TMI Blog2020 (12) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... r Assistant Commissioner of Customs - The Regulation requires the Customs Broker to obtain an authorisation, which the Appellant did. It is not the case of the Department that the signatures on the authorisation letter were forged or that the persons authorising the Appellant denied having given the authority letters. This apart, the Appellant also claims that due diligence was carried out for ascertaining the functioning of the clients at the address declared by the clients and in this connection the partnership deed as well as service tax registration, PAN card, Import Export Code, voter card, electricity bill, bank details and mobile number of the partners with email id were also examined. The Commissioner, therefore, committed an illegality in holding that Regulation 10(a) of the Licensing Regulations had been violated. Violation of 10(d) and 10 (e) of the Licensing Regulations or not - HELD THAT:- These two Regulations were taken up together by the Commissioner. Regulation 10(d) requires a Customs Broker to advice his client to comply with the provisions of the Act and the Rules and Regulations. Regulation 10(e) requires a Customs Broker to exercise due diligence to ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents could be obtained - Thus, committed an error in holding that the appellant failed to ensure due compliance of the provisions of Regulations 10(n) of the Licensing Regulations. Violation of Regulation 13 (12) of the Licensing Regulations or not - contention of the appellant is that the G-Card holder acted strictly in accordance with the guidelines issued in the Circular dated April 8, 2010. According to the appellant, the G-Card holder exercised due diligence by procuring all independent and authentic documents - HELD THAT:- This Regulation provides that the Customs Broker shall exercise such supervision as may be necessary to ensure proper conduct of his employees in the transaction of business and he will be held responsible for all acts and omissions of his employees during their employment - if the documents that were submitted to the G-Card holder, prima-facie appeared to be authentic, there was no reason for the G-Card holder to verify the contents of the documents. The grant of an Importer Exporter Code number was held by the Delhi High Court in Kunal Travels to pre-suppose verification of facts. The inevitable conclusion, therefore, that follows is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Appellant requiring the Appellant to show cause as to why it should not be held responsible for contravention of the aforesaid provisions of the Licensing Regulations and why the Licence should not be revoked and part or whole of the security submitted at the time of issue of the License be not forfeited. The Appellant was also asked to show cause as to why penalty should not be imposed in terms of Regulation 18 read with Regulation 17 of the Licensing Regulations. 4. The Appellant, by a letter dated January 02, 2020, submitted a detailed reply stating, inter alia,: (i) The Appellant and the G-Card holder had before filing the shipping bill, fulfilled the know your customer [KYC] norms by asking for the documents mentioned in Regulation 10 (n). The partnership deeds, service tax registration, voter cards, PAN card and Importer Exporter Code were submitted and the addresses of the firms were available in the Importer Exporter Code Certificates. (ii) Though the G-Card holder had not personally met all the partners of the exporting firms, but as per the practice he had met the representative of the exporting firms for taking the authorisation letters and also docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copies of the authorisation letters dated January 04, 2017 and January 07, 2017 of the two firms were submitted, as is clear from page 56 of the order. 10(d) and 10(e) Advice the client to comply with the provisions of the Act and the Regulations. Exercise due diligence to ascertain the correctness of any information which he imparts to a client. The firm in question was proved to be non-existing and, therefore, there is no question of advising his client to comply with provisions of the Act. Customs Broker has failed to exercise due diligence to ascertain the correctness of the information which he furnished for the said firm since he never visited the two firms nor met any of the partners. Due diligence does not include physical verification. As per practice IEC number, GST number and identity of clients has been done by taking all KYC norm documents prescribed in Circular 09/2010. 10(n) Verify correctness of IEC, GSTIN, identity of his client and functioning of his client at the declared address by using reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant had followed all the provisions of the Licensing Regulations and infact had duly carried out the KYC procedure norms provided for in the Licensing Regulations and the Board Circular dated April 08, 2010; (iii) The Appellant had no reason to doubt the veracity of the facts mentioned in the KYC documents as the same had been issued by the Government of India. All these documents were submitted by the Appellant to the Investigation Agency; (iv) There was no violation of Regulations 10(a), 10(d), 10 (e), 10(n) and 13 (12) of the Licensing Regulations. Copies of the authorisation letters had been submitted as also the Importer Exporter Code number and GST number. The identity of clients was established by the KYC documents. The Appellant also submitted the partnership deed, service tax registration, PAN card, electricity bill, rent agreements, bank details and mobile number of the partners and email id. Due diligence as per the practice was undertaken by the Appellant. There was also no act or omission on the part of the G-Card holder since he acted in accordance with the Board Circular and exercised due diligence by procuring all the documents in accordance with the Regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 471 (Tri.