The Delhi bench of the Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that mere non-traceability of an exporter by itself does not amount to a violation of regulation 10 (n) of Custom Brokers under Regulation ( CBLR ), 2018.
The DGARM ( Directorate General of Analytics and Risk Management ), CBIC sent a communication identifying risky exporters involved in fraudulent IGST refunds, who were not traceable, along with the details of Customs Brokers involved in the clearance of the alleged risky consignments. It was noted that World Line Cargo Movers, the appellant had handled the consignments of 48 risky exporters whose premises could not be verified physically or were untraceable.
Based on the reports received, the jurisdictional Commissioner alleged that the appellant had violated the provisions of CBLR, 2018 by not following the KYC guidelines. The CB license was suspended and thereafter, the inquiry as mandated was conducted. The impugned order was passed ordering for revoking the license, forfeiture of deposit and imposition of penalty.
The Counsel for the appellant submitted that no relied-upon documents such as the DGARM report were shared with the appellant, thereby violating the principles of natural justice. The counsel further contended that with the introduction of GST, no Shipping Bill can be processed without the valid GSTIN being mentioned on the shipping Bill. As regards IGST refunds, he contended that the same are automatically credited to the account of the exporter which is registered via AD code with the Department, which also requires extensive documentation.
The mere non-traceability of the exporters in itself is no basis to assume that the exports were fraudulent and were not eligible for IGST refund. The counsel further submitted that there is no evidence in the Show cause notice, Inquiry report or the impugned order to substantiate that the exports were incorrect or illegal, nor that there any error in the documentation.
Further submitted that Regulation 10(n) of CBLR, 2018 mandates the CB to verify the identity of the importer by way of independent documentation. The appellant cannot be held responsible for the exporters not being traceable as all necessary documents to ascertain the veracity of the exporter had been undertaken none of the documents is found to be false or forged.
It was contended that the mere Non- traceability of an exporter by itself does not lead to any conclusion that the appellant had violated the provisions of Regulation 10(n) of the CBLR 2018. There was no requirement under the CBLR, 2018 for a CB to make a visit to the business premises of the exporter to verify its functioning.
A division bench comprising of Ms Binu Tamta, Member ( Judicial ) and Ms Hemambika R Priya, Member ( Technical ) viewed that Regulation 10(n) of CBLR cannot be read to mean the latter as it would imply treating the Customs Broker as one who is competent and responsible to oversee and ensure the correctness of the actions by the Government officers. It would also mean that actions by the Customs Broker under the CBLR prevail over the actions by officers under the Foreign Trade ( Development and Regulation ) Act, 1992 ( under which the IEC is issued by DGFT ) and the Central Goods and Services Tax Act ( or state GST Act ) ( under which the GSTIN is issued by the GST officers ).
The CESTAT set aside the impugned order revoking the Customs Brokers license of the appellant, forfeiting their security deposit and further imposing a penalty on the appellant.
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