TaxTMI 
TaxTMI 
2023 (9) TMI 421
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....ellants have filed this appeal before the Tribunal. 3. The brief facts of the case are that an investigation report dated 21.01.2022 received from Special Intelligence & Investigation Branch (SIIB) of Airport Special Cargo Commissionerate (APSC), Mumbai Customs Zone-III, indicated that out of 21 identified fraudulent exporters of Cut & Polished diamonds, the appellants as Customs Broker had handled two of such exporters. During the investigation it was found that unscrupulous persons had created bogus entities by obtaining Import Export Code (IEC) in the name of real estate agents, drivers, teachers who were unrelated with the Diamond trade and used such non-functional IECs, with non-existent address declared in IECs, for fraudulent export activities. The appellants have handled exports in respect of two such exporters viz. M/s Swastik Enterprises and M/s Ganesh Exports. The investigation also revealed that on paper the proprietor of M/s Swastik Enterprises is shown as Shri Mukesh Madhu Regar, even though the actual owner of the business entity is Shri Nikunj. Similarly, in respect of M/s Ganesh Exports the on paper proprietor is shown as Shri Mangi Lal Gurjar, even though....
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....tted to Customs. On the other hand, the appellants were not given copy of investigation report dated 21.02.2022 to effectively defend them despite their request for supply of the same. Thus, he stated that suspension action taken in the impugned order does not sustain as such action should be made only in appropriate cases, where immediate action is necessary. In this regard, he relied upon the following case laws: - (a) Commissioner of Customs Vs. National Shipping Agency - 2008 (226) E.L.T 46 (Bom.) (b) Schankar Clearing & Forwarding Ltd. Vs. C.C. (Import & General) - 2012 (283) E.L.T. 349 (Del.) (c) R.S. Kandalkar Vs. Commissioner of Central Excise - 2014 (299) E.L.T. 360 (Tri. - Mumbai) (d) P. Cawasji & Co. Vs. Commissioner of Customs (General), Mumbai - 2018 (364) E.L.T.871 (Tri. - Mumbai) (e) P.P. Associates Vs. Commissioner of Customs (General), Mumbai - 2016 (343) E.L.T. 684 (Tri. - Mumbai) 5. Learned AR appearing for the Revenue reiterated the findings recorded in the impugned order. He further submitted that the appellants have processed the shipping bills without proper antecedent verification of exporters by us....
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....acted below: "Regulation 10. Obligations of Customs Broker: - A Customs Broker shall - (a) obtain an authorisation 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, as the case may be; xxx xxx xxx xxx (d) advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in case of noncompliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be; xxx xxx xxx xxx (k) maintain up to date records such as bill of entry, shipping bill, transhipment application, etc., all correspondence, other papers relating to his business as Customs Broker and accounts including financial transactions in an orderly and itemised manner as may be specified by the Principal Commissioner of Customs or Commissioner of Customs or the Deputy Commissioner....
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....ng the importer/exporter before Customs department. Hence, we do not find any merit in the conclusion arrived at by the learned Principal Commissioner in respect of Regulation 10(a) ibid. 10. As regards Regulation 10(d) ibid, it is on record in the impugned order at paragraph No. 30(2) that the CB never met the proprietors of the export firms and thus the CB had not given any advice to his clients. Further, Shri Dnyanesh P Walunj, Director of appellants/CB firm had given in his voluntary statement dated 20.11.2021 before the Customs authorities that he knew that the export goods in respect of said two export entities belonged to a third person other than the exporters, which is in violation of the provisions of the Customs Act. However, the CB failed to bring these details to the notice of the Assistant/Deputy Commissioner concerned, so that the Customs department could have taken immediate necessary action against the deviant exporters. However, these fraudulent exports were identified and brought to fore only by the Customs SIIB investigation subsequently. In this regard, in order to appreciate the importance of the role of Customs Broker/Custom House Agent and the timely acti....
