TMI Blog2023 (6) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... at In view of the customs RMS letting 80% to 95% of the exports without either assessing the documents or examining the records, there is a very high probability of any fraudster successfully exporting the goods (or even empty containers) and claiming the export incentives and profiting from it. It is found that the ratio of the above said order of the Tribunal is squarely applicable in this case. In the present case also, the appellant has collected the documents such as IEC, GSTIN etc. submitted by the exporter before processing their shipping bills. Later if they were not found to be existing in the said addresses, the appellant cannot be held responsible for their non existence at the address specified, as held by the Tribunal in the case of Anax Air Services - the allegation against the appellant in the impugned order that they have violated Regulation 10 (n) is not sustainable. The impugned order cannot be sustained and is set aside and the appeal is allowed. - MR. P. K. CHOUDHARY, MEMBER (JUDICIAL) AND MR. K. ANPAZHAKAN, MEMBER (TECHNICAL) Mr. H. K. Pandey, Advocate for Appellant Mr. S. Chakraborty, Authorized Representative for the Respondent ORDE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner has in the impugned order held that the Appellant had violated Regulation 10(n) of CBLR, 2018, revoked its licence and forfeited its security deposit. There is no other alleged violation either in the Show Cause Notice or in the impugned order against the appellant. 4. The issue in this case therefore falls in a narrow compass. The questions which need to be answered are: (a) Given the factual matrix of the case and the evidence available on record, was the Commissioner correct in holding that the appellant Customs Broker has violated Regulation 10(n) of CBLR, 2018? (b) If the answer to (a) is affirmative, can the revocation of licence of the appellant customs broker be sustained? (c) If the answer to (a) is affirmative, is the forfeiture of security deposit correct? 5. The finding recorded in paragraph 12.5 of the impugned order is that the appellant handled exports in respect of several exporters listed in paragraph 4 of the impugned order who are untraceable and therefore, the appellant has violated Regulation 10 (n) of CBLR. There is no document to support the allegation that the exporters listed in paragraph 4 of the SCN did not exist. 6. The case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018, which obligates the CB to verify the correctness of IE Code, GSTIN and functioning of their client at the declared address by using reliable, independent and authentic data, documents or information. The appellant submitted that they have carried out the due diligence as required under Regulation 10(n) by obtaining the documents such as IE Code, GSTIN etc. However, in the impugned order, the Ld Principal Commissioner has concluded that the CB has not verified the above said documents as prescribed in the Annexure to the Circular 9/2010 dated 08/04/2010. . We find that the CB has taken the documents such as IEC, GSTIN etc. These documents were issued by Government Agencies, which substantiate the existence of the exporters at the relevant time of issue of these documents. 10. We find that paragraph 6 of the Circular 9/2010-Cus dated 8.4.2010 requires the client to furnish to the CHA, a photograph of himself / herself, in the case of an individual and those of the authorized signatory in respect of other forms of organization such as company/trusts, etc. and any two of the listed documents in the annexure to the said Circular. Thus, it is evident that even as per the Circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he documents which are issued by the Government departments. The IEC number is issued by the Director General of Foreign Trade and the GSTIN is issued by the GST officers under the Central Board of Indirect Taxes and Customs of the Government of India or under the Governments of State or Union territory. The question which arises is has the Customs Broker to satisfy himself that these documents or their copies given by the client were indeed issued by the concerned government officers or does it mean that the Customs Broker has to ensure that the officers have correctly issued these documents. In our considered view, obligations under Regulation 10(n) of CBLR cannot be read to mean the latter as it would amount to treating the Customs Broker as one who is responsible to oversee and ensure the correctness of the actions by the Government officers who issued these documents. It would also mean that the Regulations under the Customs Act will prevail over the actions under the Foreign Trade (Development and Regulation) Act, 1992 under which the IEC is issued by DGFT and the Central Goods and Services Tax Act (or state GST Act) under which the GSTIN is issued by the GST officers which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the client using reliable, independent, authentic documents, data or information. In other words, he should know who the client is and the client cannot be some fictitious person. This identity can be established by independent, reliable, authentic: a) Documents; b) Data; or c) Information. 26. Any of the three methods can be employed by the Customs Broker to establish the identity of his client. It is not necessary that it has to only collect information or launch an investigation. So long as it can find some documents which are independent, reliable and authentic to establish the identity of his client, this obligation is fulfilled. If a document is issued by any other person not interested in the relationship of the client and the Customs Broker, it can be called independent. But it should also be reliable and authentic and not one issued by any Tom, Dick and Harry. Documents such as PAN card issued by the Income Tax, driving licence issued by the RTO, Election voter card issued by the Election Commission, the passport issued by the Passport Officer, etc., certainly qualify as such documents as none of these departments have any interest in the relationshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion report is based on the GSTIN. Further, IECs issued by the DGFT also show the address. There is nothing on record to show that either of these documents were fake or forged. Therefore, they are authentic and reliable and we have no reason to believe that the officers who issued them were not independent and neither has the Customs Broker any reason to believe that they were not independent. In two of the cases, the GST officers have also received some GST returns from the clients. 