Mauli Worldwide Logistics Vs Commissioner, Customs-New Delhi (Airport And General) (CESTAT Delhi)
The responsibility of the Customs Broker under Regulation 10(n) does not include keeping a continuous surveillance on the client. Once the verification is done requirement of regulation 10(n) is satisfied.
Facts-
DGARM analysed the data and identified risky exporters involved in execution of frauds. DGARM noted that these exporters were handled by certain customs brokers including appellant. Accordingly, the Commissioner issued a show cause notice to the appellant. The Inquiry Officer found that the charge in the show cause notice that the appellant had violated Regulation 10(n) of CBLR, 2018 was not established. The Commissioner, therefore, passed the impugned order holding that the Inquiry Officer had erred and that the allegation of violation of Regulation 10(n) against the appellant was established and accordingly passed the impugned order.
Conclusion-
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.
The responsibility of the Customs Broker under Regulation 10(n) does not include keeping a 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 paragraph, 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.
FULL TEXT OF THE CESTAT DELHI ORDER
We have heard Shri L.B. Yadav, learned Consultant for the appellant and Shri Nagender Yadav, learned Authorized Representative appearing for the Revenue and perused the records of the case.
2. M/s Mauli Worldwide Logistics1, a licensed Customs Broker, is aggrieved by the order in original2 dated 23.6.2021 passed by the Commissioner, Customs-New Delhi (Airport and General), New Delhi revoking its Customs Broker Licence, under Regulation 14 & 18 read with Regulation 17(7) of Customs Brokers Licensing Regulations3, 2018, forfeiting its security deposit of Rs. 75,000 and imposing a penalty of Rs. 50,000. The operative part of the impugned order is as follows:
“32. From all the facts and circumstances narrated above, I find that the CB has violated the Regulation 10(n) of CBLR, 2018 and hence, I pass the following order:
ORDER
In exercise of the powers conferred in terms of Regulation 14 & 18 read with Regulation 17(7) of CBLR, 2018 (erstwhile Regulation 18 &22 read with Regulation 20(7) of CBLR 2013),
(i) I hereby revoke the license No. R-11,/DEL/CUS/2011 (PAN: AKCPK 2519G) valid upto 20.02.2021 of M/s. Mauli Worldwide Logistics;
(ii) I order for forfeiture of the amount of security deposit of Rs. 75,000/- (Rupees seventy five thousand only) furnished by them;
(iii) I impose penalty of Rs. 50,000/- on M/s Mauli Worldwide Logistics
33. This order is being issued without prejudice to any other action that may be taken against the CB or any other persons(s)/firm(s) etc. under the provisions of the Customs Act, 1962 and Rules/Regulations framed there under or any other law for the time being in force for the present or any other past violations committed by them.”
(emphasis supplied)
3. The factual matrix which led to the issue of this order is that the Directorate General of Analytics and Risk Management4 of the Central Board of Indirect Taxes and Customs analysed the data and identified risky exporters involved in execution of frauds and got requisite 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 them to the respective Commissionerates including the Respondent herein. The Commissioner issued a show cause notice dated 30.12.2020 to the appellant and appointed an Inquiry Officer, who, after considering the reply filed by the appellant and completing the inquiry submitted his Inquiry Report in favour of the appellant on 25.3.2021. The concluding paragraph of the inquiry report is as follows:
“ 6.2 In view of my findings above, I am of the considered opinion that the Noticee/CB obtained the requisite KYC documents and thus conducted the KYC verification with the utmost diligence possible in the given circumstances and the allegation of violation of provisions of Regulation 10(n) of the CBLR, 2018 has not been established against CB.” (emphasis supplied)
4. Thus, the Inquiry Officer found that the charge in the show cause notice that the appellant had violated Regulation 10(n) of CBLR, 2018 was not established. The Commissioner issued a show cause notice and the appellant submitted its reply dated 5.5.2021 to the show cause notice before the Commissioner. The Commissioner, therefore, passed the impugned order holding that the Inquiry Officer had erred and that the allegation of violation of Regulation 10(n) against the appellant was established and accordingly passed the impugned order.
5. The questions which need to be answered in this case are:
a) Given the factual matrix of the case and evidence available on record, was the Commissioner correct in holding that the appellant Customs Broker had violated Regulation 10(n) of CBLR, 2018?
b) If the answer to (a) above is affirmative, can the revocation of licence of the appellant Customs Broker be sustained?
c) If the answer to (a) above is affirmative, is the forfeiture of security deposit correct?
d) If the answer to (a) above is affirmative, is the imposition of penalty of Rs. 50,000/- upon the appellant Customs Broker correct?
6. Although both the show cause notice and the impugned order listed several suspected exporters whose exports the appellant had handled and who are said to be untraceable, the reports in respect of only three exporters were narrated in paragraph 6 of the show cause notice but the Relied Upon Documents enclosed with the show cause notice included reports of officers in respect of eleven exporters. Evidence and documentation, if any, in respect of the remaining exporters who were said to be untraceable is not part of the show cause notice or proceedings. The relevant extracts of these eleven reports are as follows:
