Failure To Carry Out Physical Verification Of Veracity Of Exporter Alone Is No Basis To Suspend License Of Custom Broker: Delhi HC

The Delhi High Court held that a custom broker cannot be held guilty of having failed to discharge the obligation placed in terms of Regulation 10(n) of CBLR 2018, simply because he has not carried out physical verification of the veracity of the exporter. As per the Customs Brokers Licensing Regulations, 2018, Section 10(e) states about the obligation of the Custom Broker 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. Similarly, Section 10(n) of the Customs Brokers Licensing Regulations, 2018 states about the obligation of the Customs Broker to 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. The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja Observed that “the CB would not be in violation of its obligations if he has relied on “reliable, independent, authentic documents, data, or information” such as the IEC and GSTIN which are issued by the Director General of Foreign Trade and GST Officers respectively”. Facts of the case: The appellant was a licensed Customs Broker as well as held a separate CB License issued by the Mumbai Commissionerate. Upon an investigation regarding transactions undertaken by M/s Fine Overseas for fraudulently availing Integrated Goods and Services Tax refund as well as drawbacking benefits, the Principal Commissioner of Customs directed the withdrawal of permission granted to the appellant in terms contemplated under Regulation 7(3) of Customs Brokers Licensing Regulations, 2018 as well as held the appellant guilty of infraction of Regulations 10(e) and 10(n) of CBLR 2018. Further the CB License held by the appellant was suspended by the Commissioner of Customs which was further revoked. Observations of the High Court: The Bench noted that the CESTAT upon finding that the appellant had facilitated fraudulent exports proceeded to observe that suspension of the license of the appellant was a “proportionate penalty” even though there was no violation of Regulation 10(e). The Bench stated that suspension is a measure which can be adopted by the respondents in situations where they are of the opinion that immediate action is required to be taken against a CB pending investigation and inquiry as is contemplated under Regulation 16. The Bench further noted that for violation of Regulation 10(n) of the CBLR 2018 was based upon the statement of Zoheb Moin, the authorised representative and manager of M/s Fine Overseas who had placed on record the official address, rent agreement, Importer Exporter Code, Goods and Services Tax Identification Number and the annual turnover for Financial Year 2017-18 of M/s Fine Overseas as well as well as the details pertaining to its business activities. From perusal of the Regulation 10(n), the Bench found that the CB would not be in violation of its obligations if he has relied on “reliable, independent, authentic documents, data or information” such as the IEC and GSTIN which are issued by the Director General of Foreign Trade and GST Officers respectively. Furthermore, Regulation 10(n) does not necessitate a physical verification of the veracity of the exporter. Hence, the appellant is not guilty of having failed to discharge the obligation placed in terms of Regulation 10(n) of CBLR 2018. Therefore, finding merit in the contentions of the appellant, the High Court held that the order passed by the CESTAT is patently erroneous and cannot be sustained. Counsel for Appellant/ Assessee: Pradeep Jain, Shubhankar Jha and Harneet Pushkarna Counsel for Respondent/ Revenue: Harpreet Singh, with Suhani Mathur Case Title: Aradhya Export Import Consultants Pvt Ltd Verses Commissioner Of CustomsCitation: 2024 LiveLaw (Del) 848 Case Number: CUSAA 81/2023 Click here to read/ download the Judgment

Failure To Carry Out Physical Verification Of Veracity Of Exporter Alone Is No Basis To Suspend License Of Custom Broker: Delhi HC

Pankaj Bajpai

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