CESTAT upholds Order imposing Severe Penalty on CHA Company & Director for not following KYC Norms [Read Order]


The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Delhi has upheld the order of the adjudicating authority imposing Penalty on the CHA Company & Director for not complying with the KYC norms.

In the instant case, the DRI initiated an investigation against the appellant, a CHA Company on the basis of the report received from the Jewellery Expert that the Company was involved in the case of overvaluation of the import consignment.

It was alleged that the appellants failed to verify the KYC norms under the CHALR, 2004 and therefore, a Show Cause Notice bearing No. 33A/XI/32/2013-CI(NEO)/428 dated 29.1.2015 was issued to them asking as to why penalty should not be imposed on them under Section 112(a) & (b), (iii) and (iv) and under Section 114AA of the Customs Act. Subsequently, the adjudicating authority imposed a penalty of Rs. 10 lakhs on the Company and Rs. 5 lakhs on Appellant on the Director.

On the second appeal, the Tribunal noted that “It is seen from the adjudication order that the declared residential premises of Shri Uday Bhagat and Shri Sunder Prakash Sharma, the Directors of M/s Neotex Exim Pvt. Ltd. that they were not residing at the declared premises. The adjudicating authority also found that the IEC of the importer revealed that no firm/business enterprises in the name of M/s Neotex Exim Pvt. Ltd. existed at the given address and the enquiries conducted at the declared residential premises revealed that the said address was incomplete or fictitious.”

“Under the circumstances, we are in agreement with the finding of the ld. Adjudicating authority that CHA helps not properly verified the functioning of the client from at the declared address by using reliable independent and authenticate documents. This was a serious lapse on part of the CHA in verifying the KYC before taking up the Customs clearance of consignment of rough diamond imported by M/s Neotex Exim Pvt. Ltd. The appellants, considering the nature of the imported goods i.e. rough diamond, would have exercised more vigilant approach before taking up the consignment for Customs clearance after verification of KYC norms of the importer, which has not been done in this case. It is stated by the ld. Advocate that the order of the adjudicating authority has failed to discuss the various case law and their relevance in the case at hand. We find that the adjudicating authority has dealt with each and every case law cited by them at length and concluded that those are not relevant in the fact and circumstances of the present case,” the Tribunal said.

To Read the full text of the Order CLICK HERE