TMI Blog2021 (2) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... background check is done by the Customs Authorities. In fact, the grant of Importer/Exporter Code Number is a proof regarding verification of facts and if the grant of such a code number to an entity at the address mentioned is in doubt, then for such erroneous grant of the Importer/Exporter Code Number, the appellant cannot be faulted. The basic requirement of Regulation 10 (n) is that the Customs Broker should verify the identity of the client and functioning of the client at the declared address by using, reliable, independent, authentic documents, data or information. For this purpose, a detailed guideline on the list of documents to be verified and obtained from the client is contained in the Annexure to the Circular dated April 8, 2010. It has also been mentioned in the aforesaid Circular that any of the two listed documents in the Annexure would suffice. The finding recorded by the Commissioner that the required documents were not submitted is, therefore, factually incorrect - the KYC documents were submitted by the appellant and the verification was undertaken by Anil, an employee who had made the Directors. The communications with the Encanterra Traders was also done t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of M/s Encanterra Traders Pvt. Ltd. [ Encanterra Traders ] had imported the said goods by filing two bills of entry at Chennai Seaport in which the goods were declared as popcorn variety of maize corn and thus DFIA benefit was availed to the tune of ₹ 42,56,540/-. It was further noticed that Encanterra Traders had also imported the goods at ICD, Tughlakabad and at Nhava Sheva Port and thus claimed benefits of ₹ 65,67,614/- and ₹ 26,11,520/- respectively. The goods at these two ports were also declared as popcorn variety of maize corn under Customs Notification dated April 01, 2015. 4. During the scrutiny it was also found that Encanterra Traders had exported protein concentrate pop-corn gluten under DFIA from ICD Tughlakabad through six Shipping Bills and the customs clearance work of export was facilitated by a Customs Broker called M/s Transpeed Logistics International Private Limited, which is the appellant in this appeal. 5. The dispute in this appeal is restricted to these six export Shipping Bills. 6. A statement of Lal Chand Sharma, F-card holder of the appellant was recorded on September 04, 2018 under section 108 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not violated any of the CHA regulations and have obtained proper documents required to meet the requirement of KYC. Further, no means rea has been alleged against the Appellant nor there is any finding regarding illegal gain made against the CHA. Further, Shri Lal Chand Sharma of the CHA company have retracted his statement particularly answer given to Question No. 1 and 2 in the statement recorded on September 04, 2018 at the first opportunity by letter dated September 10, 2018, addressed to the Deputy Director, DRI, Delhi, stating there that the answer to the said questions were dictated by the officer threatening him of harassment, if he does not toe their line. It was further clarified that the Appellant undertook work after proper authorization. Further, we find that the subsequent non availability of the said M/s Encanterra Traders Private Limite at their address or its Directors at their earlier residential address does not lead to any conclusion that the said M/s Encanterra Traders Private Limited is a fictitious company. We further find that it is nowhere alleged, in what way the Appellant did any irregularity in handling export consignment, for which they have file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08, 2010; (ii) 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; (iii) There was no violation of regulations 10(a), 10(d), 10 (e) and 10(n) of the 2018 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. Due diligence as per the practice was undertaken by the appellant. There was also no act or omission on the part of the F-Card holder since he acted in accordance with the Board Circular and exercised due diligence by procuring all the documents in accordance with the 2018 Regulations; (iv) The duty of a Customs Broker is confined to obtaining the relevant KYC documents and he cannot be held responsible for not physically verifying the address of the exporter, as has been observed by the Tribunal in various decisions; and (v) In support of the submissions, learned counsel for the appellant placed reliance on the following decisions: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was done in June 2017, and so makes it suspect; (v) The Director of Encanterra Traders, Rakesh Kumar never appeared before Customs or DRI during the entire investigation in spite of seven summons issued to him; and (vi) Tarun Jain and Pankaj Batra have clearly accepted and elaborated the dummy nature of Encanterra Traders in their voluntary statements which have never been retracted. 16. The submissions advanced by the learned Counsel for the appellant and the learned Authorised Representative of the Department have been considered. 17. The show cause notice alleges violation of regulations 10 (a), (d), (e) and (n) of the 2018 Regulations. They are reproduced: 10. Obligations of Customs Broker .