Case Law Details
Sinha Shipping Agency Vs Commissioner of Customs (CESTAT Kolkata)
Introduction: In a recent ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Kolkata addressed the compliance of Sinha Shipping Agency, a Customs Broker, with Regulation 10 (n) of the Customs Broker Licensing Regulations, 2018 (CBLR). The case, titled “Sinha Shipping Agency vs Commissioner of Customs,” delves into the obligations of a Customs Broker regarding the verification of client information, specifically the correctness of the importer’s address.
Detailed Analysis: The appeal stems from an action initiated against Sinha Shipping Agency by the Commissioner of Customs (Airport & Admn), Kolkata. The primary allegation was a violation of Regulations 10 (d), 10 (m), and 10 (n) of the CBLR, 2018. The Customs Broker undertook an import assignment for M/s SGW Enterprises, where discrepancies in the importer’s address came to light during investigations.
Regulation 10 (n) mandates Customs Brokers to verify the correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN), identity of the client, and the functioning of the client at the declared address using reliable, independent, authentic documents, data, or information.
The appellant argued that they duly verified Know Your Customer (KYC) documents, including the IEC, with the bank, adhering to CBEC Circular No.09/2010-Cus. Despite 100% examination of the import consignments and no mis-declaration found, the Department alleged that the importer’s address was incorrect.
The adjudication order by the Commissioner raised concerns about the alleged non-existence of the importer at the declared address and invoked Regulations 10 (d), 10 (m), and 10 (n).
The appellant countered that their obligations were met by positively verifying the client’s particulars through government-issued documents, including IEC, GST registration, and bank-verified KYC details. They argued that there was no mandate in Regulation 10(n) for physical verification of the address, and the Department itself communicated with the importer at the same address it claimed to be non-existent.
Two internal communications from the Department were presented, revealing the contradiction in its position. The first communication mentioned the non-existence of the importing firm at the given address, while the second communication addressed the importer at the same address.
Citing the inherent contradiction and relying on precedents such as K.S. Sawant & Co. vs. Commissioner of Customs, Mumbai, and Kunal Travels (Cargo) vs. CC (I & G), IGI Airport, New Delhi, the appellant contended that the Department’s failure to notice the alleged non-existent address negated the charges against them.
Conclusion: CESTAT Kolkata, in its judgment on 22.11.2023, found no merit in the Department’s allegations against Sinha Shipping Agency. Emphasizing the government-issued nature of IEC and the positive verification conducted by the Customs Broker, the Tribunal set aside the order of revocation of the Customs Broker License, restoring it immediately. The ruling reinforces the importance of clear regulatory compliance and the need for consistency in the Department’s communications and actions.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant, a Customs Broker, has filed the impugned appeal for action initiated against them vide the Order-in-Original No. Kol/Cus/Airport/Commr./19/2023 dated 14.07.2023 passed by Commissioner of Customs (Airport & Admn), Kolkata, under the provisions of Customs Broker Licensing Regulations, 2018.
2. The facts of the case are that the appellant undertook an import assignment, for which, authorization was duly received by them. One person named Sandip Agarwal, who introduced himself as a Chartered Accountant of the importer’s firm, supplied the import documents authorization of the importer, which was received through email/courier.
3. The appellant submits that the said KYC documents were duly verified by them with the Bank in consequence with the condition stipulated by CBEC Circular No.09/2010-Cus dated 08.04.2010. The present import of “Gambier” was made by one Delhi based importer, M/s SGW Enterprises. The import consignments (all four) were duly examined 100% and no mis-declaration was found/suspected. Consequently, in certain investigations initiated by the Department based on assessment of certain risk parameters, it came to the conclusion that the address of the importing firm, furnished as indicated in the authorization, was incorrect since it was at variance with that indicated on the IEC copy.
4. During the course of further investigations undertaken by SIIB, it was found out that Sachin Agarwal was actually the proprietor of the importing firm and Sandip Agarwal, who had introduced himself as a Chartered Accountant of the importer’s firm, was in effect the financier of the imports made. Sachin Agarwal had however stated that he had no knowledge about the import of the impugned goods.
5. Accordingly, a show-cause notice came to be issued to the appellant for violation of Regulations 10 (d), 10 (m) and 10 (n) of the CBLR, 2018.
6. After following the due process of law, on the findings of the enquiry officer’s report, the present adjudication order has been passed by the ld. Commissioner. For the sake of clarity, Regulations 10 (d), 10 (m) and 10 (n) of the CBLR, 2018, are reproduced below :
Regulation- 10 Obligations of a Customs Broker:
“(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 non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be;
(m) discharge his duties as a Customs Broker with utmost speed and efficiency and without any delay;
(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;”
A perusal of the aforesaid provisions of law, clearly suggests the following obligations on the part of the appellant :
(i) advice to the client for compliance of the provisions of the Act and the Rules ;
(ii) discharge of the responsibility as a Customs Broker with speed and efficiency &
(iii) verification about the client’s identity with reference to the documents supplied using reliable, independent, authentic documents, data or information.
