Case Law Details
Sai Chhaya Impex Pvt. Ltd. Vs Commissioner of Customs (CESTAT Delhi)
CESTAT Delhi held that 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.
Facts- Directorate General of Analytics and Risk Management of the Central Board of Indirect Taxes and Customs analysed the data and identified risky exporters involved in execution of frauds and got 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 to the respective Commissionerates including the Respondent herein. The Respondent issued a show cause notice to the appellant and appointed an Inquiry officer. After considering the reply to the SCN and the inquiry report, the Commissioner passed impugned order holding that the appellant had violated Regulation 10(n) of the CBLR.
Conclusion- Verification of certificates part of the obligation under Regulation 10(n) on the Customs Broker is fully satisfied as long as it satisfies itself that the IEC and the GSTIN were, indeed issued by the concerned officers. This can be done through online verification, comparing with the original documents, etc. and does not require an investigation into the documents by the Customs Broker. The presumption is that a certificate or registration issued by an officer or purported to have been issued by an officer was correctly issued.
Held that the onus on the Customs Broker cannot, therefore, extend to verifying that the officers have issued the certificate or registration correctly.
Held that 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.
In view of the above, the impugned order revoking the Customs Brokers licence of the appellant, forfeiting their security deposit and further imposing penalty on the appellants cannot be sustained and needs to be set aside.
FULL TEXT OF THE CESTAT DELHI ORDER
We have heard Shri L.B. Yadav, learned Consultant for the appellant and Shri Vishwajeet Saharan, learned authorized representative for the Revenue and perused the records.
2. The appellant is a Customs Broker1whose licence was revoked by the impugned order under Regulation 14 read with Regulations 17 and 18 of Customs Brokers Licensing Regulations2, 2018 and the security deposit made by it was forfeited. Penalty was also imposed on it on the ground that it had violated Regulation 10(n) of CBLR 2018.
3. The factual matrix leading up to the issue of the impugned orders is that the Directorate General of Analytics and Risk Management3 of the Central Board of Indirect Taxes and Customs4 analysed the data and identified risky exporters involved in execution of frauds and got 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 to the respective Commissionerates including the Respondent herein. The Respondent issued a show cause notice 5 to the appellant and appointed an Inquiry officer. After considering the reply to the SCN and the inquiry report, the Commissioner passed impugned order holding that the appellant had violated Regulation 10(n) of the CBLR. This Regulation reads as follows:
10. Obligations of Customs Broker.—A Customs Broker shall…
(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;
4. Since this case requires deciding the scope of Regulation 10(n) and the extent of responsibility of the Customs Broker under it, we proceed to examine this issue before dealing with the specifics of this case. According to the learned consultant for the appellants, this responsibility is fulfilled if the Customs broker obtains at least two KYC documents and it is not the responsibility of the Customs Broker to physically inspect the premises of each of its clients to ensure that it is operating from that address. He submits that it is far too onerous for the Customs Broker to fulfil such a responsibility. He relies on the following decisions:
a) Kunal Travels versus CC(I&G), IGI Airport, New Delhi6
b)Commissioner of Customs versus Shiva Khurana7
5. According to the learned authorised representative for the Revenue, the Customs Broker is an agent of the Custom House and has to ensure that the interests of the importer/exporter as well as the Revenue are protected. It is not sufficient for the Customs broker to merely obtain two KYC documents. The Regulation also requires the Customs Broker to verify identity of his client and functioning of his client at the declared address. If the Customs Broker does not fulfil this responsibility, it will invite action under the CBLR, 2018. He relies on the following decisions:
a) Commissioner of Customs versus K M Ganatra &Co8
b) Baraskar Brothers versus Commissioner of Customs (General) Mumbai9
c) Sky Sea Services versus Commissioner of Customs (General) Mumbai10
d) Jasjeet Singh Marwah versus Union Of India and others11
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 documents, data or information
