2022 (7) TMI 1429 - AT - Customs

Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - importer alleged to be indulging in trade based money laundering by overvaluing the imported goods was issued to the importers - HELD THAT - From the facts as stated in the inquiry report and in the impugned order it is quite evident that the entire case made against the appellant is on account of their failure not to properly and completely verify the antecedents of the person/ client entrusting them with the paper and consignment for import. It is now settled preposition of law that there was no need for physical visit to the premises and meeting with the client by the CB before taking the job of clearance of the goods either for import or export. Principal Commissioner has relied upon the statement recorded during the course of investigation. These statements have not been corroborated. Even the statutory documents produced by the appellant for undertaking the KYC of the importer (IEC Holder) have not been found fake during investigation - The CB was require to do the KYC on the basis of the documents prescribed. Undisputedly such KYC was done by the appellant only what was not done was physical meeting and physical verification of the premises. In the case of M/S POONIA BROTHERS VERSUS COMMISSIONER OF CUSTOMS (PREV.) 2019 (4) TMI 911 - CESTAT NEW DELHI wherein the Hon ble Tribunal held that The CHA is not supposed to verify the each and every aspect about the business of importer as the Inspector of Department or Investigating agency. From the submission made by the ld. Advocate and fact on record it is apparent that the appellant has taken due diligence while verifying the KYC of the appellant based on the record submitted by him. In the present case the contravention alleged against the importer is non-declaration of retail sale price on auto parts imported by them for assessment under Section 4A of the Central Excise Act 1944 for CVD - it is found that the bill of entry was filed by the appellant after the goods were detained by the officers of DRI. The said bill of entry was filed on first check basis for verification of the goods before assessment. In such a situation there are no mala fide or intentional violation of any provisions of the Customs Act can be alleged on the part of the Customs broker. In the case of SETWIN SHIPPING AGENCY VERSUS COMMISSIONER OF CUS. (GENERAL) MUMBAI 2009 (9) TMI 759 - CESTAT MUMBAI the Tribunal held that there is no requirement for the CHA to verify physically the premises of importer/exporter. The Tribunal also observed that it is a settled law that the punishment has to be commensurate and proportionate to the offence committed - In the present case it is noticed that the punishment of revocation is not justifiable even if it is to be admitted that physical verification of the importer s premises could have avoided the filing of the bill of entry by the appellant. Even in such a situation the violation in respect of the cargo viz. the non-declaration of the RSP on the auto parts a debatable point of interpretation cannot be held against the appellant to result in the revocation of their licence. Admittedly the Customs Broker enjoyed a very important position in the Customs House and has been licensed to undertake the work of Customs clearance on behalf of the importer. However he does not replace the Customs Officer. Commissioner has relied upon the observations made by the Hon ble Apex Court in para 15 even without referring to the facts. There are no merit in the impugned order and the same is set aside - appeal allowed.

Summary

Issues Involved:
1. Revocation of Customs Broker Licence.
2. Allegations of over-valuation and money laundering.
3. Compliance with KYC norms under Customs Broker Licensing Regulations, 2018.
4. Role and responsibilities of Customs Brokers.
5. Comparison with previous case laws and judgments.

Detailed Analysis:

1. Revocation of Customs Broker Licence:
The Principal Commissioner of Customs revoked the Customs Broker Licence held by the appellant, citing violations of Regulations 10(d) and 10(n) of the Customs Broker Licensing Regulations (CBLR), 2018. The order included the forfeiture of the full amount of the security deposit furnished by the Customs Broker.

2. Allegations of Over-valuation and Money Laundering:
The appellant, a Customs Broker, filed Bill of Entries on behalf of an importer. The goods were initially assessed and cleared by Customs Authorities. However, subsequent investigations by the Directorate of Revenue Intelligence (DRI) revealed that the goods were grossly overvalued. The DRI determined a significantly lower value for the imported goods, suggesting that the importer was involved in trade-based money laundering. A show cause notice was issued to the importer and the Customs Broker, resulting in penalties and the initiation of proceedings to revoke the Customs Broker's licence.

3. Compliance with KYC Norms under CBLR, 2018:
The appellant argued that they had complied with KYC norms by verifying the Importer Exporter Code (IEC) and GSTIN from the Government website. The Principal Commissioner, however, found that the Customs Broker failed to physically verify the importer's premises and identity, thereby violating Regulation 10(n). The inquiry report indicated that the Customs Broker was part of a conspiracy to smuggle inferior quality stones by facilitating incorrect declarations and submitting false invoices.

4. Role and Responsibilities of Customs Brokers:
The Principal Commissioner emphasized the critical role of Customs Brokers in safeguarding the interests of both importers and Customs. The Customs Broker is expected to advise clients to comply with the law and report any non-compliance to Customs authorities. The Commissioner relied on the Supreme Court's observation in Commissioner of Customs Vs. K.M. Ganatra and Co., highlighting the significant trust placed in Customs Brokers and their obligations under Regulation 14 of the CHA Licensing Regulations.

5. Comparison with Previous Case Laws and Judgments:
The appellant cited various case laws to support their defense, arguing that physical verification of the importer's premises is not mandated by the regulations. The Tribunal referred to previous judgments, such as Poonla & Brothers Vs. Commissioner of Customs (Preventive), Jaipur, and HIM Logistics Pvt. Ltd., which held that Customs Brokers are not required to physically verify the importer's premises if they have verified the documents as per prescribed guidelines. The Tribunal found that the appellant had undertaken due diligence based on available documents and that the revocation of the licence was not justified.

Conclusion:
The Tribunal concluded that the Customs Broker had complied with the KYC requirements by verifying the necessary documents from the Government website. The failure to physically verify the importer's premises did not constitute a violation of Regulations 10(d) and 10(n) of CBLR, 2018. The Tribunal set aside the impugned order, allowing the appeal and reinstating the Customs Broker's licence. The Tribunal emphasized that the Customs Broker cannot be held responsible for valuation discrepancies determined by Customs authorities and Government valuers.