-A Customs Broker shall- (a) obtain an authorisation 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 Commission of Customs, as the case may be; (d) advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indings of the Commissioner and the submissions of the appellant. The same are contained in the following Table: Regulation invoked Ingredient of the Regulation Finding of Commissioner Submissions of the Appellant 10(a) Obtain authorization from the company which has employed the Customs Broker It is stated that the authorisation is pertaining to only five export invoices and the same is issued nine months prior to the date of invoices which raised a doubt on the authenticity of the authorization. The ownership of M/s Encanterra Traders is doubtful and the CB could not produce any documents as to who signed the authorization for custom purposes. Copies of the KYC and authorisation letter dated 19.09.2016 of Encanterra Traders were submitted vide letter dated 10.09.2018, as is clear from paragraph I at page 36 of the inquiry report dated 11.04.2019. The KYC was also submitted and the same is an admitted fact as per statement dated 04.09.2018 mentioned at paragraph 18 of impugned order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Commissioner, it would be necessary to keep in mind certain important facts. The offence report relates to certain importers who were mis-using the DFIA by importing maize popcorn and declaring the same as maize corn in order to avail undue benefits of DFIA. It also mentions about exporters who had obtained DFIA. Encanterra Traders had imported and had also exported the goods. The appellant had undertaken the work of customs clearance and had acted as a Customs Broker only for Encanterra Traders, for which six export Shipping Bills were filed in the years 2016 and 2017. The appellant had not submitted documents of Encanterra Traders for import of goods. 21. It needs to be noted that the alleged fraud relates to import of popcorn by declaring the same as maize corn so as to avail undue benefits of DFIA. This fact has to be kept in mind in relation to the allegations made against Encanterra Traders because so far as the appellant is concerned, allegations have to be examined only in relation to the six export Shipping Bills. The appellant also claims that there is nothing on the record to substantiate that the appellant was aware about the ill-intention of Encanterra Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of items without payment of Customs duty and without discharging applicable export obligations and I find that the CB is one of the cogs of this nefarious wheel as the CB was involved in clearing export consignment of a firm i.e. M/s ETPL which existed only on paper having doubtful ownership in view of statements dated 28.03.2018, 01.06.2018 04.06.2018 of Shri Pankaj Batra and statements dated 17.04.2018 24.09.2018 of Shri Tarun Jain wherein they disowned ownership of M/s ETPL and shifted the blame onto each other. The culpability of the CB is proven more when I find that the CB facilitated the export consignment without verifying the antecedents working (from the declared address) of the exporter firm and the two foreign entities through which the CB got the job of Customs clearance of the six export consignments their relation with M/s ETPL. 38. The CB had helped M/s ETPL clear their six export consignments vide Shipping Bill Nos. 1173130 dated 21.09.2016, 7732664, 7732665, 7732730, 7732720 7732671 all dated 01.08.2017 from ICD-Tughlakabad which implies that the CB was in touch with the operators of M/s ETPL at least for the period of September, 2016 to Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut prejudice to the earlier order passed by the Commissioner of Customs. c. I forfeit the security deposit of 75,000/- (Rs. Seventy Five Thousand Only) submitted by the CB. d. I impose penalty of ₹ 50,000/- (Rs. Fifty Thousand only) under Regulation 18 of the CBLR, 2018. 24. Each violation of the regulation alleged in the show cause notice shall be taken up separately. 10 (a) of the Licensing Regulations 25. 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): 41.1 When asked for providing the authorization from the Director of the company for clearing customs cargo as per Customs Broker Licensing Regulations, he could not provide the same. The Inquiry Officer in his report dated 11.04.2019 also talks about non-submission of authoriz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from our Dubai Cargo Partner office M/S. RELIANCE FREIGHT SYSTEM L.L. CPO BOX 32049 DUBAI UAE (Enclose Communication for your reference. 2. On the Basis on nomination routing Shipment. We approach to Customer here on their contact number provided by Dubai Cargo Partner and asked invoice and packing list. (Enclose Shipper s communication copy with our Office Staff) 3. As per CHA regulation and as per Customs act. We received and collect all the KYC (Original Document) from supplier and keep in our record (enclose copy for your reference) 4. Enclose Shipper s authorization letter and request for handle customs clearance of this shipment (Enclose Original Copy) 5. Enclose invoice and packing list 6. Shipping Bill copy 7. DFIC LIC application 8. Container stuffing report 9. Bill of lading copy 10. Pre Alert copy send to our Overseas office 11. Document received acknowledgment copy from customer which is taken by our office representative (physically signature and took this ack from shipper s office. (Enclose Original for your reference.) 27. Out of the eleven documents, the document at serial number. 