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....by CB, he admitted that he did not have any records regarding address verification of the IEC holders. Thus, the learned Principal Commissioner came to the conclusion that the CB could not maintain proper record in respect of the exporter and their addresses. We find that as per Regulation 10(k) ibid, the nature of records that are required to be maintained up-to-date by a Customs Broker is mentioned therein as 'bill of entry, shipping bill, transshipment application etc., all correspondences, other papers relating to his business as Customs Broker and accounts including financial transactions in an orderly and itemized manner as may be specified by the Principal Commissioner/Commissioner of Customs or the Deputy/Assistant Commissioner of Customs'. Though it is possible that the verification of addresses of the exporters from where they are functioning could have been verified by a Customs Broker through correspondence with them and thus such details may form part of the records to be maintained, we find that this is not the case before us. It is not shown to us that there was such prescription for maintenance of records specified by the Principal Commissioner, and even if so, that....
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....ulation 13, after sub-regulation (n), the following shall be inserted, namely:- "(o) 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."; xxx xxx xxx [F. No. 502/5/2008 - Cus.VI]" 12.2. In explaining the changes brought through the aforesaid Notification the Central Board of Excise & Customs (CBEC) had also issued a Circular No. 9/2010-Customs dated 08.04.2010, the relevant portion of which is extracted below: "(iv) Know Your Customer (KYC) norms for identification of clients by CHAs: 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, ....
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....red (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 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." 12.3. In the present form of sub-Regulation 10(n) of CBLR, 2018, the said earlier regulation 13(o) ....
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....ters by the competent authorities properly and their identity has not been doubted by the department. 12.4. In this regard, we find that the Co-ordinate Bench of the Tribunal had specifically dealt with the issue of compliance with the obligations by a Customs Broker under Regulation 10(n) ibid, by its Final Order dated 18.11.2022 in Customs Appeal No. 51658 of 2021 in the case of Commissioner of Customs (Airport & General), New Delhi Vs. M/s Bright Clearing & Carrier Pvt. Limited. The relevant paragraphs of the above referred Order are extracted below: "6. We have considered the submissions on both sides. Regulation 10(n) 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 document....
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....nt, 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. 8. The onus on the Customs Broker cannot, therefore, extend to verifying that the officers have issued the certificate or registration correctly. It has been held by the High Court of Delhi in the case of Kunal Travels 2017 (3) TMI 1494 - Delhi High Court - 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 b....
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....and reliable having been issued by the Government officers. However, these are not the only documents the Customs Broker could obtain; documents issued by any other officer of the Government or even private parties (so long as they qualify 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 these cases, we are fully satisfied that the appellants have fulfilled this part of the obligation under Regulation 10(n). 11. The fourth and the last 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 they are 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. By their nature, Customs formations are located ....
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....continuous surveillance on the client to ensure that he continues to operate from that address and has not changed his operations. Therefore, once verification of the address is complete as discussed in the above paragraphs, if the client moves to a new premises and does not inform the authorities or does not get his documents amended, such act or omission of the client cannot be held against the Customs Broker. Of course, if the Customs Broker was aware that the client has moved and continues to file documents with the wrong address, it is a different matter. 13. In these appeals, 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 was not operating from that address at all and the GST registration was wrongly issued, the responsibility rests on the officers who issued the GST Registration and not the Customs Broker. This wisdom in hindsight of the officers that the GSTIN was wrongly issued at that address cannot be held against the Customs Broker. 14. The appellants relied on the GST Registration Certificates a....
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....departments have issued the documents. 18. Learned Authorized Representatives further submit that the case of Kunal Travels - 2017 (3) TMI 1494 - Delhi High Court cannot come to the aid of the appellant as that was issued in the context of the erstwhile Custom House Agents Licensing Regulations,2004 which, as it stood during the relevant time, did not have an obligation on the Custom House Agent similar to the one in Regulation 10(n) of CBLR 2018. A provision similar to Regulation 10(n) of CBLR, 2018 was later introduced as Regulation 13(o) of CHA Licensing Regulations, 2004 which was considered in the case of Millenium Express Cargo - 2017 (346) E.L.T. 472 (Tri. Del) by this Tribunal which decision was upheld by the High Court of Delhi. The ratio of this order should apply to this case. 19. We have examined the order in the case of Millenium Express Cargo and find that, that was a case where the cigarettes were smuggled concealed in a consignment of induction cookers and the Bill of Entry was filed by the CHA whose licence was then revoked for violation of Regulations 13(e) and 13(o) of CHA licensing Regulations, 2004. Of these, 13(o) is p....
