Friends Cargo Services Vs Commissioner of Customs (CESTAT Delhi)
This case involves Friends Cargo Services (FCS), a customs broker, and the Commissioner of Customs, New Delhi. The Department revoked FCS’s license, claiming they violated regulations by handling exports linked to untraceable companies. FCS appealed, arguing they met all Know Your Customer (KYC) requirements and shouldn’t be held liable for exporters’ traceability issues.
Background:
- The Directorate General of Analytics and Risk Management (DGARM) identified risky exporters involved in potentially fraudulent IGST refunds.
- These exporters were untraceable during physical verification by GST officers.
- DGARM informed the authorities about customs brokers handling these exports, including FCS.
- FCS was accused of violating Regulation 10(n) of the Customs Brokers Licensing Regulations (CBLR), 2018, for not following KYC guidelines.
- Their license was suspended, followed by an inquiry and the impugned order revoking the license, forfeiting the security deposit, and imposing a penalty.
FCS’s Arguments:
- FCS argued they weren’t provided with the DGARM report, violating principles of natural justice.
- They claimed the verification reports used against them weren’t mentioned in the show-cause notice and weren’t linked to FCS’s handled consignments.
- They highlighted that the GST system automatically credits IGST refunds to verified exporter accounts, requiring extensive documentation.
- They emphasized they verified exporters’ identities using reliable documents, as mandated by Regulation 10(n).
- They argued that the CBLR doesn’t require physical visits to exporters’ premises for verification.
- They contested the department’s reliance on a circular applicable to older regulations, not the CBLR, 2018.
Department’s Arguments:
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