Custom, Excise & Service Tax Tribunal
United Cargo Services vs New Delhi -Airport And General on 19 May, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH -COURT NO. 4
Customs Appeal No. 52335 of 2024
(Arising out of Order-in-Original No. 66/VPS/POLICY/2024 dated 11.11.2024
passed by the Commissioner of Customs (Airport & General), New Delhi)
M/s United Cargo Services Appellant
Through its Proprietor Shri Mohd. Aslam Choudhry,
2085/X, Ganj Meer Khan,
Asaf Ali Road, New Delhi-110002.
Versus
Commissioner of Customs (Airport & General) Respondent
New Delhi New Custom House, Near IGI Airport, New Delhi-110037.
Appearance:
Present for the Appellant: Shri Ritaj Kacker, Advocate Present for the Respondent: Shri M.K. Shukla, Authorized Representative CORAM:
Hon'ble Dr. Rachna Gupta, Member (Judicial) Hon'ble Mr. P.V. Subba Rao, Member (Technical) Date of Hearing : 21/02/2025 Date of Decision : 19/05/2025 Final Order No. 50735/2025 Dr. Rachna Gupta:
M/s United Cargo Services 1 is a Customs Broker having license valid up to 11.03.2022 issued by Commissioner of Customs (Airport & General), New Customs House, New Delhi. It is aggrieved by the Order-in-Original dated 11.11.2024 (Impugned Order) by which its Customs Broker Licence was revoked, its security deposit is forfeited and a penalty of Rs. 50,000/- is 1 the appellant 2 C/52335/2024 imposed on it. Appellant filed Shipping Bill No. 2510760 dated 17.07.2023 and 2487254, 2487256, 2487257 all dated 15.07.2023 for export of Read Made Garments (RMG) to UAE. On the basis of an alert received from NCTC the goods covered under the above mentioned Shipping Bills were put on hold for examination by the officers of Customs (Preventive), New Customs House, New Delhi.
The NCTC in its e-mail dated 19.07.2023 provided the details of major suppliers of the exporter. The goods were found on examination to be in accordance with declaration in respect of the quantity. The goods were placed under detention in terms of Section 110 of the Customs Act, 1962, vide detention memo dated 25.07.2023. Physical verification of registered premises of M/s S.S. Enterprises 2 , was conducted under a search authorization issued by the Assistant Commissioner wherein the firm was found non-functional at its declared place of business. The supply Chain of the exporter was also found dubious as most of the suppliers, GST Registrations were either suspended or cancelled suo moto and the exporter was found non-existent at its registered place of business. Thus, the department formed an opinion that the exporter is engaged in just paper transactions to defraud the Government exchequer by claiming export benefits based on fake invoices. It was alleged that the exporter attempted improper export of goods, to avail undue export benefits such as drawback, RoSCTL and IGST refund on strength of purchase invoices issued by non-existent/fake/suppliers. It was felt that by their act of willful mis-statement, the exporter has made himself liable for penalty under Section 114(iii) & 114AA of the Customs Act, 1962. The 2 the exporter 3 C/52335/2024 detention memo dated 25.07.2023 later was converted into seizure as the goods were found liable for confiscation under Section 113 of the Customs Act, 1962 and Seizure Memo dated 18.12.2023 was issued to the exporter. Statements of all concerned such as the exporter, Customs Broker etc. were recorded. It was found based on the statement of Shri Sunil Dixit, G-Card CB No. R-22/2032 Customs Broker M/s United Cargo Services that the Customs Broker failed to fulfill its obligations, hence rendered themselves liable for penalty under Section 117 of the Customs Act. 1962. With these observations, by Order-in-Original bearing No. 21/2024 dated 08.03.2024 the CB license of the appellant was suspended in terms of Regulation 16 of Customs Broker Licensing Regulations, 2018.
