Case Law Details
ARS International Vs Commissioner of Customs (CESTAT Chennai)
Brief facts of the case are that the appellant is a holder of Customs Broker license issued by Commissioner of Customs, Tuticorin and is also transacting business at Bengaluru, Chennai, Mumbai and New Delhi. As per the investigation report dated 23.7.2020, a specific intelligence was received by Nhava Sheva Preventive Unit (Rummage and Intelligence) Mumbai that M/s. J. Tex India has fraudulently availed ineligible IGST refund, drawback and reward by using bogus GST registration issuing bogus GST invoices (where no GST duty has been paid to exchequer) and by filing shipping bills for exporting the goods involved therein. Further, the IGST refund amount which has been disbursed is equal to the FOB value of the shipping bill. Hence the case was taken up for investigation by Nhava Sheva Preventive Unit.
The department has alleged that the appellant did not obtain the KYC document of M/s. J. Tex India, the exporter, directly and had obtained it from Shri Hitesh Parmar. There is no obligation under the Regulation that the appellant who is a Customs Broker should meet the client directly and obtain the KYC documents.
The department has not been able to adduce any evidence that the appellant was in some manner involved in the fraud committed by the exporter. The appellant has not been connected with the goods exported or with the supplier abroad. Thus the allegation that the appellant has grossly failed in taking due care and diligence in verifying the identity of the client is without any basis. The appellant had verified the KYC documents by usual process of document verification and also had done verification with the bank. He prayed that the appeal may be allowed.
As per Regulation 10(d), the Customs Broker is required to advice the client to comply with the provisions of the Act and bring to the notice of the department in case of non-compliance. Regulation 10(e) requires that the Customs Broker has to exercise due diligence to ascertain the correctness of information provided by the client to him. Regulation 10(n) casts an obligation on the Customs Broker to verify the correctness of IE Code, GST Registration etc., identify of the client and functioning of client at the declared address by using reliable independent authentic document, data or information. In the present case, it is brought out from evidence that the exporter had a valid IE Code, GST registration, PAN card and bank details. It is submitted by learned counsel for appellant that the Customs Broker had done the KYC verification of the exporter namely J. Tex India by checking the details of GSTIN, IE Code. The department issues GSTIN number only after background checking of the exporter. The address and business details of the person who has applied for the GST registration is verified by the department. When the said registration is still operative as per the website, the Customs Broker cannot be found fault if he has relied upon such data available on the Government website.
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