALR, 2004, has been implemented by issue of Notification No.30/2010-Customs (NT) dated 8.4.2010. 10. These instructions may be brought to the notice of the trade by issuing suitable Trade / Public Notices. Suitable Standing orders/instructions may be issued for the guidance of the field officers. 11. Difficulties faced, if any, in implementation of this Circular, changes made in the CHALR, 2004 may be brought to the notice of the Board immediately. Annexure Client/Customer Iden....
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....he Annexure to the above circular No. 9/2010 dt. 8.4.2010, they have obtained all the documents and hence they have not violated any of the provisions of Regulation 10(n) of the CBLR, 2018. 11. The case of the Revenue is that since these firms were found to be not functioning from the registered premises when physically verified by the Departmental officers, they never existed in the first place and it was the obligation of the appellant as a Customs Broker to "verify correctness of Importer Exporter Code (IEC) number, Goods and Service 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" as provided in Regulation 10(n) of the CBLR 2018.The Departmental Representative argued that as the appellant failed to discharge this obligation they are liable for the consequences of revocation of their licence, forfeiture of the security deposit and imposition of penalty. The Departmental Representative cited the CBIC Circular No. 9/2010-Customs dated 8.4.2010 giving KYC guidelines and argued that the appellant failed to exercise due diligence and grossly viola....
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....antiate the existence of the exporters at the relevant time of issue of these documents. 14. We find that paragraph 6 of the Circular 9/2010-Cus dated 8.4.2010 requires the client to furnish to the CHA, a photograph of himself / herself, in the case of an individual and those of the authorized signatory in respect of other forms of organization such as company/trusts, etc. and any two of the listed documents in the annexure. Thus, it is evident that even as per the circular, obtaining a photograph and any two of the documents listed in the Annexure to the circular is sufficient compliance of Regulation 10(n) of CBLR, 2018. 'Any officially valid document identifying the partners and the person holding the Power of Attorney and their addresses' is cited as one of the documents for Partnership firms, trusts and foundations. The most important documents in these cases are the IEC and the GSTIN - one issued by the same department and the other by the DGFT. GSTIN which was not only issued by the same department but has also been cited in the investigation reports (RUDs to the SCN). The IEC issued by the DGFT in these cases is not disputed at all without which the goods could not have ....
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....below: 22. We now proceed to examine the scope of the obligations of the Customs Broker under Regulation 10(n). It requires the Customs Broker to 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. This obligation can be broken down as follows: a) Verify the correctness of IEC number b) Verify the correctness of GSTIN c) Verify the identity 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 23. 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 and the GSTIN is issued by the GST officers under the Central Board of Indirect Taxes and Customs of the Government of India or under the Governments of State or Union territory. The....
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....d it, the official character which he claims in such paper." 24. The onus on the Customs Broker cannot, therefore, extend to verifying that the officers have correctly issued the certificate or registration. Of course, if the Customs Broker comes to know that its client has 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 this case, 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. 25. 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 fictitious person. This identity can be established by independent, reliable, authentic: a) documents; b) data; or ....
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....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. The 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 address, this part of the obligation of the Customs Broker is fulfilled. If there are documents issued by the Government Officers which show that the client is functioning at the address, it would be reasonable for the Customs Broker to presume that the officer is not wrong and that the client is indeed, functioning at that address. In the factual matrix of this case, we find that the GSTIN issued by the officers of CBIC itself shows the address of the client and the authenticity of the GSTIN is not in doubt. In fact, the entire verification report is based on the GSTIN. Further, IECs issued by the DGFT also show the address. There is nothing on record to show that either of these documents were fake or forged. Therefore, they are authentic and reliable and we have no reason to believe that the officer....
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....ation was wrongly issued, the responsibility rests on the officer who issued the GST Registration and not the Customs Broker. The wisdom in hindsight of the officer that the GSTIN was wrongly issued at that address cannot be used against the Customs Broker. The appellant relied upon the GST Registration Certificates and if relying on them is an offence, issuing them when the firms didn't even exist must, logically be a much graver offence and the officers who issued them must be more serious offenders. There is nothing in the RUDs (the reports of the jurisdictional officers) to indicate as to why and how the GST registration was issued when the exporters did not exist at all. We also find that there were other documents procured by the appellant 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 like the GST Registration issued by the jurisdictional officers. 31. Unless all these officers of various organisations (including the jurisdictional GST officer who issued the registration in December 2018) either acted fraudulently or careles....
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....ll their obligations under CBLR 2018. "38. As far as these documents issued by various Government officers are concerned, the submission of the Departmental Representative is interesting and needs a deeper examination. It is his submission the documents were neither issued fraudulently nor issued carelessly but were issued within the mandate of the officers who issued them and this mandate does not include physical verification. In other words, the submission is that the system designed by the Government for issue of these certificates itself is such that they can be issued even to persons who do not exist at all at the declared premises. We proceed to examine this proposition. 39. 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 anot....
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....led Cheque bearing pre-printed name of applicant and A/C No 41. All that are required are a photograph, one's Aadhar card, PAN card and electricity bill or rent agreement and a cancelled cheque. Most Indians have an Aadhar card and PAN card can be obtained from Income tax based on the Aadhar card. Once an IEC is issued by the DGFT, one can start exports and imports. By producing the above documents, anyone can easily get an IEC which forms the foundation on which the entire edifice of regulatory structure over imports and exports is built. This includes not only the right to export or import but also the entitlement to and receipt of incentives such as drawback, GST refund and various export incentive schemes formulated by the DGFT. Thus, this is a very liberal, business-friendly, open, system which also makes it vulnerable to misuse. 42. While the DGFT issues the IEC, actual exports take place through the Customs which forms the second point of check over imports and exports which is also quite liberal. There are two levels of checks in Customs - assessment of the documents by the officer and physical examination of the goods being exported both of which are done....
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....easy to obtain documents. So, one cannot rule out the possibility of an IEC being issued without the person even operating its business from the address. The IEC forms the foundation for the entire system of controls and, in turn, is the basis for issue of various licences and scrips by the DGFT and is also the basis for Customs allowing exports. In view of the customs RMS letting 80% to 95% of the exports without either assessing the documents or examining the records, there is a very high probability of any fraudster successfully exporting the goods (or even empty containers) and claiming the export incentives and profiting from it." 19. On the basis of the above observations, the Tribunal, in the case of Anax Air Services Pvt Ltd concluded as under:- "46. Thus, both the financial gain to an individual and the aggregate financial impact on the budget are large but the policy and schemes are not designed mainly to facilitate the good guys and genuine exporters and not to keep the crooks out. This balance is a matter of policy. Learned departmental representative was correct in stating that the officers work within their mandate which may not include physical verificati....