d) Verify the functioning of the client at the declared address using reliable, independent, authentic documents, data or information
7. Of the above, (a) and (b) require verification of the documents which are issued by the Government departments. The IEC number is issued by the Director General of Foreign Trade12 and the GSTIN is issued by the GST officers under the CBIC under Government of India or officers under the Governments of State or Union territory. The question which arises is whether the Customs broker is required to satisfy itself that these documents or their copies given by the client were, indeed issued by the concerned government officers OR is the Customs Broker also required to ensure that the officers have correctly issued these documents. In our considered view, Regulation 10(n) of CBLR cannot be read to mean the latter as it would imply treating the Customs Broker as one who is competent and responsible to oversee and ensure the correctness of the actions by the Government officers. It would also mean that actions by the Customs Broker under the CBLR prevail over the actions by officers under the Foreign Trade (Development and Regulation) Act, 1992 (under which the IEC is issued by DGFT) and the Central Goods and Services Tax Act (or state GST Act) (under which the GSTIN is issued by the GST officers). In our view this is not the correct construction of this legal provision. Therefore, verification of certificates part of the obligation under Regulation 10(n) on the Customs Broker is fully satisfied as long as it satisfies itself that the IEC and the GSTIN were, indeed issued by the concerned officers. This can be done through online verification, comparing with the original documents, etc. and does not require an investigation into the documents by the Customs Broker. The presumption is that a certificate or registration issued by an officer or purported to have been issued by an officer was correctly issued. Section 79 of the Evidence Act, 1872 requires even Courts to presume that every certificate which is purported to be issued by the Government officer to be genuine. It reads as follows:
79. Presumption as to genuineness of certified copies. The Court shall presume to be genuine every document purporting to be a certificate, certified copy or other document, 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 Kunal Travels 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 be far too onerous to expect the CHA to inquire into and verify the genuineness of the IE code given to it by a client for each import/export transaction. When such code is mentioned, there is a presumption that an appropriate background check in this regard i.e., KYC, etc. would have been done by the customs authorities….. ” (emphasis supplied).” Of course, if the Customs Broker comes to know that its client had obtained these certificates through fraud or misrepresentation, nothing prevents it from bringing such details to the notice of Customs officers for their consideration and action as they deem fit. However, the Customs Broker cannot sit in judgment over the certificate or registration issued by a Government officer so long as it is valid. In these cases, there is no doubt or evidence that the IEC and the GSTIN were issued by the officers. So, there is no violation as far as the documents are concerned.
9. The third obligation under Regulation 10(n) requires the Customs Broker to verify the identity of the client using reliable, independent, authentic documents, data or information. In other words, he should know who the client is and the client cannot be some fictitious person. As per the Regulation, this identity can be established by independent, reliable, authentic:
a) documents;
b) data; or
c) information
10. Any of the three methods can be employed by the Customs Broker to verify the identity of its client. It is not necessary that it has to only conduct a physical verification or launch an investigation. So long as it can find some documents which are independent, reliable and authentic to establish the identity of his client, this obligation is fulfilled. If a document is issued by any other person not interested in the relationship of the client and the Customs Broker, it would be independent. But it should also be reliable and authentic and not one issued by any Tom, Dick and Harry. Documents such as PAN card issued by the Income tax, driving licence issued by the RTO, Election voter card issued by the Election Commission, the passport issued by the Passport Officer, etc., certainly qualify as independent as none of these departments have any interest in the relationship between the client and the Customs Broker and these documents are presumed to be authentic 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, fulfil this obligation by obtaining data or information.