7. Simply put the charge made out against the appellant is with reference to non-adhence to the prescriptions concerning KYC norms. It comes out from the records that the appellants filed the Bill of Entry in duly bonafide discharge of their functions as a Customs Broker and there is nothing on record to implicate them in any other business interest or relationship between the appellant and the importer other than as of Customs Broker. Also the fact that upon 100% examination of the goods, nothing improper was noticed by the department cannot be lost sight of. It is a fact on record that the department did not suspect the seeking of the KYC documents by the appellant, prior to acceptance of the import assignment. There only case being that during the course of the search at the given premises the said firm was found to be “non-existent.” A copy of the internal communication of the department is scanned hereinbelow, in support of the said observation.
8. Also as pointed out earlier upon initial examination of goods (100%) by the said officers, no concealment or mis-declaration was noticed, nor was the cause of action of the Department initiated on the basis of improper address mentioned in the authorization letter of the importer. The appellant claims to have satisfied themselves of the veracity/genuineness of the importer by way of a Bank issued reference in favour of the appellant and that mentioned in the IEC Copy. The Departmental authorities however came to the conclusion that the importer was non-existent at the declared address mentioned in the IEC, based on the search of the premises undertaken and therefore, the charge of the aforesaid infringement in law.
9. A list of documents received by the appellant are as follows :
(i) Authorization duly verified by the Bank
(ii) Importer Exporter Code issued by the DGFT
(iii) GST Registration Certificate issued by the GST Department
(iv) KYC details and signature of the importer duly verified by the Bank
(v) Aadhar Card of the proprietor of the importer firm issued by the UIDAI
(vi) PAN Card of the proprietor of the importer firm issued by the Income Tax Department.
10. At the time of hearing, the appellant has pointed out two communications for consideration before us, while one is scanned in para 8 above, the other one is as under:
Thus in the first communication issued by the Assistant Commissioner (Group III) vide F.No.VIII(SB)Cus Prev/Commr./Gr.III/1535/22 dated 28.09.2022, it is conveyed that the importing firm was found “nonexistence” at the address given, which was indicated to the appellant by the importer. The second internal communication is a copy of the correspondence of the Department to the Deputy/Assistant Commissioner (Import Shed) vide F.No. VIII(SB)10/Cus.Prev./Gr.III/1535/2022 dated 23.09.2022. These are presented to us to point out, that the Department itself has been in communication with the importer at the address mentioned, to which it alleges to be non-existent. We note that the copy of the second communication cited above, at Sr. 2 of the address endorsement in itself is marked by the department at the following address:
“M/s. SSB Enterprises (IEC No. FHNPS4416) M16 FF, Gali Gosain Shiv Motor Market, North Delhi, Delhi-110006.”
That is too say that the department was itself in communication with the importer at the stated address said to be “non-existence.” Moreover, if the department falters on this count of communication at a wrong address, it doesn’t behove the department to subject the Customs Broker to such harsh punitive action. Moreover, it is not the mandate of Regulation 10(n), that the Customs Broker is to physically ascertain the correctness of the address given. All regulation 10(n) calls for is such a verification using reliable, independent, authentic- document, data or information. Certainly IEC- a government issued document, in the first instance would call for no disbelief, moreso when the particulars are verified with bank related records. In fact the onus cast upon the Customs Broker in this regard ends with a positive outcome of such a verification.
It be further noted that the time lag between the two communications referred to supra, is merely five days i.e. even less than a week. We therefore find no merit in the departments stand point.
11. In support of his contentions the ld. Counsel for the appellant, relied on the following case laws, to clarify the aspect of their obligations under the CBLR, 2018.
(i) K.S.Sawant & Co. Vs. Commissioner of Customs (General), Mumbai1,
(ii) Kunal Travels (Cargo) Vs. CC (I & G), IGI Airport, New Delhi2,
(iii)Perfect Cargo an Logistics Vs. Commissioner3,
12. In the circumstances, we find absolutely no merit in the plea of the Department alleging failure on the part of the appellant for meeting out their obligations in fulfillment of the KYC requirements. The inherent contradiction made by the Department is self evident, when the department with all the wherewithal at its command, itself fails to take note of the alleged non-existent address, it cannot shoot off the blame for a similar lapse, if any, onto the Customs Broker.
13. Under these circumstances, we are of the opinion that no action as initiated in the present matter, was made out in the first place. The order of the adjudicating authority is certainly without a toehold of legitimacy and therefore, needs to be set aside.
14. In view of the above discussions, we set aside the order of revocation of Customs Broker Licence and restore the same, forthwith.
15. The appeal is allowed, in the aforesaid terms, with all consequential benefits as per law.
(Pronounced in the open court on 22.11.2023)
Notes:-
1. 2012 (284) ELT 363 (Tri.-Mumbai)
2. 2017 (354) ELT 447 (Del.)
3. 2021 (376) ELT 649 (Tri.)
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