KYC Verification Of Importer By Customs Broker Through Govt. Portals Enough, No Physical Verification Required: CESTAT

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside an order revoking the customs broker licence of M/s Shalom Forwarders, holding that a customs broker cannot be expected to physically verify every importer’s premises or continuously monitor its business activities after completing statutory KYC formalities. The bench of Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) ruled that verification of Import Export Code (IEC), GST registration, PAN, Aadhaar and other government-issued credentials through official portals constitutes substantial compliance with the obligations prescribed under the Customs Brokers Licensing Regulations (CBLR), 2018. The dispute arose from a Bill of Entry filed in July 2023 by Shalom Forwarders on behalf of an importer, M/s Reloyn Tradex Trading Private Limited, for clearance of goods declared as “Slaked Lime.” Subsequently, customs authorities alleged that the importer was non-existent at the declared address and accused the customs broker of failing to verify the antecedents and functioning of the importer. Based on the investigation, the Commissioner of Customs, Tuticorin, revoked the customs broker licence, ordered forfeiture of the security deposit and imposed a penalty of ₹50,000 for alleged violations of Regulations 10(n) and 10(j) of the CBLR, 2018. Shalom Forwarders challenged the order before the Tribunal. A major issue before the Tribunal was whether the revocation proceedings were vitiated by denial of cross-examination. The customs broker argued that the department relied heavily on statements recorded during the investigation and on verification reports without granting an effective opportunity to cross-examine the persons whose statements formed the basis of the allegations. The Tribunal accepted this contention and observed that proceedings under the CBLR have serious civil and commercial consequences because revocation of a licence directly affects the broker’s business, reputation and livelihood. Therefore, strict adherence to principles of natural justice is essential. Referring to judicial precedents including Andaman Timber Industries and Naman Gupta, the Bench held that where adverse findings are substantially founded on statements and investigation reports, denial of cross-examination causes serious prejudice and undermines procedural fairness. According to the Tribunal, the adjudicating authority had largely accepted the investigation findings without independently evaluating the broker’s defence, thereby rendering the proceedings procedurally defective. On merits, the Tribunal examined the scope of Regulation 10(n), which requires customs brokers to verify the antecedents, identity and functioning of clients through reliable and authentic documents or information. The Bench found that Shalom Forwarders had obtained and verified the importer’s IEC, GST registration, PAN, Aadhaar and Udyam registration through official government portals before undertaking customs clearance work. Rejecting the department’s interpretation, the Tribunal held that Regulation 10(n) does not mandate compulsory physical verification of every importer’s premises. The Bench observed that once a customs broker verifies government-issued credentials through official sources, the statutory obligation stands substantially fulfilled unless there is evidence of conscious knowledge, collusion or deliberate disregard of suspicious circumstances. The Tribunal further emphasized that customs brokers cannot be expected to keep continuous surveillance over importers or monitor whether they subsequently change premises or cease operations. Imposing such an obligation would effectively transform customs brokers into investigative agencies, which is not contemplated under the law. The Tribunal noted that the department had failed to produce any evidence showing that the customs broker fabricated documents, shared financial benefits from the transaction, facilitated evasion or possessed prior knowledge of any alleged misdeclaration. Significantly, the Bench observed that even customs authorities themselves initially faced difficulty identifying the imported goods and had to undertake multiple rounds of laboratory testing before arriving at a final opinion regarding classification. In such circumstances, the Tribunal held that it would be unsafe to infer that the customs broker had prior knowledge of any alleged misdeclaration when the investigating authorities themselves required repeated examinations to determine the nature of the goods. The department had also alleged violation of Regulation 10(j) based on alleged deletion of WhatsApp chats relating to the transaction. However, the Tribunal found the allegation speculative and unsupported by evidence. The Bench noted that the department had already extracted the chats before issuing summons and that there was no proof of deliberate destruction or concealment of records after commencement of the investigation. Consequently, the allegation under Regulation 10(j) could not be sustained. The Tribunal also invoked the doctrine of proportionality, observing that revocation is the harshest punishment available under the CBLR framework and should ordinarily be reserved for cases involving fraud, deliberate facilitation of smuggling, forged documents, repeated violations or conduct fundamentally incompatible with continuation as a licensed customs broker. The Bench found no evidence of active collusion, fabrication of documents, monetary gain or repeated misconduct on the part of the appellant. Therefore, even assuming some procedural inadequacy existed, the punishment of licence revocation would be “shockingly disproportionate.” Allowing the appeal, the Tribunal held that the proceedings were vitiated due to denial of effective cross-examination and violation of natural justice. The customs broker had substantially complied with Regulation 10(n) by verifying government-issued credentials through authentic sources. Regulation 10(n) does not require compulsory physical verification or perpetual surveillance of importers. The allegation relating to deletion of WhatsApp chats was unsupported by evidence. No material established deliberate connivance, conscious facilitation or active involvement by the broker in any alleged irregularity. Revocation of licence, forfeiture of security deposit and penalty were unsustainable in law. Accordingly, CESTAT set aside the Order-in-Original in its entirety and restored the customs broker’s licence with consequential reliefs. Case Details Case Title: M/s. Shalom Forwarders v. Commissioner of Customs, Tuticorin Citation: JURISHOUR-1583-CES-2026(CHE) Case No.: Customs Appeal No. 40870 of 2025 Date: 02/06/2026 Counsel For Appellant: A.K. Jayaraj, Advocate Counsel For Respondent: Anoop Singh, Authorized Representative Click Here To Read Order Read More: Reversal of CENVAT Credit Equals Non-Availment: CESTAT

KYC Verification Of Importer By Customs Broker Through Govt. Portals Enough, No Physical Verification Required: CESTAT

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