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 only in a few places while exporters or importers could be from any part of the country and they hire the services of the Customs Brokers. Besides the fact that no such obligation is in Regulation 10(n), it will be extremely difficult, if not, totally impossible, for the Customs Broker to physically visit the premises of each of its clients for verification. For instance, if an importer from a small town in, say, Madhya Pradesh imports goods through ICD Tughlakabad in Delhi, the Customs Broker operating in Delhi cannot be expected to leave his entire business and travel to that town to verify physically if the importer, indeed, is functioning from that address. If Regulation 10(n) is interpreted to burden the Customs Broker with such a responsibility, it will not only be far too onerous to the Customs Broker but it will also make it impossible for anyone in the country to import/export unless he/she can find a Customs Broker willing to travel to his/her town for physical verification. This Regulation cannot be read so as to cause such harassment to the Customs Brokers and to the importers/exporters. This Regulation, in fact, gives the option of verifying using documents, data or information. If there are authentic, independent and reliable documents or data or information to show that the client is functioning at the declared address, this part of the obligation of the Customs Broker is fulfilled. If there are documents issued by the Government officers which show that the client is functioning at the address, it would be reasonable for the Customs Broker to presume that the officer is not wrong and that the client is indeed, functioning at that address. In this case, we find that the GSTIN issued by the officers of CBIC itself shows the address of the client and the authenticity of the GSTIN is not in doubt. In fact, the entire verification report is based on the GSTIN. Further, IECs issued by the DGFT also show the address. There is nothing on record to show that either of these documents were fake or forged. Therefore, they are authentic and reliable and we have no reason to believe that the officers who issued them were not independent and neither has the Customs Broker any reason to believe that they were not independent.
12. We further note that 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 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 continued to file documents with the wrong address, it is a different matter.
13. In this appeal, 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 on 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 appellant relied on the GST Registration Certificates and if relying on them is an offence, issuing them when the firms didn‗t even exist must, logically be a much graver offence and the officers who issued them must be more serious offenders. There is nothing in the reports of the jurisdictional officers which were the Relied Upon Documents in the SCN to indicate as to why and how the GST registration was issued when the exporters did not exist at all. We also find that other documents were procured by the appellant which were also issued by various other authorities which have not been alleged to be, let alone, proven to be fake or forged by the Revenue. Evidently, they also must have been issued by concerned officers just as GST Registration was issued by the jurisdictional officers.
15. Unless all these officers of various organisations (including the jurisdictional GST officer who issued the registration in December 2018) either acted fraudulently or carelessly, the above could not have been issued.
16. It is possible that all the authorities who issued the above documents had issued them correctly and thereafter, by efflux of time, when the GST officers went for verification, the situation changed. If so, it is a ground for starting a thorough investigation by the officer and is not a ground to revoke the licence of the Customs Broker who processed the exports. We also find that there is nothing in the SCN to prove that the exporters did not exist or operate from the addresses when the Shipping Bills were filed.
17. Learned Departmental Representative submitted that officers issue these documents as per their mandate which does not include physical verification of the business premises. In almost all these cases, the Registrations were issued based on online applications. The officers are not mandated to ensure that the exporter(s) existed and were functioning from these premises but the Customs Broker is so mandated by Regulation 10(n) of the CBLR, 2018 which obligation does not get obliterated or diluted by the fact that officers of various departments have issued the documents.
18. Learned Authorized Representative further submitted that Kunal Travels 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 place 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 13 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 pari materia with CBLR 10(n) under consideration in this case. In the case of Millenium express cargo, the CHA has not even ever claimed that it had verified the existence of the importer at the given address. Paragraph 5 of this order is reproduced below:
5. We have considered the contentions of both sides. It is an admitted fact that the appellant had dealt with the importer M/s. Nikhaar Associates. It is also a fact that the importer was found to be non-existent. CHA Regulation 13(e) state that ―a CHA shall exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage
In the present case, there was no question of the appellant being in a position to impart any information to the client as the same was found non-existent. Also the weight of the container for which it filed bill of entry was in excess by 7.280 tonnes over the declared weight (5.051 tonnes) which should have come to the appellant‗s notice had due diligence been exercised. Thus the allegation of violation of Regulation 13(e) is sustainable. Further Regulation 13(o) ibid states as under:
―A Custom House Agent shall 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.
C.B.E. & C. vide Customs Circular No. 09/2010-Customs dated 08.04.2010 in order to avoid any ambiguity inter alia laid down the following requirements of verification and documents for the ―individual category to which the importer belonged being a proprietorship concern as claimed.
S.No.
