AI Structured Summary
Not yet generated for this judgment
Judgment
We have heard Shri Ved Prakash Batra, learned consultant for the appellant and Shri Rakesh Kumar, learned authorised representative for the
Revenue and examined the records of the case.
These two appeals have been filed by the Revenue and the Customs Broker on the same issue and hence are being disposed of together.
M/s. CRM Logistics Pvt. Ltd, Customs Broker, the appellant in Customs Appeal no. 50857 of 2021 is a licensed Customs Broker whose licence
was suspended by the Commissioner by an order dated 25.8.2020. After considering the Customs Broker’s representation dated 9.9.2020, the
Commissioner, by an order dated 6.11.2020, revoked the suspension under Regulation 16(2) of the Customs Brokers Licensing Regulations, 2018,
CBLR specifically mentioning therein “this order is being issued without prejudice to any other action that may be taken against the CB
or any other person(s)/firm(s), etc. under 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.â€
Revenue’s appeal C/50389 of 2021 is filed against this order of 6.11.2020 revoking the suspension of the licence. Cross objection
C/Cross/50408/2021 was filed by the Customs Broker in this appeal. While this appeal was pending in this Tribunal, a Show Cause Notice dated
24.12.2020 was issued to the Customs Broker proposing revocation of its licence, which culminated in the issue of Order in Original, Impugned order
dated 13.5.2021 revoking the licence of the Customs Broker. Therefore, Revenue’s appeal has now become infructuous being supervened by the
impugned order dated 13.5.2021 and needs to be disposed of and is disposed of along with the cross objections of the Customs Broker as infructuous.
Customs Broker’s Appeal C/50857/2021 assails the impugned order, whose operative portion is as follows:
“ In exercise of 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 CB License No. R-06/DEL/CUS/2015 (PAN:AACCC6225C) valid upto 19.12.2024;
(ii) I order for forfeiture of the whole amount of security deposit of Rs. 5,00,000/- (Rupees Five Lakh only) furnished by them;
(iii) I impose penalty of Rs. 50,000/- on M/s CRM Logistics (P) Ltd.
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.â€
The factual matrix which lead up to the issue of this order is that the Directorate General of Analytics and Risk Management, DGARM of the
Central Board of Indirect taxes and Customs analysed the data and identified 2,710 risky exporters involved in IGST refund frauds and got verification
done by the jurisdictional GST officers and found that 2,005 of the exporters could not be found at all physically at their registered premises. DGARM
also found that exports by these exporters were handled by 62 Customs Brokers including the appellant herein and reported to the respective
Commissionerates. The Commissioner issued a Show Cause Notice, SCN dated 24.12.2020 to the appellant and an Inquiry Officer was appointed
who submitted his Inquiry Report on 16.2.2021 in which he found “that the appellant failed to apply due diligence in obtaining proper KYC
documents of the said exporters and therefore, they should be held responsible for contravention of provisions of Regulation 10(n) of
Customs Broker Licensing Regulation. Accordingly, strict action may be taken against them under the provisions of CBLR, 2018.â€
The Commissioner then passed the impugned order in which he held that the appellant had violated Regulation 10(n) of the CBLR 2018 and
revoked its licence, forfeited its security deposit and imposed a penalty of Rs. 50,000/- upon it. There is no finding of any other violation by the
appellant Customs Broker in the impugned order. The issue in this case, therefore, falls in a narrow compass. 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
has 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?
Although both the SCN and the impugned order listed several suspected exporters whose exports the appellant is said to have handled, the Relied
Upon Documents were only in respect of three firms as follows:
(i) M/s Duoflex Expo India (07AAPFD 4245 F1ZF)-RUD-2
(ii) Global CNI (07AAUPZ9336Q1Z6)- RUD-3
(iii) Galaxy Impaxe (07BL PI0059B1Z3)- RUD-4
The finding in the impugned order that the appellant has violated Regulation 10 (n) of CBLR 2018, is based on the above three cases. This
regulation reads as follows:
Obligations of Customs Broker.â€"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;
We now proceed to examine the above three cases which formed the basis of the SCN and the impugned order and the arguments on both sides
with respect to each of the cases.
M/s. Duoflex Expo India â€"RUD 2
In this case, as well as in other cases, the SCN reproduces the remarks of the jurisdictional officer who submitted a report in the given format to
the DGARM. This report is RUD-2 of the SCN. The remarks of the officer were as follows:
“M/s Duoflex Expo India was found non-existent at their registered address. M/s. Duoflex India got registration in December 2018.