2. In view of above facts, prima facie, it appeared to the department that the Customs Broker M/s United Cargo Services had violated provisions of the Customs Brokers Licensing Regulations, 2018 as they had facilitated customs clearance of the overvalued export of goods and also that the exporter of these consignments was non-functional/non-existent at the declared address. The exporter also did not appear before the investigating agency despite issue of summons dated 01.08.2023, 30.10.2023 and 16.11.2023. Further during physical verification, the residential address of Shri Santosh Sharma, proprietor of M/s SS Enterprises (Exporter) was found incomplete/not traceable. Based thereupon the Show Cause Notice bearing No. 17/2024 dated 21.05.2024 was served upon the appellants alleging contravention of provisions of Regulation 10(d), 10(c) and 10(e) of Customs 4 C/52335/2024 Broker Licensing Regulations, 2018 and proposing revocation of the CB licences along with forfeiture in terms of Regulation 10 read with Regulation 17 of CBLR, 2018. Penalty was also proposed to be imposed on them under the provisions of Regulation 18 of CBLR, 2018 read with Regulation 17 of CBLR, 2018. The said proposals have been confirmed vide Order-in-Original No. 66/2024 dated 11.11.2024. Being aggrieved the appellant is before this Tribunal.
3. We have heard Shri Ritaj Kacker, learned counsel for the appellant and Shri M.K. Shukla, learned Authorized Representative for Revenue.
4. Learned counsel for the appellant submitted that the appellant is alleged to have failed to fulfill its obligation under CBLR only on the ground that the exporter was found non-traceable at his declared place of business. A perusal of Regulation 10(n) as has been invoked, makes it amply clear that the CB is obligated 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, date or information. It is submitted that it is a settled law that the responsibility of a Customs Broker under Regulation 10(n) does not include keeping a continuous surveillance on the client to ensure that he continues to operate from that address and that he has not changed his operations. Reliance is placed on the judgment passed in the matter of M/s Bright Clearing & Carrier Private Limited Vs. Commissioner of Customs (A&G) and Star Carriers Vs. 5 C/52335/2024 Commissioner of Customs (A&G)3 wherein it has been held that it is not the responsibility of the Customs Broker to physically inspect the premises of each of its client to ensure that he is operating from the said address. It has been held that it is far to onerous for the CB to fulfill such a responsibility. Learned counsel relied upon another decision in case of International Cargo Services Vs. Commissioner of Customs (Export), New Delhi4 and M/s Satwin Shipping Agency Vs. Commissioner of Customs (General), Mumbai 5 which states that physical verification is not required to be done by CHA. Accordingly, it is submitted that the adjudicating authority has failed to even abide by the case laws rendered by Hon'ble Courts and this Tribunal.
5. It is further submitted that the show cause notice further alleges that the CB have facilitated the shipping bill on behalf of the exporter M/s SS Enterprises by mis-declaring the value of the goods. It is submitted that the show cause notice is very vaguely attracting the violation of Regulation 10(d) and 10(e) on account of having facilitated shipping bills, which are pending adjudication, on behalf of the exporter. Reliance is placed on the decision of Hon'ble Delhi High Court in the case of Kunal Travels (Cargo) Vs. CC (I&G), IGI Airport, New Delhi6.
6. Learned counsel also submitted that the SCN is not clear about the content of allegation against the appellant and the same cannot be treated as even and offence report which is the mandatory requirement for initiation of any action against the 3 2022 (11) TMI 935 - CESTAT NEW DELHI 4 2015 (333) ELT 206 (Tri.-Del.) 5 2010 (250) ELT 141 (Tri.-Mumbai) 6 2017 (354) ELT 447 (Del.) 6 C/52335/2024 custom broker. Hence initiation of action against the appellant is contrary to the provisions of the CBLR, 2018 and therefore, liable to be dropped on this ground itself. It is further submitted that the power of suspension which impacts the livelihood of the Customs Broker and his employees is required to be exercised with caution and in accordance with the inbuilt safeguards to prevent arbitrary use of power. The appellant relied upon the judgments of this Tribunal in A.S. Vasan & Sons Vs. Principal Commissioner of Customs (General), Mumbai 7 and R.S Kandalkar & Co. Vs. Commissioner of Central Excise, Mumbai8 which categorically lay down that the suspension of the license of a Custom Broker is not sustainable where there is no urgent need for the same. Learned Commissioner failed to appreciate the fact that in the present case the last export for which shipping bill was filed by the petitioner was of July, 2023 and the suspension order has been issued on 08.03.2024 after almost 9 months of filing the last shipping bill. Accordingly, the appellant prayed the suspension of the CB license of the appellant be revoked on the said ground of lack of any urgency. Appeal is prayed to be allowed.