Form of organisation
Features to be verified Documents to be obtained
1. Individual (i) Legal name and (i) Passport any other names (ii) PAN card used (iii) Voter‗s identity card (ii) Present and Permanent address (iv) Driving licence, (v) Bank account statement in full, complete (vi) Ration card and correct
Note : Any two of the documents listed above, which provides client/ customer information to the satisfaction of the CHA will suffice. Thus the appellant was required to inter alia verify 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 Revenue that on the day the Shipping Bills were filed the exporters did not exist at the premises.
21. As far as the documents issued by various Government officers are concerned the submission of the learned departmental representatives that the documents were neither issued fraudulently nor issued carelessly but were issued within the mandate of the officers who issued them and this mandate does not include physical verification. In other words, the submission is that the system designed by the Government for issue of these certificates itself is such that they can be issued even to persons who do not exist at all at the declared premises. We proceed to examine this proposition and if it supports case of the Revenue in these appeals.
22. It is common knowledge that in designing schemes for issuing registrations, certificates or providing incentives, two conflicting objectives of due diligence and facilitation are balanced. Too many checks can make life difficult for the exporter or the citizen and too much facilitation can open the doors for frauds. Determining the ‘golden mean’ and where to draw the line is a matter of public policy. The extent of liberalization or tightening may also vary greatly from one system to another and that is also a matter of public policy. The entire system of exports is based heavily on trust and facilitation and very less emphasis on due diligence which enhances trade facilitation but also makes it vulnerable to misuse by fraudsters. The IEC is issued by DGFT based only on an online application and a few easy to obtain documents. Similarly, as per the submission of the learned authorized representatives for the Revenue, GSTIN is also issued without any verification at all and through an automated process. So, one cannot rule out the possibility of an IEC and/or GSTIN being issued without the person even operating its business from the address. The IEC forms the foundation for the entire system of controls over imports and exports and, in turn, is the basis for issue of various licences and scrips by the DGFT and is also the basis for Customs allowing exports. As the risk management system14of the Customs Electronic Data Interchange 15 permits majority of the exports without either assessing the documents or examining the records, 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 this appeal 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 address and this verification can be done through independent, reliable, authentic, documents, data or information. Secondly, this decision of the coordinate bench in Baraskar brothers is contrary to the decision of the jurisdictional Delhi High Court in Kunal Travels which is binding on us.
25. We now proceed to examine the evidence based on which the SCN is issued and the evidence produced by the appellant in defence to see if the charge of violation of Regulation 10(n) by the appellant and consequent decisions in the impugned order can be sustained. The SCN alleged that the appellant processed exports in respect of 30 non-existent exporters but verification was done only in respect of the following 3 exporters which form the basis of the entire case:
“DGARM Reference No. 21P
Commissionerate Code : ZK
GSTIN – 07AAACX3158K123
A. Physical Verification of Principal and additional place (s) of business
1. Address of principal place of business : 1191/13, Govidpuri, New Kuku Cable, South Delhi, Delhi – 110 019‖.
” Recommendation about the bonafides of the entity verified :
…………………………………………………………………………………………………
…………………………………………………………………………………………………
“Non Existent exporter.
NOC is denied.
Signature of Deputy/Assistant Commissioner…………………
Name : ………………………………………………………………..
Official Stamp
Recommendation about the bonafides of the entity verified :
Non-Existent Exporter
Signature of Pr. Commissioner/Commissioner ………………
Name : ……………………………………………………….”
“DGARM Reference No. 21P
Commissionerate Code : ……………………………………………..
GSTIN – 07AABCZ474481ZM
A. Physical Verification of Principal and additional place (s) of business
1. Address of principal place of business : Ground Floor, Shop No. 818, Barija Sadan Market, Badarpur, Delhi – 110 044‖.
” Recommendation about the bonafides of the entity verified :
…………………………………………………………………………………………………..
…………………………………………………………………………………………………..
…………………………………………………………………………………………………..”
“Non Existent exporter.
NOC denied.
Signature of Deputy/Assistant Commissioner…………………
Name : ………………………………………………………………..