28. The responsibility of the Customs Broker under Regulation 10(n) does not include keeping a continuous surveillance on the client to ensure that he continues to operate from that address and has not changed his operations. Therefore, once verification of the address is complete as discussed in the above paragraph, if the client moves to a new premises and does not inform the authorities or does not get his documents amended, such act or omission of the client cannot be held against the Customs Broker. Of course, if the Customs Broker was aware that the client has moved and continues to file documents with the wrong address, it is a different matter. 29 When a Government officer issues a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. Unless all these officers of various organizations (including the jurisdictional GST officer who issued the registration) either acted fraudulently or carelessly, the above could not have been issued. 32. The Customs Broker is not omniscient and omnipotent. The responsibility of the Customs Broker under Regulation 10(n) does not extend to ensuring that all the documents issued by various officers of various departments are issued correctly. The Customs Broker is not an overseeing authority to ensure that all these documents were correctly issued by various authorities. If they were wrongly issued, the fault does not lie at the doorstep of the Customs Broker and it is not up to the Customs Broker to doubt the documents issued by the authorities and he cannot be faulted for believing them to be correct. 33. It is possible that by efflux of time, when the GST officers went for verification, situation changed. If so, it is a ground for starting a thorough investigation by the officer and is not a ground to suspend/cancel the license of the Customs Broker who processed the exports. We also find that there is nothing in the SCN to prove that the exporters did not exist o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draw the line is a matter of public policy. The extent of liberalization or tightening may also vary greatly from one system to another and that is also a matter of public policy. If one wants to obtain a passport, for example, which gives one nothing more than the right to leave the country and to return to it, the passport is issued either after or subject to police verification so that the passports are not issued incorrectly or misused. Similarly, if a poor hut-dweller wants a Ration Card which entitles him and his family to subsidized or free food from the State worth a few thousand rupees, such a card is issued only after verifying his address, the number of his family members, etc. so that the scheme may not be misused by those who are not entitled to the benefits. 40. On the other hand, anybody, even the very hut-dweller living below the poverty line wants to export goods and claim export incentives, neither his means nor his capability can be either checked or held against him. The Shipping Bills are processed by the Customs solely based on the fact that an IEC is issued to the exporter by the DGFT. Nothing in the Customs Act empowers the Customs officers to stop an ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the officer and physical examination of the goods being exported both of which are done only in selected cases and other cases are facilitated i.e., the export is allowed without any officer either assessing the shipping bill or examining what was actually being exported to ensure that it matches with the shipping Bill. The customs Risk Management System (RMS) decides which shipping bill should be assessed and/or which export consignment must be subjected to physical 25 examination. The National Time Release Study12 by the CBIC reports as follows: 7. Exports - procedure, methodology and scope 7.1 Export procedure requires filing of electronic self-declaration (shipping bill) by exporter before the goods move from exporter s premises. The RMS allows the lowest risk category to be cleared as facilitated without subjecting the cargo to assessment or examination . In this study, facilitation level for shipping bills at seaports/ICDs was seen to be 80%, and at air cargo complexes at 95%. Thus, there is a 80 to 95% probability of a fraudulent export not being detected by the Customs. Even if an exporter is caught and is being investigated for such an export, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk within their mandate which may not include physical verification of the premises of the exporters. Nevertheless, the burden of this very liberal, open, scheme and its potential misuse cannot be put at the doorstep of a Customs Broker. Just as the officer s responsibility ends with doing his part of the job (which may be issuing a registration without physical verification or allowing exports without assessing the documents or examining the goods), the Customs Broker s responsibility ends with fulfilling his responsibilities under Regulation 10 of the CBLR, 2018. In dispute in this case is CBLR 10(n) which, as we have discussed above, does not require any physical verification of the address of the exporter/importer and the appellant has fully met his obligations under Regulation 10(n). 47. To sum up, the only allegation against the appellant in the impugned order is that it violated Regulation 10 (n) which we find is not true. 48. In view of the above, we proceed to answer the questions framed by us in paragraph 4 above. The answer to question (a) is that in the factual matrix of the case and evidence available on record, the Commissioner was not correct in holding tha ..... 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