Customs brokers not liable for exporter overvaluation absent evidence of knowledge or collusion; document-based KYC suffices without physical verification; no duty to independently assess goods value.

PER : M.M. PARTHIBAN

These appeals have been filed by M/s Horizon Cleford Private Limited, Mumbai (herein after, referred to as ‘the appellants’ for short) assailing the Order-in-Original CAO No.26/CAC/PCC(G)/SJ/CBS-Adj. dated 19.07.2024 (referred together as ‘the impugned orders’) passed by the Principal Commissioner of Customs, New Custom House, Mumbai.

2.1. Briefly stated, the facts of the case are that the appellants herein is a Customs Broker (CB) holding a regular CB license issued by the Mumbai Customs under Regulation 7(2) of Customs Brokers Licensing Regulations (CBLR), 2018. An offence report in the form of Order-in-Original CAO No. ADC/MKS/104/2023-24 Adj.(X) ACC dated 23.12.2023 received in Customs Brokers (CB) Section, New Custom House (NCH), reporting violation of CBLR, 2018. Preliminary investigation revealed that three Shipping Bills (S/Bs) No. 8986426, 8986316 and 8986318, all dated 19.11.2018, was filed by an exporter M/s Jamilar International Private Limited, New Delhi, a merchant exporter with higher/inflated prices of export goods viz. ‘USB cables’ with an intention of availing ineligible IGST refunds/benefits. These shipping bills were filed through the appellant CB at the Air Cargo Complex, Mumbai declaring over valued prices with the sole intention of availing substantially higher ineligible IGST refunds.

2.2 Further, physical verification about the business premises of the exporter M/s Jamilar International Private Limited revealed that they were not traceable and the summons issued could not be delivered, and the exporter did not participate in the investigation. The market survey conducted by the Customs investigation agency redetermined value of all the three shipping bills as per Customs (Determination of Value of Export Goods) Rules, 2007 at Rs.28,08,000/- as against the declared value of Rs.2,18,02,500/-. Thus, it appeared that as against the actual IGST refund of Rs.1,68,480/- eligible to the exporter, they had claimed substantially higher amount of Rs.13,08,150/- in a fraudulent manner. Further, the investigation also indicated that there were also certain past exports through four S/Bs, in which higher IGST refunds had already been sanctioned to the exporter M/s Jamilar International Private Limited for an amount of Rs.47,89,332/-. As against the summons issued to exporter, Shri Devendra Kumar Yadav, General Manager participated in the investigation proceedings and gave his statement dated 05.12.2024; further, statements were recorded from other persons concerned including the Shri Nilesh Desai, employee of appellants CB. From the above investigation, it was alleged by the department that the appellants CB firm had played the role of facilitating such exports by mis-use of documents with the intention of availing undue IGST refunds and other export incentives in a fraudulent manner.

2.3 On the above basis the jurisdictional Principal Commissioner of Customs (General), Mumbai-I had concluded that there is a prima facie case against the appellants for having contravened Regulations 10(d), 10(e) and 10(n) of CBLR, 2018. Accordingly, he had initiated show cause proceedings by issue of notice No. 37/2023-24 dated 27.02.2024 for initiating inquiry proceedings under Regulation 17 ibid, against violations of CBLR as above.

2.4 Upon completion of the inquiry, a report dated 25.06.2024 was submitted by the Inquiry Authority concluding that the appellants CB has failed to adhere to/abide by the provisions of Regulations 10(d), 10(e) and 10(n) of CBLR, 2018. Accordingly, the Principal Commissioner of Customs (General), Mumbai, being the licensing authority had passed the impugned order dated 19.07.2024 under Regulations 17(7), 14 and 18 ibid, for revocation of CB License of the appellants and for forfeiture of entire amount of security deposit, besides imposition of penalty on the appellants. Feeling aggrieved with the impugned order, the appellants have preferred this appeal before the Tribunal.

3.1 Learned Ad