Official Stamp
Recommendation about the bonafides of the entity verified :
Non-Existent Exporter
Signature of Pr. Commissioner/Commissioner ………………
Name : ……………………………………………………………….. ,,
“DGARM Reference No. Report 21R
Commissionerate Code : CGST Delhi North
GSTIN – 07EMRPM6580E1ZI
A. Physical Verification of Principal and additional place (s) of business‖
Recommendation about the bonafides of the entity verified:
The Exporter was visited at its registered Principle place of business. The firm is registered at Faiz Road, 945 T/F, Naiwala No. 21N, Galli No. 3-4, Karol Bagh, Near Red Light Faiz Road, Delhi – 110 005. No such firm was found existing at the said premises. There is no inward E Way Bill supplies are being reflecting in E way Bill Portal. Therefore, it is recommended that the IGST Refund Claims made by the exporter are bogus and may be rejected.
Signature of Deputy/Assistant Commissioner…………………
Name : ………………………………………………………………..
Official Stamp
Recommendation about the bonafides of the entity verified :
Not recommended for reasons stated above.
………………………………………………………………………………………………….
………………………………………………………………………………………………….
Signature of Pr. Commissioner/Commissioner ………………
Name : ………………………………………………………. “
26. Inquiry Report dated 18.03.2021 concluded that the appellant has violated provisions of Regulation 10(n) of CBLR. The Conclusion in this report is as follows:
“29. In view of the above, I find that the Noticee M/s Sai Chhaya Impex Pvt. Ltd., A-506, Ansal Chamber – I, 3, Bhikaji Cama Place, New Delhi – 110 066 have failed to comply with the provisions of regulation 10 (n) and is liable for action under Regulation 14 read with Regulation 17 and 18 of CBLR, 2018 (also read with Regulation 18 and Regulation 20 of erstwhile CBLR, 2013), including revocation of CB license, forfeiture of part or whole of security & imposition of penalty”.
27. Impugned order held that as per the appellant has violated Regulation 10(n). The relevant extract of the impugned order is as follows:
” 24.1 As per Regulation 10 (n) of CBLR, 2018: A Customs Broker shall –
(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 ;
24.2 I observe that under the mandate of the Regulation 10 (n) of the CBLR 2018, a Customs broker is obliged to verify correctness of IEC, GSTIN, identity and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. I also observe that vide Circular No. 09/2010-Customs dated 08.04.2010 “Know Your Customer (KYC)” guidelines were specifically issued to CHAs (now CBs). In this context, I would like to discuss para 6 of the said CBIC Circular dated 08.04.2010, which states that :
“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, Regulation 13 of CHALR, 2004, has been suitably amended to provide that certain obligations on the CHAs to verify the antecedent, correctness of Import Export Code (IEC) Number, identity of his client and the functioning of his client in the declared address by using reliable, independent, authentic documents, data or information. In this regard, a detailed guidelines on the list of documents to be verified and obtained from the client/customer is enclosed in the Annexure. It would also be obligatory for the client/customer to furnish to the CHA, a photograph of himself/herself in the case of an individual and those of the authorized signatory in respect of other forms of organizations such as company/trust etc., and any two of the listed documents in the annexure”.
