No CBLR Violation If Customs Broker Verifies KYC and Acts Based on Documents from Intermediary: CESTAT [Read Order]

Bablani Clearing Forwarding & Logistics Co. Pvt. Ltd., the appellant, was a licensed customs broker accused of facilitating fraudulent exports involving fake Factory Stuffing Permissions (FSPs) and forged documents. The customs department alleged that the broker filed shipping bills on behalf of exporters using forged authorizations and documents, which resulted in wrongful availing of export benefits like duty drawback.

The department issued a show cause notice and later revoked the broker’s license, forfeited the security deposit, and imposed a penalty. It argued that the broker did not obtain proper authorization directly from the exporters and failed to verify the legitimacy of the exporting firms, thereby violating Regulations 10(a), 10(d), and 10(n) of the CBLR, 2018.

The appellant’s counsel countered that they had collected all necessary KYC documents, including PAN, IEC, GST registration, and address proof from the intermediary, and had no knowledge of any fraud. The appellant argued that the documents were verified as per CBIC circulars and had been submitted to customs at the time of clearance.

They also submitted that no penalty was imposed under the Customs Act, and the delay of over six years in taking CBLR action raised questions about the fairness of the proceedings. They relied on past CESTAT decisions, including those in K.S. Sawant & Co. and Kunal Travels, which accepted the practice of receiving documents through intermediaries.

The revenue counsel argued that customs brokers must deal directly with the exporter and cannot rely on intermediaries. It stated that the appellant failed to advise clients properly and did not alert authorities about suspicious activities.

The bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that the broker had fulfilled the KYC requirements as outlined in CBIC Circular No. 9/2010, and had verified all essential documents. The tribunal also observed that there was no evidence showing the broker knowingly facilitated fraud, and that reliance on an intermediary was not prohibited under law.

The tribunal found that the customs department itself failed to detect forged documents during clearance and that the customs broker was being unfairly penalized for systemic lapses. It was observed that initiating disciplinary action after more than six years was unreasonable.

Considering that there was no violation of Regulations 10(a), 10(d), or 10(n), the tribunal set aside the order revoking the license and forfeiting the security deposit. The appeal was allowed in favor of Bablani Clearing Forwarding & Logistics Co. Pvt. Ltd.