7. While rebutting these submissions, learned Departmental Representative mentioned that the Customs Broker's actions demonstrate clear violations of Regulations 10(d), 10(e) and 10(n) of the CBLR, 2018. The CB facilitated fraudulent transactions by a non-existent exporter, thereby attempting to defraud the government exchequer. It is further submitted that the purpose of licensing a customs broker is to ensure responsible representation 7 2018 (362) ELT 272 (Tri.-Mumbai) 8 2014 (299) ELT 360 (Tri. - Mumbai) 7 C/52335/2024 of importers/exporters while adhering to rules and regulations. The broker's failure to fulfill his obligation indicates a breach of trust and responsibility. Learned Departmental Representative impressed upon that with respect to role and responsibilities of customs broker or agent- "there is no second opinion to the fact that CHA is a very important component in the whole system of customs administration, which has a major bearing on Customs revenue collection and national security. The CHAs cannot shy away from the responsibilities and obligations casted upon them by law as has been held by Tribunal. CESTAT in Baraskar Brothers Vs. Commissioner of Customs (General), Mumbai 9 . It is evident that Customs broker has a dual role to play- to ensure that rules and procedures are followed as well as to facilitate trade in a transparent and lawful manner.
8. In the present case a large number of consignments being handled by the CB were prima facie found to have been exports by non existent exporters. This is a grave act of misdemeanor on the part of the CB and a lenient view, mooted on the ground of loss of livelihood, in this regard may lead to further proliferation of other agents/brokers who are hand in glove with fraudsters. Decision of the Hon'ble Supreme Court in Commissioner of Customs Vs K.M. Ganatra10 is relied where the Court had held that: "the CHA occupies a very important position in the Customs House. The Customs procedures are complicated. The importers have to deal with a multiplicity of agencies viz. carriers, custodians like BPT as well as the Customs. The importer would find it impossible to clear 9 2009 (244) ELT 562 10 2016-TIOL-13-SC-CUS 8 C/52335/2024 his goods through these agencies without wasting valuable energy and time. The CHA is supposed to safeguard the interests of both the importers and the Customs. A lot of trust is kept in CHA by the importers/exporters as well as by the Government Agencies. To ensure appropriate discharge of such trust, the relevant regulations are framed Regulation 14 of the CHA Licensing Regulations lists out obligations of the CHA. Any contravention of such obligations even without intent would be sufficient to invite upon the CHA the punishment listed in the Regulations.........." We approve the aforesaid observations of the CEGAT, West Zonal Bench, Mumbai and unhesitatingly hold that this misconduct has to be seriously viewed"
9. In the light of above submissions and decisions cited, learned Departmental Representative prayed that this appeal dismissed and impugned order passed by the adjudicating authority may be upheld.
10. Having heard the rival contentions and perusing the record, we observe and hold as follows:
11. The proceedings originated from Show Cause Notice (SCN) No. 11/2024 dated 22.02.2024, issued by the Additional Commissioner of Customs, SIIB, ICD Tughlakabad (Export), following an alert from the NCTC regarding three shipping bills dated 15.07.2023, following observations was made:
(i) Physical examination of the goods by Customs Preventive officers on 25.07.2023 revealed discrepancies.9
C/52335/2024
(ii) Registered premises of M/s SS Enterprises, the exporter, were found non-functional;
(iii) Suppliers of the exporter were suspended or had canceled registrations, a dubious supply chain.
(iv) The exporter was found engaged in paper transaction to claim fraudulent export benefits. SCN No. 11/2024 proposed confiscation of goods, denial of export incentives, and imposition of penalties under the Customs Act, 1962. M/s United Cargo Services (Customs Broker) was also implicated for violations under the Customs Brokers Licensing Regulations (CBLR), 2018. Vide the impugned show cause notice dated 20.05.2024 alleged violation of Regulation 10(d), 10(e) and 10(n) of CBLR, 2018, by the appellant.
As impressed upon by learned Departmental Representative, the CB, as an intermediary, holds a fiduciary responsibility to ensure compliance with laws and regulations. Breach of trust and negligence in fulfilling regulatory obligations undermine the CB's role in maintaining trade integrity and government revenue.
