The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi Principal Bench, has upheld penalties imposed on a Customs House Agent/Customs Broker and its director for allegedly knowingly advising importers to misclassify areca nuts in order to avail an ineligible customs duty exemption and facilitate clearance of prohibited goods.
The Bench of Dr. Rachna Gupta (Judicial Member) dismissed three appeals arising from the same investigation concerning imports of areca nuts from Indonesia.
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The proceedings originated from intelligence developed by the Directorate of Revenue Intelligence (DRI), Delhi Zonal Unit, regarding imports of areca nuts from Indonesia.
The goods had allegedly been declared as “Beetle Nut” or “supari” and classified under CTH 21069030. Following the intelligence, the consignments covered by three Bills of Entry were examined by officers of the SIIB, ICD Tughlaqabad, on January 27 and 28, 2022.
Representative samples were drawn from the containers and the goods were subsequently seized. According to the Tribunal’s order, the imported goods consisted of broken/cut pieces as well as whole pieces of substandard or inferior-quality areca nuts. Reports from the Central Revenue Control Laboratory (CRCL), New Delhi, and the Areca Nut Research and Development Foundation, Mangalore, were relied upon in relation to the characteristics and moisture content of the goods.
During the investigation, statements of the concerned importers were recorded under Section 108 of the Customs Act, 1962.
The importers allegedly acknowledged that the goods were actually classifiable under CTH 08028090 and that the imports were prohibited because the applicable conditions under DGFT Notification No. 20/2015-2020 dated July 25, 2018 had not been complied with.
The authorities consequently considered the goods liable to confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962.
The investigation also alleged that the value of the goods had been wrongly declared at ₹90.48 per kilogram and that the goods had been classified under CTH 21069030 with the intention of wrongly claiming the benefit of Serial No. 103 of Notification No. 50/2017-Cus dated June 30, 2017.
The Customs Broker, who had filed the Bills of Entry for the importers, was also proceeded against.
The department alleged that the broker had knowingly participated in the improper importation by advising the importers regarding the incorrect classification. It was alleged that the broker used false and incorrect material concerning the imported goods and advised the importers despite being aware of the correct classification.
The alleged conduct was stated to be in violation of Regulations 10(d), 10(e) and 10(f) of the Customs Broker Licensing Regulations, 2018.
Show cause notices were issued not only to the respective importers but also to the common Customs Broker. Penalties were proposed under Sections 112 and 114AA of the Customs Act, 1962, and were subsequently confirmed through adjudication orders.
Before the Tribunal, the Customs Broker argued that the penalties had been wrongly imposed.
The appellant contended that there was no allegation or evidence establishing knowledge, participation, intent, abetment or mens rea on its part in relation to the alleged improper imports.
According to the defence, the broker had merely reproduced the documents supplied by the importers while filing the Bills of Entry and had no role in procurement, shipment, negotiations, valuation, classification or decision-making concerning the imports.
It was argued that routine filing of Bills of Entry could not, by itself, constitute abetment of an illegal import.
The appellant relied upon judicial precedents including Joshi M.J. v. CC, Noida, G. Seenivasan v. CC, Airport & Air Cargo, and Him Logistics Pvt. Ltd. v. Commissioner of Customs, New Delhi, contending that a Customs Broker could not be penalised merely for accepting documents and filing papers where there was no positive act or awareness of wrongdoing.
The appellant also relied upon the principle that classification of goods is a technical function undertaken by the Customs assessing officer and that a Customs Broker cannot ordinarily be expected to override the importer’s documents or independently determine the classification of goods.
The department took a contrary position.
The authorised representative submitted that the director of the Customs Broker had, in his statement, admitted that the importers were advised to classify the goods under CTH 21069030 so that the goods could be cleared at minimum customs duty and the importers could remain competitive in the market.
According to the department, the investigation established that the Customs Broker knowingly recommended the incorrect classification, thereby enabling the importers to attempt clearance of prohibited goods.
