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2023 (3) TMI 27 - AT - CustomsRevocation of Customs Broker License - forfeiture of the Security deposit - levy of penalty - order passed merely based on suspicion - HELD THAT - The SCN does not rely on anything but an email said to be sent by the DGARM indicating a list of suspicious exporters. While analysis of data to identify suspicious exporters is a good method to begin investigations but such suspicion however strong cannot be a substitute for evidence. In this case the SCN was issued without any further enquiry and without producing any evidence documentary or otherwise. It simply jumped to the conclusion that the appellant must have violated Regulation 10(n). The logic was rather simplistic. Since DGARM sent a list of suspicious exporters identified based on data analysis and since the exporters whose exports the appellant handled formed part of the list such exporters do not exist and also did not exist at the time the exports were made and since they did not exist the appellant must not have conducted the verification as obligated under Regulation 10(n) and therefore must have violated it. Therefore the appellant s Customs Broker licence is liable to be revoked and penalty is liable to be imposed on it. It is not permissible to revoke the Customs Broker s licence of the appellant with nothing more than some suspicion. The suspicion can be ground to start an investigation and if evidence is found against the Customs Broker action must be initiated but SCN issued without any evidence whatsoever is bad in law. The inquiry report and the impugned order based on such SCN cannot be sustained - there is no evidence to support the allegation that the Customs Broker violated Regulation 10(n). As it is found that there is no evidence of violation of Regulation 10(n) by the appellant the revocation of its licence forfeiture of the Security deposit and imposition of penalty cannot be sustained - appeal allowed.
Issues Involved:
1. Scope of the responsibility of the Customs Broker under Regulation 10(n) of CBLR, 2018. 2. Whether the appellant violated Regulation 10(n) of CBLR, 2018. 3. Proportionality of the penalty imposed on the appellant. Detailed Analysis: Scope of Regulation 10(n) of CBLR: Regulation 10(n) mandates that a Customs Broker must verify the correctness of the 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 this responsibility is fulfilled by obtaining at least two KYC documents and does not extend to physically inspecting the client's premises. The appellant relied on precedents such as Kunal Travels vs. CC(I&G), IGI Airport, New Delhi and Commissioner of Customs vs. Shiva Khurana to support this view. The respondent contended that the Customs Broker must ensure that the interests of both the importer/exporter and the Revenue are protected, and merely obtaining two KYC documents is insufficient. The respondent cited cases like Commissioner of Customs vs. K M Ganatra & Co and Sky Sea Services vs. Commissioner of Customs (General) Mumbai to argue for a broader interpretation of the broker's responsibilities. The Tribunal concluded that the verification of IEC and GSTIN is satisfied as long as the Customs Broker ensures these were issued by the relevant authorities, without needing to investigate the correctness of these documents. The Tribunal emphasized that the Customs Broker is not required to physically verify the client's premises but can rely on independent, reliable, and authentic documents, data, or information to verify the client's identity and functioning. Violation of Regulation 10(n): The Tribunal found that the Show Cause Notice (SCN) issued to the appellant lacked any relied upon documents and was based solely on an email from the Directorate General of Analytics and Risk Management (DGARM) listing suspicious exporters. The SCN did not provide evidence that the exporters did not exist or that the appellant failed to comply with Regulation 10(n). The appellant argued that the SCN was issued without evidence, no inquiry was conducted, and the email from DGARM did not constitute valid evidence under Section 138C of the Customs Act. The appellant also pointed out that the SCN was issued beyond the permissible period after the initial suspension of the license was revoked. The Tribunal held that suspicion alone cannot substitute for evidence. The SCN's logic, based on the DGARM's email, was insufficient to prove that the appellant violated Regulation 10(n). The Tribunal found no evidence to support the allegation that the Customs Broker failed to verify the clients as required by Regulation 10(n). Proportionality of the Penalty: Given the lack of evidence of any violation, the Tribunal deemed the revocation of the appellant's license, forfeiture of the security deposit, and imposition of penalty as unsustainable. The Tribunal emphasized that penalties should be proportionate to the violation, and in this case, no violation was proven. Conclusion: The Tribunal set aside the impugned order, revoked the Customs Broker's license, forfeited the security deposit, and imposed a penalty on the appellant. The appeal was allowed with consequential relief to the appellant, as there was no evidence of violation of Regulation 10(n) by the Customs Broker. The order was pronounced in open court on 27/02/2023.
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