Annexure
Client/Customer Identification Procedure Features to be verified and documents to be obtained
from clients/customers
|
Sr. No. |
Form of
Organisation |
Features to be verified | Documents to be obtained |
| 1. | Individual | (i) Legal name and any other names used
(ii) Present and Permanent address, in full; complete and correct. |
(i) Passport
(ii) PAN card (iii) Voter‘s Identity card (iv) Driving licence (v) Bank account statement (vi) Ration card Note : Any two of the documents listed above, which provide client /customer information to the satisfaction of the CHA will suffice. |
| 2. | Company | (i) Name of the company
(ii) principal place of business (iii)mailing address of the company (iv) telephone, fax number, e-mail address. |
(i)Certificate of incorporation
(ii)Memorandum of Association (iii) Articles of Association (iv) Power of Attorney granted to its managers, officers or (v) Copy of PAN allotment letter (vi)Copy of telephone bill |
| 3. | Partnership firm | (i)Legal name
(ii)Permanent address,in full, complete and correct, (iii)Name of all partners and their addresses, in full complete and correct. (iv)telephone, fax number,e-mail address of the firm |
(i)Registration certificate,if registered
(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 (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 |
24.3 The CB in their written as well oral submissions has inter-alia submitted that before accepting the contextual customs clearance assignments of 133 Shipping Bills during the period 2018-2019 they duly procured all the KYC documents pertaining to each and every exporter as per Regulation 10 (n) of CBLR, 2018 and CBIC Circular No. 09/2010 dated 08.04.2010 and thoroughly conducted verification of their identity and functioning in terms of Regulation 10 (n) of CBLR, 2018; that neither Regulation 10 (n) of CBLR, 2018 nor Board‘s Circular dated 08.04.2010 mandate physical verification of the exporter‘s place of business through personal visit by the Customs Broker; that even otherwise Circular No. 09/2010-Customs dated 08.04.2010 mandate physical verification of the exporter‘s place of business through personal visit by the Customs Broker; that even otherwise Circular No. 09/2010-Customs dated 08.04.2010 is not relevant to the instant case as the same was introduced for implementation of Customs House Agent Licencing Regulations (CHALR), 2004 which has since been rescinded and superseded by CBLR, 2018 however the said circular has not been made applicable to CBLR, 2018; that the said Circular itself prescribes PAN as a document to be obtained from the exporter and Regulation 10 (n) of CBLR, 2018 prescribes that Importer Exporter Code, GSTIN and identity of the client and his functioning at the declared address is to be verified to which end documents such as “IEC, PAN, Aadhar, Electricity Bill, Rent Agreement, AD code letter from Bank, GST registration, KYC form etc.” serve the purpose. Therefore, the instant Show Cause Notice has been issued without proper application of mind to the attendant provisions of law and documents on record therefore the same is devoid of any merit and unsustainable in the eyes of law; that there is no independent material evidence to substantiate Noticee‘s role in the alleged IGST refund fraud in the entire Show Cause Notice‘; that physical verification of only 3 out of total 30 exporters have been conducted and no investigation hnas been conducted in respect of the remaining 27 exporters, that there is neither any evidence on record to hold that the exporters were untraceable at the time of their engagement with the Noticee nor that the Noticee had any knowledge of their alleged bogus nature at the relevant time, that since January, 2020 till date due the COVID-19 pandemic, exports have drastically reduced resulting into closure of many big and small export companies therefore the possibility that if the investigation qua the existence of the exporters was carried out during the period of the pandemic, the exporter‘s officers might have been temporarily closed, or dormant, cannot be ruled out.
24.4 However, in the above annexure to the Circular No. 09/2010-Customs dated 08.04.2010, detailed guidelines on the lsit of documents to be verified and obtained from the client/customer have been provided. But on going through the documents submitted by CB, it has been observed that CB has not fully complied with the provisions of Circular No. 09/2010 and has failed to verify identity of his clients and functioning of his clients at the declared address by using reliable, independent, authentic documents, data or information. On going through the documents submitted by CB, it has been observed that CB has complied with the provisions of Circular No. 09/2010-Customs dated 08.04.2010 in cases of 01 exporter only and has failed to obtain mandated documents in case of other 29 exporters. Further, I find that in cases of 03 exporters M/s Cuthbert Fashion Industrt (P) Ltd., M/s KK Tradelinks and M/s Golden Impex, even the address mentioned in the documents submitted does not match with the address in GSTIN. Further, the said Circular specifically states that “It would also be obligatory for the client/customer to furnish to the CHA, a photograph of himself/herself in the case of an individual and those of the authorized signatory in respect of other forms of organizations such as company/trusts etc., and any two of the listed documents in the annexure”. However, on going through the documents submitted it was also observed that in many of the cases, the CB has failed to collect photograph of the authorized signatory.