Therefore, the ITC availed by M/s. Duoflex Expo India is not genuine and thus is not admissible.â€
The SCN cited CBIC Circular no. 9/2010-Customs dated 8.4.2010 giving KYC guidelines and alleged “here it appears that the CB failed to
exercise due diligence and grossly violated the KYC guidelines of the said Circular dated 8.4.2010 read with CBLR, 2018 as a number of exporters
have been found to be untraceable. As per the mandate of Regulation 10(n) of the CBLR, 2018 read with the circular no. 9/2010-Customs dated
8.4.2010, it was incumbent upon the CB to verify the identity and functioning of his client at the declared address by using reliable, independent,
authentic documents, data or information which apparently the CB have failed to do.â€
The appellant’s submissions before the Inquiry officer, the adjudicating authority as well as before us is that it had carried out the due diligence
as required under Regulation 10 (n) by obtaining the following and verified online the documents.
(i) Authorisation letter from the exporter
(ii) KYC letter
(iii) GST Registration Copy
(iv) IEC Registration Copy
(v) Income tax Return of Mr. Atal Bihari- partner of the exporter
(vi) Company PAN card of the exporter
(vii) Electricity bill copy
(viii) PAN Card Mr. Atal Bihari- partner of the exporter
(ix) Aadhar card copy of Mr. Atal Bihari
(x) Partnership deed
(xi) Aadhar card copy of Mrs. Saroj Bansal- the other partner of the exporter
(xii) PAN card copy of Mrs. Saroj Bansal
(xiii) Rent Agreement
The Commissioner observed in the impugned order “Here, it appears that the CB failed to exercise due diligence and grossly violated the KYC
guidelines of the Circular dated 8.4.2010 read with CBLR, 2018 as a number of exporters have been found untraceable.†He relied on the
Tribunal’s order in the case of Baraskar Brothers vs Commissioner of Customs (General), Mumbai, 2009 (244) ELT 562 in which it was held that
“there is no second opinion to 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 cast upon
them by law.â€
Learned Departmental representative reiterates the above findings of the impugned order.
We agree that the Customs Brokers (or CHAs as they were called earlier) play an important role in the Customs administration and have to fulfil
their responsibilities and obligations under the law. The law in question in this case is Regulation 10(n) of CBLR, 2018. The entire allegation against
the appellant in respect of this exporter is based on the report of the jurisdictional officer. This report (RUD-2) has two findings-
(a) that the exporter was found to be non-existent at the registered premises which were registered in December 2018; and
(b) the ITC (input-tax credit under GST) is not admissible to the exporter.
As far as the admissibility of ITC is concerned, nothing in the CBLR, 2018, even remotely suggests that it is the responsibility of the Customs
Broker to ensure its admissibility or that if inadmissible ITC is taken and thereafter a refund of it is claimed, the Customs Broker is responsible. As per
the CGST/IGST/SGST Act, the assessee takes ITC and the officers can verify and if necessary, take appropriate action. The Customs Broker has no
locus standi or power to verify the ITC taken. The Customs Broker is not an officer with the power to verify the ITC. Therefore, for any ITC
wrongly taken by any assessee, the Customs Broker is in no way responsible. As far as the existence of the exporter at the registered premises is
concerned, 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 responsibility does not extend to physically going to the premises of each
of the exporters to ensure that they are functioning at the premises. When a Government officer issues a certificate or registration with an address to
an exporter, it is not for the Customs Broker to sit in judgment over such a certificate. The Customs Broker cannot be faulted for trusting the
certificates issued by a government officer. It is a different matter if documents were not authentic and were either forged by the Customs Broker or
the Customs Broker had reason to believe that the documents submitted to him were forged. It has been held by the High Court of Delhi in the case
of Kunal Travels, 2017 (3) TMI 1494- Delhi High Court thatâ €œthe 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).â€
In this case, the negative report (RUD-2) is by the jurisdictional officer who, or whose predecessor, must have issued the GST registration.
