AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2023 (6) TMI 201
X X X X Extracts X X X X
X X X X Extracts X X X X
....toms Broker Services Pvt. Ltd. (PAN AADCJ4115D), having address at 4, Netaji Subhas Road, 1st Floor, Cubical No. 155, Kolkata, 700001 bearing licence No. S-116 (PAN: AAGCS7156L), by exercising powers conferred upon me under Regulation 14 of CBLR, 2018. ii. The full amount of Security Deposit furnished by the CB M/s Jyoti Customs Broker Services Pvt. Ltd., is also ordered to be forfeited as per provision of Regulation 18 of CBLR, 2013. 2. The factual matrix which led to the issuance of this order is that the Directorate General of Analytics and Risk Management (DGARM) of the Central Board of Indirect Tax and Customs analysed the data in respect of IGST refund frauds and got investigation done by the jurisdictional GST Officers and identified exporters who could not be found at all physically at their registered premises. After finalization, the data for 2710 adversely reported cases to identify risky exporters including that of 2005 exporters, who could not be verified physically(untraceable), it was revealed that Customs Broker had handled consignments for untraceable exporters. 3. A Show Cause Notice dated 16/10/2020 was issued to the Appellant and an en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to discharge this obligation and hence it is liable for the consequences of revocation of its licence and forfeiture of the security deposit. The SCN cited CBIC Circular No.9/2010-Customs dated 8.4.2010 giving KYC guidelines and alleged that the appellant failed to exercise due diligence and grossly violated the KYC guidelines of the said Circular dated 8.4.2010 read with CBLR, 2018 as a number of exporters have been found to be untraceable. As per the mandate of Regulation 10(n) of the CBLR, 2018 read with the Circular No. 9/2010Customs dated 8.4.2010, it was incumbent upon the CB to verify the identity and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information which apparently the CB have failed to do. 7. The Appellant's submission before the Inquiry Officer, the adjudicating authority as well as before us is that it had carried out the due diligence as required under Regulation 10(n) by obtaining the documents such as: (i) Authorisation letter from the exporter (ii) KYC letter (iii) GST Registration Copy (iv) IEC Registration Copy (v) Company PAN card of the exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Customs Brokers play an important role in the Customs administration and have to fulfill their responsibilities and obligations under the law. The law in question in this case is Regulation 10(n) of CBLR, 2018. 12. Regulation 10(n) of CBLR 2018 assigns certain responsibilities to the CB. For the sake of easy reference, the said Regulation reproduced below: "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.," 13. We have to examine whether the CB has complied with the provisions of the above said regulation. We find that the Tribunal has examined the scope of these obligations in the case of M/S Anax Air Services Pvt Limited vs Commissioner of Customs, (Airport and General), New Delhi. The relevant portion of the order is reproduced below: "22. We now proceed to examine the scope of the obligations of the Customs Broker under Regulatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estigation into the documents by the Customs Broker. The presumption is that a certificate or registration issued by an officer or purported to be issued by an officer is correctly issued. Section 79 of the Evidence Act, 1872 requires even Courts to presume that every certificate which is purported to be issued by the Government officer to be genuine. It reads as follows: "79. Presumption as to genuineness of certified copies. The Court shall presume to be genuine every document purporting to be a certificate, certified copy or other document, which is by Law declared to be admissible as evidence of any particular fact and which purports to be duly certified by any officer of the Central Government or of a State Government, or by any officer in the State of Jammu and Kashmir who is duly authorized thereto by the Central Government. Provided that such document is substantially in the form and purports to be executed in the manner directed by law in that behalf. The Court shall also presume that any officer by whom any such document purports to be signed or certified, held, when he signed it, the official character which he claims in such paper." 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alify as independent, reliable and authentic) could meet this requirement. While obtaining documents is probably the easiest way of fulfilling this obligation, the Customs broker can also, as an alternative, fulfill this obligation by obtaining data or information. In the factual matrix of this case, we are fully satisfied that the appellant has fulfilled this part of the obligation under Regulation 10(n). 27. The fourth obligation under Regulation 10(n) requires the Customs Broker to verify the functioning of the client at the declared address using reliable, independent, authentic documents, data or information. This responsibility, again, can be fulfilled using documents or data or information so long as it is reliable, independent and authentic. Nothing in this clause requires the Customs Broker to physically go to the premises of the client to ensure that they are functioning at the premises. Customs formations are only in a few places while exporters or importers could be from any part of the country and they hire the services of the Customs Brokers. Besides the fact that no such obligation is in Regulation 10(n), it will be extremely difficult, if not, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t authentic and are either forged by the Customs Broker or the Customs Broker has reason to believe that the documents submitted to him were forged. It has been held by the High Court of Delhi in Kunal Travels that "the CHA is not an inspector to weigh the genuineness of the transaction. It is a processing agent of documents with respect of clearance of goods through customs house and in that process only such authorized personnel of the CHA can enter the customs house area........ It would be far too 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)." 30. In this case, the negative reports were issued by the jurisdictional GST officers who, or whose predecessors or colleagues, must have issued the GST registration. Thereafter, if it is found that the exporter is not operating from that address at all and the GST registration was wrongly issued, the responsibility rests on the officer who i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Government and if the exporter did not exist at all at the premises how these documents were issued by several Government officers, learned Departmental Representative submitted that officers issue these documents as per their mandate which does not include physical verification of the business premises. He further clarified that in almost all these cases, the Registrations are issued by the officers based on online applications. They are not mandated to ensure that the exporter(s) exist and are functioning from these premises but the Customs Broker is so mandated by Regulation 10(n) of the CBLR, 2018 which obligation does not get obliterated or diluted by the fact that officers of various departments have issued these documents." 14. From the above discussion, we find that physical verification of the business premises is not an obligation cast upon the CB, under Rule 10(n) of CBLR, 2018. 15. The Tribunal in the above said Order further examined the reliability of these documents issued by various Government agencies and analyzed the scope of the Custom Broker in relying on these documents to fulfill their obligations under CBLR 2018. "38. As far as thes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the officers to stop his imports or exports. Means of the person cannot be questioned either. The same hut-dweller, who gets his ration card after due verifications can get an IEC from DGFT based solely on an online application and after submitting his documents and can file a shipping bill for export of goods worth several crores of rupees and his lack of means does not mean that the officers can stop such an export. All that is required is that the exporter or importer should have an IEC issued by the DGFT. The IEC is issued by the DGFT on an online application in Form ANF2 and some supporting documents. For instance, in case of individuals, the documents that are required are: i. Digital Photograph (3x3cms) of the Proprietor. ii. Copy of PAN card of the Proprietor. iii. Copy of Passport (first & last page)/Voter's I-Card/ Driving Licence/UID (Aadhar card) (any one of these). iv. Sale deed in case business premise is self-owned; or Rental/Lease Agreement, in case office is rented/ leased; or latest electricity /telephone bill. v. Bank Certificate as per ANF 2A(I)/ Cancelled Cheque bearing pre-printed name of applicant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the banks when the remittances pertaining to the exports are received. The export data is transmitted by the Customs to the Reserve Bank of India online where it is matched with the remittance data obtained from the banks. Remittances have to be received within one year and so there is no immediate check at the time of export. It is a sort of postmortem exercise for possible remedial action. 44. As far as the export incentives such as drawback are concerned, they are received on the basis of the shipping bills cleared by the Customs and the corresponding Export General Manifest (EGM) filed by the Master of the Vessel or his agent confirming that the container is loaded on to the ship. Regardless of whether the remittance is received (for which a time of one year is available or not, the exporter gets drawback into his account immediately from the Government. 45. To sum up, 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 doc....