The Delhi High Court has quashed the order revoking the customs broker’s licence and held that it is not necessary for the custom broker to keep continuous surveillance at the exporter’s physical address.
The bench of Justice Vibhu Bakhru and Justice Swarana Kanta Sharma has observed that the KYC documents are required to be obtained at a time when a particular entity is onboarded as a client of the Custom Broker. It is also necessary for the Custom Broker to periodically verify the same. Plainy, the rent agreement and the electricity bill could not be considered to be stale or were required to be disbelieved.
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Background – Order Revoking Customs Broker Licence
The respondent is a Custom Broker and had filed the aforesaid appeal before the CESTAT challenging the order by which it’s Customs Broker License, was revoked. In addition, the Commissioner of Customs (CoC) had also imposed a penalty of ₹50,000.
The punitive action was taken by the CoC on account of certain exports facilitated by the respondent which were made by the exporters, who are allegedly found to be non-existent at their principal place of business.
The Directorate General of Analytics and Risk Management (DGARM) analysed the data available with it and identified certain persons whose registration under Central Goods and Services Tax Act, 2017/State Goods and Services Tax Act, 2017 appeared to be suspicious.
Physical verification of the tax payers was conducted and it was found that some of the taxpayers or persons registered under the CGST Act/SGST Act were not in existence at their declared place of business.
Some of these taxpayers had been issued Importer Exporter Codes (IEC) by the Directorate General of Foreign Trade (DGFT) and goods had been exported in their names. DGARM also identified the Custom Brokers that had facilitated the export goods from such persons and forwarded the data to the Customs Authorities.
The respondent was identified as one of the Custom Brokers, who had facilitated export of goods from such a person, who although registered under the CGST Act/SGST Act was found to be non-existent at its declared place of business.
Based on the information, a Show Cause Notice was issued to the respondent and an enquiry was conducted.
The Custom Broker’s license was suspended with effect from 13.02.2023. The order of suspension of licence was confirmed on 02.03.2023.
The CoC found that the respondent had fallen foul of complying with Section 10(n) of the Customs Broker Licencing Regulation, 2018 (CBLR).
The CESTAT examined the controversy and found that the respondent had taken reasonable steps to verify that M/s Shree Enterprises was functioning at the given address at the material time. The learned CESTAT noted that none of the documents, which were produced by the respondent were found to be forged or fabricated.
Customs Broker’s Arguments – Order Revoking Customs Broker Licence
The customs broker contended that it had performed its functions diligently and had obtained the KYC documents from the concerned exporter namely M/s Shree Enterprises. However, the CoC found to the contrary and held that the respondent had not collected the relevant KYC documents as required. Accordingly, the CoC proceeded to pass the order originally dated 17.10.2023, revoking the respondent’s licence.
The customs broker had obtained documents such as partnership deed, rent agreement from 02.01.2020 to 01.12.2020, electricity bill, PAN number of the constituent partners of M/s Shree Enterprises, and the registration deed of M/s Shree Enterprises.
The customs broker contended that it had obtained the necessary documents for verifying that M/s. Shree Enterprises was extant at the declared place of business. The respondent claimed that it had physically verified the existence of the exporter. However, the CoC faulted the respondent, essentially, on the ground that the respondent had not physically verified the premises of the said exporter (M/s Shree Enterprises) prior to the export of the goods in question.
The CoC examined the documents produced by the respondent and observed that “there is sufficient indication that the so-called business address was dis-functioning and the claims that the Custom Broker physically verified the address are false”. The respondent was also faulted for not producing any telephone bills.
Conclusion – Order Revoking Customs Broker Licence
The court held that the documents evidencing the issuance of IEC as well as the registration under the CGST Act/SGST Act (allocation of Goods and Service Tax Identification Number – GSTIN) were undeniably documents, which emanated from the government authorities and therefore, the respondent cannot be faulted in relying upon the same.
The court ruled that the documents such as the rent agreement and the electricity bill that were collected by the respondent from the entity in question and furnished to the CoC, are genuine documents. There are no allegations that the documents are forged or fabricated.
The court, while quashing the order, dismissed the customs department’s appeal.
Read More: Customs Dept’s Re-Determination Of Classification Of Imported ECU Not Legal: CESTAT
Case Details
Case Title: Commissioner Of Customs (Airport And General) New Delhi Versus M/S Shakti Cargo Movers
Case No.: CUSAA 82/2024 & CM APPL. 63876-77/2024
Date: 29.10.2024
Counsel For Appellant: Aditya Singla
Counsel For Respondent: Piyush Kumar