Thereafter, if it is found that the exporter is not operating from that address at all and the GST registration was wrongly issued, the responsibility rests
on the officer who issued the GST Registration and not the Customs Broker. The appellant relied upon the Registration Certificate and if relying upon
it is an offence, issuing a registration when the firm doesn’t even exist must, logically be a much graver offence and the officer who issued it must
be a more serious offender. There is nothing in the RUD (the report of the jurisdictional officer) to indicate as to why and how the GST registration
was issued in December 2018 when the firm does not exist at all. We also find that there were other documents procured by the appellant 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 like the GST Registration issued by the jurisdictional officer in December 2018. These are:
(i) IEC Registration issued by the officer of DGFT
(ii) Company PAN card of the exporter which is issued by the Income tax officer
(iii) Electricity bill â€" issued by the supplier of the electricity
(iv) PAN Card Mr. Atal Bihari- issued by the income tax officer
(v) Aadhar card copy of Mr. Atal Bihari- issued by the UIDAI
(vi) Aadhar card copy of Mrs. Saroj Bansal- issued by the UIDAI
(vii) PAN card copy of Mrs. Saroj Bansal- issued by the UIDAI
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. We find that the Commissioner has not held that all the above officers have
issued the above documents wrongly and only the officer who has given the report in RUD-2 has given the correct report. We also find it hard to
believe so.
The Customs Broker is not Omniscient and Omnipotent. The responsibility of the Customs Broker under Regulation 10(n) does not extend to
ensuring that all the documents issued by various officers of various departments are issued correctly. The Customs Broker is not an overseeing
authority to ensure that all these documents were correctly issued by various authorities. If they were wrongly issued, the fault does not lie at the
doorstep of the Customs broker and it is not up to the Customs Broker to doubt the documents issued by the authorities and he cannot be faulted for
believing them to be correct.
It is possible that all the authorities who issued the above documents had issued them correctly and thereafter, by the time the jurisdictional GST
officer who prepared the report (RUD-2) went for verification, situation may have changed. If so, it is a ground for starting a thorough investigation by
the officer and is not a ground to suspend/cancel the licence of the Customs Broker who processed the exports. It is not the responsibility of the
Customs Broker to physically go to and verify the existence of each exporter in every location, let alone, keeping track if the exporter has moved from
that address. In this case, there is no clarity whether the exporter was not available at the registered premises on the date of export or if he ceased to
operate after the export. Even if the exporter has changed his address and failed to change his address in various documents issued by various
authorities immediately, it cannot be held against the Customs Broker.
We, therefore, find that the Customs Broker has not failed in discharging his responsibilities under Regulation 10(n) as far as this case is exporter
is concerned.
Global CNI -RUD 3
The remarks of the jurisdictional officers (RUD-3) are as follows:
“ M/s Global CNI has submitted documents for claiming refund and as per GST 2A of M/s Global CNI it has taken ITC on the invoices of
M/s GDI Exim and M/s. Alomax Impex both registered at the Ground floor R 24, Gali No.1, Ramesh Park, Laxmi Nagar, Delhi 92.
This office is already conducting an investigation against M/s. GDI Exim and M/s Alomax Impex wherein the proprietor of the above
mentioned firms has admitted that he is engaged only in issuing invoices without actual supply of goods.
Therefore, in view of the above facts, the ITC availed by M/s. Global CNI is not genuine and thus is not admissible.
In the RUD 3, against cell 1 “Found to be existing (Yes/No)â€, the officer entered “PV NOT DONEâ€. Learned consultant submits that
PV stands for physical verification. Thus, as far as this case is concerned, there is not even a suggestion that the exporter does not exist at the
registered premises. All that RUD-3 says is that the exporter is that ITC is not admissible to the exporter because the exporter’s suppliers on the
basis of whose invoice the ITC was taken made a statement that they had not supplied goods and only issued invoices. How and from whom the
exporter procures goods and whether the exporter had taken ITC correctly or not the concern of the Customs Broker. He neither has any authority
nor any responsibility in this regard. As far as the responsibility under Regulation 10(n) is concerned, learned consultant for the appellant Customs
Broker submits that they had obtained the following documents for KYC of this exporter and submitted copies of these documents at the time of
investigation to the officers.
(i) Authorisation letter
(ii) Copy of signature verification from HDFC bank
(iii) Copy of AD code letter from HDFC Bank
(iv) IEC Registration Copy
(v) Copy of Bank Statement
(vi) GST Registration copy
(vii) PAN card copy of Mr. Abbas, the proprietor
(viii) AADHAAR card copy of Mr. Abbas
(ix) Rent agreement copy
(x) Electricity bill copy
We do not find any reason for the Revenue to have entertained the belief that the appellant Customs Broker had violated Regulation 10(n) in
respect of this exporter when none of the documents obtained for KYC have even been alleged to be not genuine and no physical verification of the
premises of the exporter was even done by the officers. We therefore, find that the Customs Broker has not violated Regulation 10(n) with regard to
this exporter.