-Del.)]. (b) HLPL Global Logistics Pvt. Ltd. vs. Commr. of Cus. (Airport Admn.), Kolkata [2019 (370) ELT 501 (Tri.-Del.)] (c) Bhaskar Logistic Services Pvt Ltd. vs. Union of India [2016 (340) ELT 17 (Pat.)]. (d) Multi Wings Clearing Forwaring P. Ltd. vs. C.C. (General), New Delhi [2019 (369) ELT 820 (Tri.-Del.)]. 9. The submissions advanced by the learned Counsel for the Appellant and the learned Authorised Representative of the Department have been considered. 10. The License was issued to the Appellant about 20 years back. The Appellant, as a holder of the License, had done customs clearance for firms. The Department had started investigation in 2017 in respect of various exports of readymade garments and during this investigation it was found that five of such exports pertained to the Appellant. According to the show cause notice dated December 03, 2019 that was issued to the Appellant, of the five exporters, two exporters, namely, M/s Impex Trading and Global Trading were not available at the address mentioned in the KYC documents. The Appellant claims that the officers of the Department visited the address provided by these two firms after a long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 guideline 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 authorised signatory in respect of other forms of organisation such as company/trust etc., and any two of the listed documents in the annexure. (emphasis supplied) 13. The relevant portion of the Annexure of the said Circular containing the features to be verified and the documents to be obtained from the client/ customers in relation to Partnership Firms is reproduced below: Client/Customer identification Procedure Features to be verified and documents to be obtained from clients/ customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms. Thus, I find that non-existence of the said two firms M/s Impex Trading and M/s Global Trading is a true and is an undisputed fact. (emphasis supplied) 15. Each violation of the Regulation alleged in the show cause notice shall be taken up separately. 10 (a) of the Licensing Regulations 16. Regulation 10(a) deals with obligations of Customs Broker and provides that the Customs Broker shall obtain an authorisation letter from each of the companies, firms or individuals by whom he is for the time being employed as a Customs Broker and produce such authorisation whenever required by the Deputy Commissioner of Customs or Assistant Commissioner of Customs. The Commissioner has recorded the following finding in regard to violation of Regulation 10 (a): In this regard, agreeing with report of the inquiry officer, and as already discussed by me in the foregoing part, I find that it has been conclusively proved by ample of evidence that the two firms in the name style of M/s Impex Trading and M/s Global Trading, were found non-existing. The CB has also at no stage of proceedings contradicted or controverted the alleged fact that the said firms are non-existing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to any work related to clearance of cargo or baggage. 20. The Commissioner has placed much emphasis on the statements made by Virender Kumar Saraswat, who is a G-Card holder. The Commissioner noted that he had made a statement that he had never visited the firms nor he had met any of the partners of the said firms and that it was Shashank Sharma who used to meet the G-Card holder on behalf of the two firms to hand over the papers. Emphasis has been also placed on his statement that he had asked Shashank Sharma for verification of the two firms. The Commissioner, therefore, concluded that the Customs Broker and his G-Card holder were conscious of the fact that the two firms, for whom they were making customs clearance, were fictitious or non-existing. After having so noted, the Commissioner made the following observations: I, therefore, hold that the CB has failed to exercise due diligence to ascertain the correctness of any information which he furnished for the said firms. Further, as the firms in question were proved to be non-existing there is no question of advising his client to comply with the provisions of the Act, other allied Acts and the rules and regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney and their addresses (v) Telephone bill in the name of firm/partners. 25. Out of the documents listed in the Annexure to the Circular, only two documents have to be obtained. The Appellant did obtain two documents. Neither the Circular nor the Annexure requires any physical verification of the premises. It is not the case of the Department that the documents that had been obtained were forged documents. The reply submitted by the Appellant has not been discussed at all nor any reason has been assigned as to why these documents could not be considered. The Commissioner appeared to have been swayed by the fact that the two firms did not exist at the addresses provided and so the documents cannot be relied upon. It needs to be noted that this verification of the address was undertaken by the Department after 18 months. 