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....ify present and permanent address in full, complete and correct which the appellant did not do. Merely because the appellant obtained documents as per Column 4 of the above table does not tantamount to fulfilment of requirement of Column 3 relating to features to be verified because if that was so, then there was no need to have Column 3. As seen from Regulation 13(o) quoted above, the Customs House Agent is obligated to inter alia verify antecedent, correctness of Importer Exporter Code, identity of the importer and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. The appellant has not even claimed that it had ever verified the existence of the importer at the given address. Obviously, the appellant failed to fulfil the requirement of Regulation 13(o) ibid. 20. Millenium express Cargo does not support the case of the Revenue since there is nothing on record to show that the exporters did not exist at the premises at the time of export or that the appellants were aware about the non-existence of the exporters when they filed the Shipping Bills. In fact, there is not even an assertion by the Re....
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....rds, 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. 23. However, the burden of this very liberal, open, scheme and its potential misuse cannot be put at the doorstep of a Customs Broker. Just as the officer's responsibility ends with doing his part of the job (which may be issuing a registration without physical verification or allowing exports without assessing the documents or examining the goods), the Customs Broker's responsibility ends with fulfilling his responsibilities under Regulation 10 of the CBLR, 2018. In dispute in these appeals is CBLR 10(n) which, as we have discussed above, does not require any physical verification of the address of the exporter/importer. 24. Learned Authorized representatives for the Revenue relied on the decision of a coordinate bench of this Tribunal in Baraskar Brothers that there is an obligation on the Customs Broker to conduct a physical verification. Firstly, there is nothing in the Regulation 10(n) about physical verification. It requires verification that the person is operating from that addres....
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....nbsp; 28. Impugned order dated 18.6.2021 held that the appellant has taken necessary documents as per the KYC as per CBLR 2018 but failed to verify the actual functioning of the exporter concerned and has not satisfied the inquiry officer that they had made all possible efforts to verify the genuineness of the exporter. The appellant has been held to have violated Regulation 10(n) of CBLR 2018 and hence his licence was revoked under Regulations 14&18 read with Regulation 17(7) of CBLR 2018 and his security deposit of Rs. 5,00,000/- was forfeited and a penalty of Rs. 50,000/- was imposed on the appellant. 29. It appears from the verification reports that in two cases, the officers enquired not by 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 would confirm. Interestingly, the reports also indicate that the premises were rented while at the same time indicating that the exporter was non-exist....
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....e exporter-assessee M/s. Prakash Industries (GSTIN 07AAWFP7599M1ZU) does not appear to be bonafide'. (iii) M/s Kavya Impex (07AIMPL4955B1Z7)- RUD-4: This report indicates that the exporter was not found to exist at the premises but further specifies the total value of exports within 9 months and older than 9 months and also gives details of remittances received. It further gives the details of the bank account of the exporter and month wise transactions for a few months. It also confirms that physical copy of the PAN and IEC were provided. 33. Inquiry Report dated 26.3.2021 held that the appellant has violated provisions of Regulation 10(n) of CBLR, 2018 34. Impugned order dated 22.6.2021 revoked the licence, directed the licence to be surrendered immediately along with all F, G &H cards issued, forfeited security deposit of Rs. 50,000 and imposed penalty of Rs. 50,000/-. 35. Two verification reports in respect of this appellant state that the exporter is 'not bonafide'. The third verification is self contradictory inasmuch as it, on the one hand, states that the exporter does not exist at the place and on the other hand confirm....