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2025 (5) TMI 1375 - AT - CustomsViolation by a Customs Broker under Regulation 10(d) 10(e) and 10(n) under the Customs Brokers Licensing Regulations (CBLR) 2018 - facilitated customs clearance of the overvalued export of goods - exporter of these consignments was non-functional/non-existent at the declared address - purchase invoices issued by non-existent/fake/suppliers - revocation of the CB licences along with forfeiture in terms of Regulation 10 read with Regulation 17 of CBLR 2018 - GST Registrations were either suspended or cancelled - HELD THAT - The proceedings originated from Show Cause Notice (SCN) No. 11/2024 dated 22.02.2024 issued by the Additional Commissioner of Customs SIIB ICD Tughlakabad (Export) following an alert from the NCTC regarding three shipping bills dated 15.07.2023. We observe that the show cause notice further alleges that the CB have facilitated filing of shipping bills on behalf of the exporter M/s SS Enterprises by mis-declaring the value of the goods. Nothing in the Customs Act or the Customs Valuation Rules or the CBLR gives the Customs Broker any power to examine the goods or assess their value. The value of goods has to be self-assessed by the exporter or re-assessed by the officer. The role of Customs Broker is confined to filing the Shipping Bills correctly as per the documents provided to him. We also observe that the show cause notice is too vague to allege violation of Regulations 10(d) and 10(e). There is no evidence in the show cause notice and the suspension order about the duties which has not been fully complied with by the appellant. The confirmation of proposal of such show cause notice cannot sustain. We draw our support from the decision of Hon ble Delhi High Court in the case of Kunal Travels (Cargo) 2017 (3) TMI 1494 - DELHI HIGH COURT wherein it is held that clause 10(e) of the CB Regulation 2018 requires exercise of due diligence by the CHA regarding such information which he may give to his client with reference to any work related to clearance of cargo. In the present show cause notice there is no mention of any such information which was to be parted with the exporter. Clause (d) requires that all documents submitted such as bills of entry and shipping bills delivered etc. reflect the name of the importer/exporter and the name of the CHA prominently at the top of such documents. The aforesaid clauses do not obligate the CHA to look into such information which may be made available to it from the exporter/importer. The CHA is not an inspector to weigh the genuineness of the transaction. It is a processing agent of documents with respect to clearance of goods through customs house and in that process only such authorized personnel of the CHA can enter the customs house area. That the allegations made against the Appellant / Customs Broker that the CB have facilitated the Shipping Bills on behalf of the exporter M/s SS Enterprises by mis declaring the value of the goods did not bring the non-compliance of the provisions of the CBLR 2018 and therefore the same does not attract violation of Regulation 10(d) and 10(e) of CBLR 2018. The appellant had verified the necessary KYC documents viz. IEC of the importer bank signed authorization and their GSTIN certificate. All the said certificates were found to be valid and existing. From the above discussion it is clear that there is no such evidence on record which may prove prior knowledge with the appellant about the declarations in the documents provided by the exporter and that those were mis-declarations. As such from the facts on record it is concluded that the appellant M/s United Cargo Services (PAN ACYPC7426N) has followed the provisions of Regulation 10(d) and 10(e) of CBLR 2018 and no contravention of the provision of this regulation is established. We have also perused the inquiry report in reference to impugned show cause notice dated 21.05.2024 that inquiry officer in the detailed report dated 16.08.2024 has meticulously considered the entire factual matrix has concluded that the CB M/s United Cargo Services has not violated Regulations 10(d) 10(n) and 10(q) of the Customs Brokers Licensing Regulations 2018. The adjudicating authority has not cited any plausible reason while concluding contrary to said inquiry report. We do not see any reason to differ from the findings of the enquiry officer. Hence we hereby set aside the order under challenge. Consequent thereto the appeal is allowed.