26. The provisions of Regulation 10(e) of the Licensing Regulations were examined at length by the Delhi High Court in Kunal Travels and the relevant observation are as follows: 12 . Clause (e) of the aforesaid Regulation requires exercise of due diligence by the CHA regarding such information which he may give to his client with reference to any work r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do a background check of the exporter/client who approaches it for facilitation services in export and imports. Regulation 13(e) of the CHALR, 2004 requires the CHA to : 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 (emphasis supplied). The CHAs due diligence is for information that he may give to its client and not necessarily to do a background check of either the client or of the consignment. Documents prepared or filed by a CHA are on the basis of instructions/documents received from its client/importer/exporter. Furnishing of wrong or incorrect information cannot be attributed to the CHA if it was innocently filed in the belief and faith that its client has furnished correct information and veritable documents. The misdeclaration would be attributable to the client if wrong information were deliberately supplied to the CHA. Hence there could be no guilt, wrong, fault or penalty on the appellant apropos the contents of the shipping bills. Apropos any doubt about the issuance of the IE Code to M/s. H.S. Impex, it was for the respondents to take appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otment letter from Government, or No Objection Certificate from the legal owner. 4. Details of the main Bank Account 5. Memorandum/Articles of Association/List of Directors 6. Authorisation by the Board of Directors/Partners/Proprietor for the person filing the application. 7. Business transaction numbers obtained from other Government departments or agencies such as Customs Registration No. (BIN No.), Import Export Code (IEC) number, State Sales Tax Number (VAT), Central Sales Tax Number, Company Index Number (CIN) which have been issued prior to the filing of the service tax registration application. 2. PAN Card of Partners/Partnership Firm 1 Copy of certificate of registration issued by Registrar of firms of Copy of Partnership Deed duly notarized by Notary in India which works as proof of the firm‟s existence along with PAN Card from 49A. 2 Address Proof of firm If the registered office place is rented, rent agreement andone utility bill (electricity bill, water bill, property tax bill, gas receipt etc.) have to be submitted. Also, NOC from landlord i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of the firms. The findings that the Appellant had not followed the provisions of Regulations 10(d) and 10(e) of the Licensing Regulations is, therefore, erroneous. 10(n) of the Licensing Regulations 31. Regulation 10(n) requires the Customs Broker to verify the correctness of Importer/Exporter Code Number, Service Tax Identification Number, identity card of the client and functioning of the client at the declared address by using reliable, independent, authentic documents, data or information. 32. The Commissioner, after referring to the Board Circular dated April 08, 2010 and its Annexure, observed as follows: In this regard, the Inquiry Officer observed that to verify above said feature of partnership firm any two of the above said documents had to be obtained. In the instant case, CB has provided partnership deed. But CB has failed to provide any other document i.e. either registration certificate of partnership firm or Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf or any officially valid document identifying the partners and the person holding the Power of Attorney and their addresses or Telephone bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case. The reference to the verification of antecedents and correctness of Importer Exporter Code (IEC) Number and the identity of the concerned exporter/importer, in the opinion of this Court is to be read in the context of the CHA's duty as a mere agent rather than as a Revenue official who is empowered to investigate and enquire into the veracity of the statement made orally or in a document. If one interprets Regulation 13(o) reasonably in the light of what the CHA is expected to do, in the normal course, the duty cast is merely to satisfy itself as to whether the importer or exporter in fact is reflected in the list of the authorized exporters or importers and possesses the Importer Exporter Code (IEC) Number. As to whether in reality, such exporters in the given case exist or have shifted or are irregular in their dealings in any manner (in relation to the particular transaction of export), can hardly be the subject matter of due diligence expected of such agent unless there are any factors which ought to have alerted it to make further inquiry. There is nothing in the Regulations nor in the Customs Act which can cast such a higher responsibility as are soug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills of CB at Delhi Air Cargo filed by him. He also stated that he was in charate of overall supervision of all the exports made through the firm M/s Perfect Logicare Private Limited. Further, the Inquiry Officer found that he stated that he joined CB firm in 2008 and till now he had been working with the CB firm. The Inquiry Officer rightly observed from the statement of Sh. Virender Kumar Saraswar that he is overall in charge of the CB firm at Delhi. CB has failed to explain in what manner he used to supervise the functioning of his G-Card employee. It was the responsibility of CB to ascertain from his G-Card holder that nature of documents that he obtained from his clients for KYC purpose are legally valid. But the CB has failed to do the same. Had the CB exercised his proper supervision on the functioning of his G-Card employee, the fictitious exporting firms would have not succeeded in exporting the overvalued goods with intention to avail ineligible drawback. The Inquiry Officer found no merit in the contentions of CB and concluded that CB has contravened the provisions of Regulation 13(12) of CBLR, 2018 {read with erstwhile regulation 17(9) of CBLR, 2013} In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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