24.5 Further, it was found that in most of the cases, the CB has procured some other documents viz. KYC form, IEC, GST Registration, Aadhar, Electricity Bill, Rent Agreement, AD code letter from bank, etc. Which are not prescribed under the Circular No. 09/2010-Customs dated 08.04.2010 to establish address & identity proof and in my view CB has failed to fulfil his obligation cast upon him in terms of provisions laid down under Regulation 10 (n) o CBLR, 2018 read with the said Circular.
24.6 I also note that an examination of the documents in respect of some of the exporters submitted by the CB along with their submissions dated 15.03.2021, it is further noticed by the Inquiry Officer that :
(i) In case of M/s Vindhyawasini Enterprise, declared address on IEC and GST Registration Certificate is 2nd Floor, 209, R.G. Trade Tower, Netaji Subhash Place, Pitampura, West Delhi, Delhi – 110 037. However, the Aadhar Card is having Address as G-92, Ground Floor, Pushkar Enclave, Paschim Vihar, West Delhi, Delhi – 110 063 and the Electricity Bill is having address as SO-334, Tower Apartments, Pitampura, Delhi – 110 034.
(ii) In case of M/s Neelkanth Traders, the declared address on IEC and GST Registration Certificate is 39, Ground Floor, Haiderpur, Delhi North West Delhi. However, on Aadhar Card, the address is 69/4, Jain Street, Jain Mohalla, Panipat, Haryana – 132 103 and on address certificate dated 17.11.2017 issued by Induslnd Bank, the address is 34 Ground Floor Haiderpur, Delhi – 110 088.
(iii)In case of Krish Overseas, the declared address on IEC and GST Registration Certificate is A-4/135, G/F, Paschim Vihar West Delhi – 110 063. However, address on Aadhar Card is A-6 205C Paschim Vihar, Delhi. There is no other KYC document.
(iv) In case of Balayan Impex, the declared address on IEC is House No. 174, Village Pooth Kalan, Near Bal Vidhya Mandir, Delhi – 110 086 whereas address on GST Registration Certificate is 2nd Floor, House No. 174, Village Pooth Kalan, Near Bal Vidhya Mandir Model School, Delhi – 110 086.
(ix) In case of Golden Impex, WZ-62, Shop No. 03, Ground Floor, Possangipur Village, Janak Puri, New Delhi, having proprietor as Anand Kumar Gupta, the BSES Electricity bill taken as KYC document is issued in the name of Mr. Virender Kumar.
(x) In case of Cuthbert Fashion Industry Private Limited, the declared address on IEC is A-6/1, Ground Floor, Gali No. 5, East Krishna Nagar, Delhi – 110 051 where address on GST is 305, B-Block, 3rd Floor, NDM-1, Netaji Subhash Place, Pitampura, New Delhi.
(xi) In case of M/s Shukra Enterprises having declared address on IEC as well as GST registration certificate as Flat No. 22, F/F, Janta Flats Pocket B, Sector-16B, Dwarka, New Delhi, the address on Electricity Bill is same, however, in the address certificate dated 22nd June 2018, the address of the proprietorship concern in bank records is A-1/16, Laxmi Vihar, Mohan Garden, Uttam Nagar, New Delhi.
(xii) Many of the documents submitted by the Noticee are illegible.
24.7 Accordingly, I find that violation of Regulation 10 (n) stands established and the defence arguments do not hold good and from the above stated facts, it is evident that contravention of Regulation 10 (n) of CBLR 2018 {erstwhile Regulation 11 (n) of CBLR 2013} stands established.
25. I also note that the CB has relied some judgments in their favour. However, I find that the judgments relied upon by the CB are distinguished on the facts and circumstances of each case. Rather reliance is placed on the decision of Division Bench of Hon‘ble Supreme Court of India who in its judgement dated 14.01.2016 in Commissioner of Customs versus K.M. Gantra & Co. In Civil Appeal No. 2940 of 2008 inter alia observed that ―The CHA occupies a very important position in the Customs House. The Customs procedures are complicated. The importers have to deal with a multiplicity of agencies viz. Carriers, custodians like BPT as well as the Customs. The importer would find it impossible to clear his goods through agencies without wasting valuable energy and time. The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/exporters as well as by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed. Regulation 14 of the CHA Licensing Regulations lists out obligations of the CHA. Any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulations.”
