While deleting a penalty against Customs Broker, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi bench has held that the Regulations does not mandate that the Customs Broker shall physical verify the address of the Client and such verification based on the Government documents including GSTIN was sufficient and any omission on the part of the Client to amend such address on the Government document cannot be attributed to the Customs Broker.
The department issued a notice to the appellants, M/s Mauli Worldwide Logistics alleged that the exporters were non-existent and therefore the shipping bills were filed on their behalf by the appellant without the requisite verification as per Regulation 10(n). on investigation, it was found that these firms never existed at the premises at all and the GST Registrations were issued by the officers to non-existent firms and the officers have also been receiving GST Returns filed by them or that the firms existed originally and later ceased to operate from the premises.
Consequently, the appellants received a notice alleging that the Know Your Client guidelines issued by CBIC Circular no. 9/2010-Customs dated 8.4.2010 were violated by the appellant because it failed to exercise due diligence since a number of exporters have been found to be untraceable.
Allowing the plea of the appellants, a bench of Justice Dilip Gupta, President and Mr. P. Venkata Subba Rao, Member (Technical) observed that “if the importer-exporter code6 issued by the Director General of Foreign Trade7 is wrongly issued to non-existent businesses and entities, the appellant cannot be blamed for trusting the IEC issued by the DGFT. Similar is the case with respect to other documents such as PAN card (issued by the Income Tax Department), Driving Licence (issued by the Transport Department), Voter ID (issued by the Election Commission). When a document is issued by a Government authority, it is reasonable to presume it to be valid. It is not open to the appellant to question the issue of these documents and as a Customs Broker to sit in judgment over the decisions of these officers. If the verification reports are true and none of the exporters existed at their premises, the irresistible conclusion is that all these officers of various departments have been either extremely careless or were operating under flawed systems which allowed documents to be issued to non-existing businesses.”
“It is undisputed that the GSTIN, PAN, IEC, and other documents obtained by the appellant as a part of the KYC were genuine documents and were issued by the officers concerned. In our considered view, if the GSTIN is issued by the officers to persons who did not exist at the time of verification it could mean that the officers have issued GSTIN to non-existent firms or that they had subsequently either stopped operating from that address or that they had moved from that place and have not changed the address. In any of these scenarios, if the GSTIN was issued by the departmental officers to such a large number of non-existent persons, it shows either the lack of any due diligence on the part of the officers or an inherently flawed system of issuing GSTIN. The appellant cannot be faulted for trusting the GSTIN issued by the department,” the Tribunal said.
Deleting the penalty order, the Tribunal added that “We find that Regulation 10(n) requires 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. This responsibility does not extend to physically going to the premises of each of the exporters to ensure that they are functioning at the premises. When a Government officer issues a certificate or registration with an address to an exporter, the Customs Broker cannot be faulted for trusting the certificates so issued.”
Shri L.B. Yadav, Consultant appeared for the appellants.
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