The core legal questions considered in this judgment revolve around the alleged violations by a Customs Broker (CB) under the Customs Brokers Licensing Regulations (CBLR), 2018, specifically:
Regarding the obligations under Regulation 10(d), 10(e), and 10(n) of the CBLR, 2018, the Court examined the regulatory framework and relevant case law. Regulation 10(d) requires a Customs Broker to advise clients to comply with customs laws and report non-compliance to authorities. Regulation 10(e) mandates exercising due diligence in ascertaining the correctness of information imparted to clients related to cargo clearance. Regulation 10(n) obliges the Customs Broker to verify the correctness of the Importer Exporter Code (IEC), Goods and Services Tax Identification Number (GSTIN), identity of the client, and the functioning of the client at the declared address using reliable, independent, and authentic documents or data. The Court noted that the Customs Broker was alleged to have facilitated shipping bills on behalf of an exporter found to be non-existent or non-functional at the declared address, and that the exporter's supply chain was dubious with suspended or canceled GST registrations. The department contended that this amounted to facilitating fraudulent export transactions and mis-declaration of goods value, thereby violating the Customs Act and the CBLR. However, the Court emphasized that neither the Customs Act nor the Customs Valuation Rules empower the Customs Broker to examine the goods or assess their value. The Customs Broker's role is limited to filing shipping bills accurately based on documents provided by the exporter. The Court found the allegations regarding mis-declaration of value vague and unsupported by specific evidence demonstrating non-compliance by the Customs Broker with Regulations 10(d) and 10(e). It relied on precedents from the Hon'ble Delhi High Court and this Tribunal, which clarified that the Customs Broker is not an inspector or investigator and is not required to verify the genuineness of transactions physically. On the issue of physical verification of the client's functioning at the declared address under Regulation 10(n), the Court interpreted the regulation as requiring verification through reliable, independent, and authentic documents or data, not physical inspection. The Court cited prior decisions holding that it is overly onerous and beyond the scope of the Customs Broker's duties to physically inspect the client's premises. The Customs Broker had verified necessary KYC documents, including IEC, GSTIN certificates, and bank authorizations, all of which were valid and existing at the relevant time. The Court further examined the inquiry report prepared by the inquiry officer, which concluded that the Customs Broker had not violated Regulations 10(d), 10(n), and 10(q) of the CBLR. The adjudicating authority's contrary conclusion was found to lack plausible reasons and was therefore not sustained. The Court accorded deference to the inquiry report's detailed factual analysis and findings. Regarding the procedural propriety and the reasonableness of suspending the Customs Broker's license and imposing penalties, the Court considered submissions that the suspension power must be exercised cautiously to avoid arbitrary deprivation of livelihood. The last export shipment handled by the Customs Broker was filed in July 2023, while the suspension order was issued in March 2024, indicating a delay that undermined the urgency of suspension. The Court relied on Tribunal precedents emphasizing the need for urgent necessity to justify license suspension. The Court also addressed the sufficiency and clarity of the Show Cause Notice (SCN). It was held that the SCN lacked clear allegations specifying the exact nature of the Customs Broker's default or misconduct, rendering it inadequate as a basis for disciplinary action. The SCN did not amount to an offence report, which is a mandatory prerequisite for initiating action against a Customs Broker under the CBLR. In rebuttal, the department emphasized the fiduciary responsibility of Customs Brokers to ensure compliance with customs laws and to prevent fraudulent transactions. The department cited a Supreme Court decision underscoring the important role of Customs Brokers in customs administration, their duty to safeguard government revenue, and the necessity of strict enforcement against misconduct. The department argued that facilitating exports by non-existent exporters is a grave misdemeanor warranting stern action to protect the integrity of customs processes. However, the Court balanced these concerns with the legal limits of the Customs Broker's obligations and the evidence presented. It concluded that there was no proof of prior knowledge or willful mis-statement by the Customs Broker regarding the exporter's non-existence or fraudulent declarations. The Customs Broker had complied with the verification duties as prescribed by the CBLR. In summary, the Court's significant holdings include:
The Court set aside the impugned order revoking the Customs Broker's license, forfeiting security deposit, and imposing penalty, thereby allowing the appeal. It held that the Customs Broker had complied with the relevant provisions of the Customs Brokers Licensing Regulations, 2018, and that no contravention was established on the facts and evidence on record.
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