12. We now examine the case Regulation wise as follows:
Regulation 10(d): advise his client to comply with the provisions of the Act, other allied Acts and the rules and regulations thereof, and in case of non-compliance, shall bring the matter to the notice of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be:
Regulation 10(e) exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any work related to clearance of cargo or baggage:10
C/52335/2024
13. We observe that the show cause notice further alleges that the CB have facilitated filing of shipping bills on behalf of the exporter M/s SS Enterprises by mis-declaring the value of the goods. Nothing in the Customs Act or the Customs Valuation Rules or the CBLR gives the Customs Broker any power to examine the goods or assess their value. The value of goods has to be self- assessed by the exporter or re-assessed by the officer. The role of Customs Broker is confined to filing the Shipping Bills correctly as per the documents provided to him. We also observe that the show cause notice is too vague to allege violation of Regulations 10(d) and 10(e). There is no evidence in the show cause notice and the suspension order, about the duties which has not been fully complied with by the appellant. The confirmation of proposal of such show cause notice cannot sustain. We draw our support from the decision of Hon'ble Delhi High Court in the case of Kunal Travels (Cargo) (supra), wherein it is held that clause 10(e) of the CB Regulation, 2018 requires exercise of due diligence by the CHA regarding such information which he may give to his client with reference to any work related to clearance of cargo. In the present show cause notice there is no mention of any such information which was to be parted with the exporter. Clause (d) requires that all documents submitted, such as bills of entry and shipping bills delivered etc. reflect the name of the importer/exporter and the name of the CHA prominently at the top of such documents. The aforesaid clauses do not obligate the CHA to look into such information which may be made available to it from the exporter/importer. The CHA is not an inspector to weigh 11 C/52335/2024 the genuineness of the transaction. It is a processing agent of documents with respect to clearance of goods through customs house and in that process only such authorized personnel of the CHA can enter the customs house area. That the allegations made against the Appellant / Customs Broker that the CB have facilitated the Shipping Bills on behalf of the exporter M/s SS Enterprises by mis declaring the value of the goods, did not bring the non- compliance of the provisions of the CBLR, 2018 and therefore, the same does not attract violation of Regulation 10(d) and 10(e) of CBLR, 2018. Regulation 10(n) is reproduced below:
"10- Obligations of a Customs Broker
(n) 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, date or information."
This Regulation requires to CB 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. The CB in his defence reply dated I3.06.2024 and also in his statement has simply admitted that the CB is obligated 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. So long as the CB can find documents which are independent, reliable and authentic to 12 C/52335/2024 establish the identity of his client, this obligation stands fulfilled. In addition, under Regulation 10(n) the Customs Broker is required to verify the functioning of the client at the declared address using reliable, independent, authentic documents, data or information. This responsibility again, can be fulfilled using documents or data or information so long as they are reliable, independent and authentic. Nothing in this clause requires the Customs Broker to physically go to the premises of the client to ensure that they are functioning at the premises.
14. Further we also draw support from the decision in the matter of M/s Bright Clearing & Carrier Private Limited (supra) and Star Carriers (supra) wherein it has been held that it is not the responsibility of the Customs Broker to physically inspect the premises of each of its client to ensure that he is operating from the said address. It is held that it is far to onerous for the CB to fulfill such a responsibility. This Tribunal also in the matter of M/s. Setwin Shipping Agency (supra) held that the Customs House Agent (now known as customs broker) need not verify the genuineness physically of the exporter/importer. That further even the Hon'ble Delhi High Court in the case of Commissioner of Customs Vs. Yogesh Kumar11 had again reiterated the aforesaid interpretation that the CHA was not under any obligation to physically verify the particulars. The appellant had verified the necessary KYC documents viz. IEC of the importer, bank signed authorization and their GSTIN certificate. All the said certificates were found to be valid and existing. From the above discussion, it 11 2017 (349) ELT 12 (Del.) 13 C/52335/2024 is clear that there is no such evidence on record which may prove prior knowledge with the appellant about the declarations in the documents provided by the exporter and that those were mis- declarations. As such from the facts on record, it is concluded that the appellant M/s United Cargo Services (PAN ACYPC7426N) has followed the provisions of Regulation 10(d) and 10(e) of CBLR, 2018 and no contravention of the provision of this regulation is established.
15. We have also perused the inquiry report in reference to impugned show cause notice dated 21.05.2024 that inquiry officer in the detailed report dated 16.08.2024 has meticulously considered the entire factual matrix has concluded that the CB, M/s United Cargo Services has not violated Regulations 10(d), 10(n) and 10(q) of the Customs Brokers Licensing Regulations, 2018. The adjudicating authority has not cited any plausible reason while concluding contrary to said inquiry report. We do not see any reason to differ from the findings of the enquiry officer. Hence we hereby set aside the order under challenge. Consequent thereto, the appeal is allowed.
(Pronounced in open Court on 19.05.2025) (Dr. Rachna Gupta) Member (Judicial) (P.V. Subba Rao) Member (Technical) RM