26. The Hon‘ble CESTAT in the case of Baraskar Brothers versus Commissioner of Customs (General), Mumbai [2009 (244) E.L.T. 562], has also upheld that ―there is no second opinion of the fact that the CHA is a very important component in the whole system of Customs administration, which has a major bearing on Customs revenue collection and national security. The CHAs cannot shy away from the responsibilities and obligations casted upon them by law”.
27. In view of the above discussion, I find that mere obtaining the documents without following the norms prescribed in Circular 09/2010-Customs dated 08.04.2010 in this regard is non-compliance of the stipulated provisions. Accordingly, I hold that CB M/s Sai Chhaya Impex Pvt. Ltd. Has contravened the provisions of Regulation 10 (n) of the CBLR, 2018 read with the Circular 09/2010-Customs dated 08.04.2010″
28. It appears from the verification reports that the officers enquired not 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 will be able to confirm.
29. Further, we find that the conclusion in the verification reports are ‘Non-existent exporter‘, ‘NOC denied‘ and ‘No such firm was found existing at the said premises and therefore, IGST Refund claims made by the exporter are bogus and may be rejected.‘ None of them state that the exporter never operated from that premises and the officer has issued GSTIN to a non-existent firm or at the time of verification, the firm was not operating from the premises but it may or may not have existed at the time of export. If the former is the case, it is also not clear why and how the officer who conducted the verification or his predecessor issued the GSTIN to a non-existent exporter.
30. As far as the remark ‗NOC denied‘ is concerned, it is presumed NOC refers to a No Objection Certificate. Neither the exporter nor the Customs Broker require such a certificate from the officer and it does not appear that such a certificate was sought either.
31. As far as the recommendation to deny the IGST refund is concerned, it has nothing to do with the appellant processing the exports by the exporter, let alone come to the support the finding in the impugned order that the appellant had not conducted the verification as required under Regulation 10(n).
32. Thus, none of these three RUDs make out any case to show that the Customs Broker had not fulfilled its obligation under Regulation 10(n) of CBLR 2018.
33. Even if it is presumed that the officers had conducted the enquiries properly indicating the names of the exporters and found that the exporters had not existed on the day of verification, it is not clear if the exporter never operated from that premises and the GSTIN and the IEC were wrongly issued by the officers without verification or it had shifted or closed after the GSTIN or IEC were issued. If so, it is not clear if the exporter had existed or not on the day the appellant obtained the KYC documents and processed the exports.
34. In view of the above, we find that:
a) The evidence available on record in the form of verification reports relied upon in the SCN are vague and in some cases, even the name of the exporter who they were enquiring about is not indicated in them.
b) The reports state either NOC denied which is not required by any Customs Broker or exporter or that the exporters did not exist at the time of verification which does not prove that they did not exist at the time of verification or that IGST refund may be denied which is irrelevant to the present proceedings. None of the reports establish that the appellant had violated Regulation 10(n).
35. In view of the above, the impugned order revoking the Customs Brokers licence of the appellant, forfeiting their security deposit and further imposing penalty on the appellants cannot be sustained and needs to be set aside.
36. The impugned order is set aside and the appeal is allowed with consequential relief to the appellant.
(Order pronounced in open court on 03/02/2023.)
Notes:
1 CB
2 CBLR
3 DGARM
4 CBIC
5 SCN
6 2017(354) ELT 447(Del)
7 2019 (367)ELT 550 (Del)
8 2016(332) ELT 15(SC)
9 2009(244) ELT 562(Tri-Mumbai)
10 2022(5) TMI 1050- CESTAT Mumbai
11 2009(2)TMI 57-Delhi High Court
12 DGFT
13 2017 (346) ELT 471 (Tri- Del)
14 RMS
15 EDI
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