Galaxy Impaxe
The remarks of the jurisdictional officer (RUD-4) were as follows:
M/s. Galaxy Impaxe has submitted the documents for claiming refund and as per the documents submitted by the assessee, it has taken
purchase from M/s Suryaditya metal, 38/10, Block AA, Jhilmil Industrial Area, Delhi 110095 and M/s. GD Corporation, 21/13, First floor,
Kalyanpuri Delhi 110091 among others.
The premises of M/s Suryaditya Metal and M/s G D Corporation were visited by the officers of this office and both of them were found to be
non-existent.
Therefore, in view of the above facts, the ITC availed by M/s Galaxy Impaxe is not genuine and thus, it is not admissible.
In the RUD 4, against cell 1 “Found to be existing (Yes/No), the officer typed Yes. Thus, even on physical verification by the officer,
this exporter was found to exist. The officer investigated further and found some of the suppliers of this exporter on the strength of whose invoices the
exporter claimed ITC were found to be non-existent. By no stretch of imagination can the obligation on the Customs Broker under Regulation 10(n) be
extended to verifying the existence of all the suppliers of the exporter. Learned consultant for the appellant submits that they had obtained the
following documents for KYC:
(i) Authorisation letter
(ii) KYC letter
(iii) IEC Registration
(iv) GST Registration
(v) AD code copy from Axis Bank
(vi) PAN card copy of Mr. Irshad, the proprietor
(vii) Aadhar card copy of Mr. Irshad
(viii) Bank Statement of the firm
We, therefore, find that the jurisdictional officer’s report in respect of this exporter cannot form the basis to conclude that the appellant has
violated regulation 10(n) of CBLR, 2018.
It has also been mentioned in the SCN ‘Similar adverse report/comments had been given by the jurisdictional authorities in respect
of all the exporters mentioned in Table-1’ (of the SCN). This allegation is extremely vague. It does not say what goods were exported by
which exporter listed in the Table and which of those were handled by the appellant and how the investigations have led the department to conclude
that the appellant has not fulfilled its obligations under Regulation 10(n).
To sum up, the only allegation against the appellant is that it violated Regulation 10(n) which obligates 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. While a large number of
exporters were listed in the Table in the SCN, there were only three verification reports which formed the Relied Upon Documents (RUD 2, RUD 3
and RUD4). Of these RUD 3 says that the officers have not conducted any physical verification. RUD 4 confirms that the exporter was operating
from the place. Neither of these supports the case of the Revenue. In respect of these two RUDs, the report of the officers is that the exporter had
taken ineligible ITC, which, even if found true, cannot be held against the appellant as the Customs Broker has neither any authority nor any
responsibility to ensure that the exporter had taken ITC properly or that the exporter’s suppliers exist at their registered premises.
As far as RUD 2 is concerned, the officer reported that the GST Registration was issued in December 2018 and that the exporter was not found
to be operating from the place. The SCN and the impugned order ignore several documents which were obtained by the appellant, which were issued
by the various Government departments and authorities to the exporter with the same address. We find no reason to disbelieve all these officers of
various government departments and believe only the verification report by the jurisdictional officer who submitted RUD2. We also find that this
report is defective inasmuch as it does not say when the verification was carried out and when the exporter stopped operating from the premises or if
the exporter never operated from the premises at all and the GST Registration and all the other documents issued by various government officers
were issued carelessly or fraudulently or without any verification at all. If the exporter ceased to operate from that premises subsequent to the issue of
GST Registration, the report does not say whether the exporter ceased to operate prior to the date of export or after that date. Even if the exporter
had ceased to operate from that premises and had not got amendments made in the official documents issued by various authorities, this cannot be
held against the appellant Customs Broker to say that it violated Regulation 10(n) of the CBLR, 2018. For these reasons, RUD-2 also does not support
the case of the Revenue.
In view of the above, we proceed to answer the questions framed by us in paragraph 8 above. The answer to question (a) is that in the factual
matrix of the case and evidence available on record, the Commissioner was not correct in holding that the appellant Customs Broker has violated
Regulation 10(n) of CBLR, 2018. Consequently, the answer to questions (b), (c) and (d) are negative.
We find that the impugned order cannot be sustained and needs to be set aside and is set aside. The following order is, therefore, passed :
a) Revenue’s Appeal C/50389/2021 and the Cross Objection of the Customs Broker C/Cross/50408/2021 are dismissed as infructuous.
b) Customs Broker’s Appeal No. C/50857/2021 is allowed and the impugned order is set aside with consequential relief.
(Order pronounced in court on 03/12/2021).