Failure to conduct physical verification of exporter’s credibility is not, in itself, a ground for suspending license of a customs broker: Delhi HC

According to the Customs Broker Licensing Regulations 2018, Section 10(e) states that the customs broker has a duty to exercise due care to ensure the accuracy of all information provided to a client in relation to work related to the customs clearance of cargo or baggage.

Similarly, Section 10(n) of the Customs Brokers Licensing Regulations, 2018 lays down the obligation of the customs broker to verify the accuracy of Importer Exporter Code Number (IEC), Goods and Services Tax Identification Number (GSTIN), identity of his client and function of his client at the specified address through reliable, independent and authentic documents, data or information.

The Division Bench of Judge Yashwant Varma And Judge Ravinder Dudeja Noted that “The CB would not be in breach of its obligations if it had relied on “reliable, independent, authentic documents, data or information” such as the IEC and GSTIN issued by the Director General of Foreign Trade and the GST officials respectively.“.

Facts:

The complainant was a licensed customs broker and held a separate CB license from the Mumbai Commissionerate. After an investigation into transactions of Fine Overseas for the purpose of fraudulently availing refunds and benefits of Integrated Goods and Services Tax, the Chief Commissioner of Customs ordered withdrawal of the license granted to the complainant under Rule 7(3) of the Customs Brokers Licensing Rules, 2018 and found the complainant guilty of violation of Rules 10(e) and 10(n) of the CBLR, 2018. Further, the CB license belonging to the complainant was suspended and revoked by the Commissioner of Customs.

Supreme Court comments:

The Court noted that after finding that the applicant had facilitated fraudulent exports, CESTAT concluded that the suspension of the applicant’s licence was a “proportionate penalty” even though there was no violation of Regulation 10(e).

The Court explained that suspension is a measure that can be taken by respondents in situations where they consider that immediate action needs to be taken against a CB while the investigation and inquiry under Regulation 16 are completed.

The Court further found that the violation of Rule 10(n) of CBLR 2018 was based on the statement of Zoheb Moin, the authorised representative and manager of M/s Fine Overseas, who had placed on record the official address, lease agreement, importer-exporter code, Goods and Services Tax identification number and annual turnover for the financial year 2017-18 of M/s Fine Overseas and the details of its business operations.

After perusing Regulation 10(n), the court concluded that the CB is not in breach of its obligations by relying on “reliable, independent and authentic documents, data or information” such as the IEC and GSTIN issued by the Director General of Foreign Trade and the GST officers respectively.

Moreover, Regulation 10(n) does not require physical verification of the credibility of the exporter. Therefore, the complainant is not guilty of failing to comply with his obligation under Regulation 10(n) of the CBLR 2018.

The High Court, therefore, found merit in the arguments of the appellant and concluded that the order passed by CESTAT was manifestly erroneous and could not be maintained.

Counsel for the appellant/taxpayer: Pradeep Jain, Shubhankar Jha and Harneet Pushkarna

Counsel for the defendant/tax office: Harpreet Singh, with Suhani Mathur

Case Title: Aradhya Export Import Consultants Pvt Ltd v Commissioner of Customs

Case number: CUSAA 81/2023

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