The department therefore argued that the use of incorrect classification in the import documents was a conscious and intentional act and that the penalties imposed under the Customs Act were justified.
After considering the submissions, the Tribunal noted that the investigation concerned three importers who had filed Bills of Entry through the common Customs Broker.
The goods had been declared as areca nuts and classified under CTH 21069030. The adjudicating authorities had concluded that the goods had been knowingly misclassified with the intention of wrongly claiming the benefit of Notification No. 50/2017-Cus.
The Tribunal noted that the goods were alleged to have been imported below the Minimum Import Price and were therefore prohibited. Goods valued at approximately ₹3.01 crore were confiscated under Sections 111(d) and 111(m) of the Customs Act.
A penalty of ₹10 lakh under Section 112(a)(i) and another penalty of ₹20 lakh under Section 114AA had been imposed on the appellant.
A significant aspect of the Tribunal’s decision was its treatment of the statement recorded under Section 108 of the Customs Act.
The statement of the Customs Broker’s director was relied upon as the principal basis for imposing penalties. The appellant had challenged the admissibility and evidentiary value of the statement.
The Tribunal, however, observed that the statement had been recorded under Section 108 and referred to the established legal position concerning statements made before Customs officers.
The order discussed the distinction between confessions made to police officers and statements/confessions made before Customs officers. It referred to decisions including Ramesh Chandra Mehta v. State of West Bengal and Illias v. Collector of Customs, noting the evidentiary significance attached to voluntary statements recorded by Customs authorities.
The Tribunal further referred to the Supreme Court’s decision in Amad Noormamad Bakali v. State of Gujarat, judgment dated February 23, 2026, reiterating the principle that a voluntary confession made before a Customs officer is admissible as evidence.
The Tribunal observed that statements recorded by Customs officers can constitute substantive evidence when voluntarily made.
In the present case, the Tribunal noted that there had been no retraction of the statements made by either the Customs Broker or its director.
The Tribunal found that the director had admitted suggesting to the three importers that the goods be classified under CTH 21069030 instead of CTH 08028090.
The laboratory and technical reports were also found to corroborate the statements. According to the Tribunal, the reports indicated that the imported goods were broken/cut pieces of areca nuts of substandard or inferior quality and that their moisture content did not correspond with goods falling under the declared classification.
The Tribunal further observed that the appellants had not produced evidence to disprove the documentary material or establish that coercion had been used when the statements were recorded.
On the cumulative evidence, CESTAT concluded that the Customs Broker had knowingly recommended the incorrect classification.
The Tribunal held that the purpose was to enable the importers to obtain the benefit of the exemption under Notification No. 50/2017-Cus and thereby remain competitive and secure further customs clearance business.
The finding was therefore not based merely on the fact that the Customs Broker had filed the Bills of Entry. Instead, the Tribunal considered the alleged positive act of advising the importers on the classification, coupled with the statements and corroborating technical evidence, sufficient to establish knowledge and intention.
The Tribunal also emphasised the special position occupied by Customs Brokers in the customs clearance system.
Referring to the Bombay High Court’s decision in CC (General) v. World Wide Areca Manufacturer and the Supreme Court’s decision in Commissioner of Customs v. K.M. Ganatra & Co., the Tribunal highlighted that Customs Brokers occupy an important position within the Customs House.
The Supreme Court, as quoted in the order, recognised that Customs Brokers act as an interface between importers/exporters and various government and other agencies. Because customs procedures are complex, importers depend substantially upon Customs Brokers for clearance of goods.
The Tribunal emphasised that Customs Brokers are expected to safeguard the interests of both importers and Customs and are subject to regulatory obligations designed to ensure proper discharge of that responsibility.
The Tribunal held that the department had sufficiently established that the alleged advice concerning misclassification and under-valuation was provided knowingly and intentionally.
It observed that penalties under the relevant provisions could be imposed where the Customs Broker possessed the requisite knowledge and intention to facilitate illegal imports.
Finding no infirmity in the impugned orders, the Tribunal upheld the penalties imposed upon the Customs Broker and its director.
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