The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) while quashing the penalty of Rs. 50,000 on the customs broker, held that the Customs Broker cannot be expected to act as an investigating agency and go beyond his obligations of KYC Verification of his client.
The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya, (Technical Member) has observed that it is highly improper to impose a burden on the Customs Broker to verify who is the actual beneficiary in a transaction.
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Background
The investigation was initiated by the Customs Preventive, New Delhi following an alert from the National Customs Targeting Centre (NCTC) regarding a high-risk import by M/s.Aparna Overseas under Bill of Entry No.3742746 dated 14.12.2022.
The consignment was declared as “PP Regrind”. However, upon examination, it was found to contain mis-declared and prohibited goods, including “E-Cigarettes” concealed with the declared goods.
The consignment was imported under the Importer Exporter Code (IEC) of M/s. Aparna Overseas, but Shri Ashok Kumar was identified as the actual beneficiary.
The appellant was the Customs Broker filed the Bill of Entry for this consignment. It was alleged that the Customs Broker failed to fulfill its obligations under Regulation 10(n) of the Customs Broker Licensing Regulation, 2018 (CBLR 2018), as they did not verify the antecedents of KYC of the actual beneficiary, Ashok Kumar, who was handling the import in place of the declared importer, Aparna Overseas.
A show cause notice was issued to the Customs Broker proposing the revocation of their Customs Broker License, forfeiture of security deposit, and imposition of a penalty under CBLR, 2018.
The Inquiry Officer in his report concluded that the Customs Broker had failed to conduct due diligence regarding the actual beneficiary of the consignment. The Inquiry Officer found that the Customs Broker, despite knowing that Ashok Kumar was the actual beneficiary of the consignment, did not obtain proper authorization or KYC documentation for him.
The Customs Broker only dealt with Shri Ashok Kumar and failed to verify his credentials, which was a violation of Regulation 10(n) of CBLR, 2018.
The Adjudicating Authority by the impugned order concluded that although the CB had completed the KYC verification for the importer, they failed to take proper steps to verify the identity and authorization of Shri Ashok Kumar, who was acting as the beneficiary of the consignment.
The case highlights the failure of the Customs Broker to fulfil their obligation under Regulation 10(n) of CBLR, 2018, by not verifying the beneficiary’s credentials. and other mitigating factors, the penalty imposed was limited to Rs.50,000/- and neither the licence was revoked nor security was forfeited.
The appellant has filed the appeal before the Tribunal.
Arguments
The customs broker contended that Customs Broker did not contravene the provisions of Regulation 10(n) as they produced the KYC documents along with authorization from the importers and also all other documents required in that regard.
The Customs Broker had verified the address of the importer and met the importer and also the KYC documents were duly verified. At the time of investigation, the importer was available at all times. The Customs Broker having duly fulfilled his obligations cooperated with the Department, therefore, the penalty imposed is unsustainable.
The Customs Broker contended that he has acted with due diligence about the importer as far as the KYC formalities are concerned.
The department contended that the Customs Broker did not obtain any authorization from M/s. Aparna Overseas (Importer) for Ashok Kumar or verify his KYC details. No interference is called for in the order as the punishment imposed is absolutely appropriate. In the facts of the case, imposing only the penalty of Rs.50,000 and dropping the proposal for revocation of the licence and the forfeiture of the security cannot be found to be faulty.
Relevant Provisions
Regulation 10(n) of the CBLR states that a customs broker shall verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN), identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information.
Conclusion – KYC Verification
The tribunal noted that the Customs Broker complied with the obligations as per Regulation 10(n) and thereby acted with due diligence. Consequently, there is no contravention of the Regulation 10(n) of the CBLR.
The tribunal quashed the order in so far as it imposed the penalty of Rs.50,000 on the Customs Broker.
Read More: Kerala High Court Upholds Rs. 1 Lakh Penalty For Non-Declaration In Form 8FA Under KVAT Act
Case Details
Case Title:M/s. Mahavir Logistics Versus Commissioner of Customs
Case No.:Customs Appeal No.50446 of 2024
Date: 15.10.2024
Counsel For Petitioner: T. Chakrapani
Counsel For Respondent: Girijesh Kumar
