Verification Regulations issued for Importers, Exporters, Custom Brokers

The CBIC has issued the Customs (Verification of Identity and Compliance) Regulations, 2021 relating to verification of the identity of importers, exporters and customs brokers vide Notification No. 41/2021-Customs (N.T.). The Notification has been issued in relation to Section 99B of the Customs Act, 1962 which empowers the Board to issue such regulations for protecting the interests of the revenue and to prevent smuggling.

Persons on whom the regulations are applicable

The regulations provide that the following class of persons are required to verify the identity under the regulations:

1. Importers, exporters or custom brokers who are newly engaged in import or export activity after the commencement of these regulations
2. Persons selected by the Commissioner of Customs who may have been engaged in the import/export activities or availed or claimed the benefits mentioned in Section 99B(3)
3. Persons selected by the Commissioner of Customs who are engaged as Customs brokers in the activities, or in availing, or claiming benefits as mentioned in a) and b) above prior to the commencement of these regulations

The person selected by the Commissioner of Customs shall be informed about the selection through the Common Portal. In cases where communication cannot be made through Common Portal, the person shall be informed by the means as the Commissioner of Customs may deem appropriate.

These regulations do not apply to the Central Government, State Governments and Public Sector Undertakings.

From when the regulations are applicable

These regulations shall come into force with effect from the date to be notified.

Procedure of verification of identity

The regulations provide the procedure for verification of identity for the specified persons which is summarized as follows:

1. Furnishing of documents:

   After getting intimation of selection, the person is required to submit the following documents on the Common Portal within a time period of 15 days of receiving such intimation:

   • Documents of incorporation, in case of persons other than individuals
   • Document evidencing the appointment of authorised signatories
   • Permanent Account Number
   • GST Identification Number
   • Document such as bank statement, Income Tax Return etc. evidencing financial standing of the person.

   The newly engaged person can submit these documents maximum by 30 days of engaging in import or export activity.

2. Aadhaar Authentication and PAN Verification:

   After the above submission, every individual, Karta, managing director, whole-time director, partners, member of the managing committee of the association, board of trustees, authorized representative, the authorized signatory is required to undergo Aadhaar authentication and PAN verification on the Common Portal.

   Dive Deeper:
   Aadhar Card (आधार कार्ड) – Get Aadhaar Card Complete Information Online

   Where Aadhaar authentication is not completed due to technical reasons, the person can furnish a notarized copy of a valid passport or electoral photo identity card within an extended further period of five days. However, in such a case, the physical verification of the address will become compulsory.

3. Physical Verification of address

   After the above two steps, the proper officer (or officer authorised by him) will conduct physical verification of the address of the principal place of business within 45 days of submission of documents. According to such regulations, the proper office is empowered to evaluate the financial standing of the person.

   The proper office can also verify other documents as he may deem fit in place of physical verification of the place of business.

4. Verification Report by proper officer

   After completion of the above process, the proper officer shall provide the outcome of the verification through the Verification Report on the Customs Automated System within 30 days of submission of the document. Where physical verification is carried out, the proper officer may prepare a verification report within 60 days.

   The outcome of the verification shall be informed to the person on the Common Portal within 7 days of the determination of such outcome.

   Result of failure of Verification

   The outcome of the verification can be considered either successful or failed, depending upon the fact of whether the identity is established through the documents presented or physical verification. The verification of identity may fail due to the following reasons:

   1. 1. Where the person fails to comply with the requirements mentioned above
      2. Where the person submits incorrect documents or informationThe failure may result in the suspension of the benefits provided to the person under Section 99B (supra). However, the benefits can be restored if the person furnishes the correct document or information.In case of failure of authentication by the person, the Commissioner of Customs may deny the benefits mentioned under Section 99B after giving an opportunity of being heard.A person who is aggrieved by any of the above may file an appeal to the Customs, Central Excise and Service Tax Appellate Tribunal.The Commissioner of Customs is empowered to impose a penalty not exceeding Rs. 50,000 if a person fails to comply with any provision of these regulations.

Taxmann’s Comments

• These regulations require authentication and verification of every director specified, which is a challenge for MNCs as most of its directors may not be Indian citizens having Aadhar. In this situation, they will fall under the category of compulsory physical verification which is again a procedural burden to them.However, a similar provision exists under the GST laws, where relaxation has been provided to the foreign directors by way of Notification No. 17/2020 – Central Tax dated 23^rd March 2020. Similar clarification under the Customs laws would provide relief to MNCs having foreign directors.
• The regulations mention that the benefits provided under Section 99B(3) would be suspended till the verification process is successfully completed. However, if the process gets delayed due to genuine reasons, suspension of the benefits such as clearance of goods, issuance of refund, drawbacks, etc. will get delayed and cause hardship to the taxable persons.