4 is the Shipper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage. 30. In regard to the said Regulations, the Commissioner made the following observations: 41.2 Here, I find from the discussion in the foregoing paras that during the investigation by DRI, M/s Encanterra Traders Pvt. Ltd. was found to be a fictitious and non-existent firm which had doubtful ownership in view of statements dated 28.03.2018, 01.06.2018 04.06.2018 of Shri Pankaj Batra and statements dated 17.04.2018 24.09.2018 of Shri Tarun Jain wherein they both disowned ownership of M/s ETPL and shifted the blame onto each other. *************** The CB facilitated M/s ETPL in the Customs clearance of aforesaid Export shipments in the time span of September, 2016 to October, 2017. I find that the CB did not exercise due diligence and did not advise his client to comply with the provisions of the Customs Act and Customs Tariff Act as there is nothing brought on record by the CB to suggest otherwise. Thus, the CB had failed to discharge their responsibilities, duties and obligations cast upon them as a Customs broker under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General of Foreign Trade who had provided the Certificate as well as the IEC. The appellant had also submitted copies of the Aadhar Card, IEC, Pan Card, Certificate of Incorporation of the Company, Memorandum of Association and Article of Association of the Company. 34. 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 related to clearance of cargo. Clause (l) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 action. Furthermore, the inquiry report revealed that there was no delay in processing the documents by the Appellant under Regulation 13(n). (emphasis supplied) 35. It is clear from the aforesaid decision of the Delhi High Court that there is no obligation on the Customs House Agent to look into the information made available by the exporter/exporter. The Customs House Agent is merely a processing agent of documents with respect to clearance of goods through Customs House and he is not an inspector to weigh the genuineness of the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the provisions of regulation 13(o) of the 2004 Regulations had not been complied with. In this connection the learned Authorized Representative also pointed out that the appeal filed by Millennium Express Cargo before the Delhi High Court was dismissed and the decision is reported in 2017 (354) E.L.T.467 (Del.) [ Millennium Express Cargo Pvt. Ltd. vs. Commissioner of Customs ] . It is, therefore, the contention that what was held by the Tribunal in Millennium Express Cargo should be considered as the law laid down by the Delhi High Court and so the decisions of the Delhi High Court in Kunal Travels and Shiv Khurana should not be considered to have laid good law. 40. The submission advanced by leaned Authorized Representative is mis-conceived. In Millennium Express Cargo decided by the Tribunal, another issue that had arisen for consideration was the time line prescribed in regulation 22 of the 2004 Regulations and it is in this context that the Tribunal observed as follows: 6 . The appellant is right in contending that the time line prescribed in Regulation 22 ibid have been violated in that present case. However, it is pertinent to note that the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt s licence already stood confirmed by an order passed by the respondent on 8thOctober, 2014. In fact, it was that order which was taken up in appeal before the CESTAT along with an application for stay. The CESTAT rejected the stay application on 19th January, 2015 and thereafter Customs Appeal No. 7/2015 was filed before this Court. 19. The question of the Court granting further time to the respondent to again pass another order confirming the suspension of the appellant s licence, therefore, did not arise. In its order dated 25th February, 2015, the Court did not set aside the order dated 19th January, 2015 passed by CESTAT rejecting the stay application of the appellant. In effect, the Court permitted the orders suspending the appellant s licence to continue to operate as such. It is in this context that the direction used in para 2 of the order dated 25th February, 2015 requires to be examined. 20. Regulation 22(1) of the CHALR reads as under:- 22 Procedure for suspending or revoking licence under Regulation 20. (1) The Commissioner of Customs shall issue a notice in writing to the Customs House Agent within ninety days from the dated of receipt of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present appeal stands restricted by the sole question of law framed when the appeal was admitted by this Court on 2nd September, 2016. Consequently, no further question arises. The Court is also not inclined at this stage to frame any further question in the appeal. 25. The question framed is accordingly answered in the negative, that is, against the appellant and in favour of respondent by holding that the CESTAT did not err in rejecting the appellant s contention that in the circumstances of the case the revocation was not sustainable in law by extending the time limit as prescribed under the Regulation. The appeal is accordingly dismissed. 43. It is, therefore, clear from the aforesaid judgement of the Delhi High Court that the only issue that was examined was as to whether the Tribunal committed an error in rejecting the contention of the appellant that the revocation of License was not sustainable in law for exceeding the time limit prescribed under the Regulations. There was no occasion for the Delhi High Court to examine the order revocation on the merits since the scope of the appeal was restricted to the sole question of law that had been framed when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sought to be urged by the Revenue. In other words, in the absence of any indication that the CHA concerned was complicit in the facts of a particular case, it cannot ordinarily be held liable. 49. The basic requirement of Regulation 10 (n) is that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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