Top Stories Not Necessary for Custom Broker to keep Continuous Surveillance at Physical Address of Exporters: Delhi HC restores Licence [Read Order] The case involved M/s Shakti Cargo Movers, whose licence was revoked by the Commissioner of Customs (CoC) on grounds of allegedly failing to verify the legitimacy of one of their clients By Manu Sharma – On November 14, 2024 5:58 pm – 2 mins read

In a recent ruling, the Delhi High Court clarified that it is not necessary for Customs Brokers to maintain continuous surveillance of the physical addresses of exporters. The case involved M/s Shakti Cargo Movers, whose licence was  revoked by the Commissioner of Customs ( CoC ) on grounds of allegedly failing to verify the legitimacy of one of their clients, M/s Shree Enterprises. This client was suspected of being non-existent at its registered address, a finding based on an investigation by the Directorate General of Analytics and Risk Management ( DGARM ).

Become a PF & ESIC expert with our comprehensive course – Enroll Now An analysis by Directorate General of Analytics and Risk Management ( DGARM ) had flagged M/s Shree Enterprises as potentially fraudulent, citing discrepancies in its registration details under the Central Goods and Services Tax ( CGST ) and State Goods and Services Tax ( SGST ) Acts. Following this, a Show Cause Notice was issued, leading to the revocation of Shakti Cargo Movers’ customs broker license in October 2023. The CoC argued that the broker failed to meet its obligations under Section 10(n) of the Customs Broker Licensing Regulation, 2018 ( CBLR ), which requires brokers to verify clients’ information, including the Importer Exporter Code ( IEC ) and GST Identification Number ( GSTIN ), and to confirm the operational status of the client at the stated address.

However, Shakti Cargo Movers countered these allegations, asserting they had duly collected KYC documents, including the partnership deed, rent agreement, and electricity bill for M/s Shree Enterprises, and claimed to have physically verified the business address. Despite this, the CoC argued the broker had not conducted adequate verification, specifically noting the expiry of the rent agreement and outdated documents as evidence of the broker’s negligence. Upon appeal, the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) overturned the CoC’s order, determining that Shakti Cargo Movers had taken reasonable steps to verify M/s Shree Enterprises’ legitimacy. Notably, the CESTAT observed that none of the documents collected by the broker were found to be forged or fabricated, and government-issued documents like the IEC and GSTIN registrations were presumed genuine under the Indian Evidence Act.

The tribunal further opined that while Customs Brokers are expected to perform diligent checks when onboarding clients, continuous surveillance of clients’ business premises was not mandated. Become a PF & ESIC expert with our comprehensive course – Enroll Now The Delhi High Court upheld the decision of the Customs, Excise and Service Tax Appellate ( CESTAT ), affirming that Customs Brokers are not obligated to maintain ongoing surveillance of an exporter’s physical address after the initial verification. The High Court held that the documents provided by Shakti Cargo Movers, although dated, were still valid at the time of verification. Consequently, the appeal was dismissed, and the CoC’s initial revocation of the customs broker licence was annulled.