The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench, has set aside a ₹10 lakh penalty imposed on customs broker, ruling that a mere allegation of violation of the Customs Brokers Licensing Regulations (CBLR) cannot justify the imposition of penalty under Section 112(a)(i) of the Customs Act unless there is evidence that the broker’s acts or omissions rendered the goods liable for confiscation under Section 111. 

The bench of Justice S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that although the authorities repeatedly alleged violations of the CBLR, no penalty had actually been imposed under the licensing regulations, and instead a penalty under the Customs Act was imposed without satisfying its statutory requirements. 

Buy Now: Customs Duty Judgements E-Compilation – June 2026

The dispute originated from an import consignment filed in May 2021 by M/s Shreyans Appearls & Leatherites, which declared the cargo as 1,120 bags of dry dates valued at approximately ₹19.04 lakh.

During customs examination, officers noticed differences in the packing arrangement inside the containers. On deeper inspection, they discovered large quantities of undeclared foreign-brand cigarettes concealed behind the bags of dry dates.

The concealed goods included 120 cartons of ESSE cigarettes (12 lakh sticks), 20 cartons of Benson & Hedges cigarettes (2 lakh sticks), and 110 cartons of Gudang Garam cigarettes (15.84 lakh sticks)

The cigarettes allegedly lacked the mandatory statutory health warnings required under Indian law and were treated as prohibited imports, leading to seizure of the goods under the Customs Act. 

The Customs Broker was issued a show cause notice alleging that he had failed to discharge his obligations under Regulation 10 of the Customs Brokers Licensing Regulations, 2018 (CBLR).

The adjudicating authority imposed a penalty of ₹10 lakh under Section 112(a)(i) of the Customs Act, which was subsequently upheld by the Commissioner (Appeals). Bagri challenged this order before CESTAT. 

The appellant contended that the proceedings were fundamentally flawed because the allegations were confined to an alleged breach of the CBLR. His conduct had already been examined in earlier licence suspension proceedings, where the Commissioner of Customs had revoked the suspension after holding that there was no mens rea, no negligence, and no evidence of connivance on his part. That earlier order had attained finality since it was never challenged by the department. Section 112 of the Customs Act applies only when a person’s act or omission renders goods liable to confiscation under Section 111, and no such finding existed against him. 

The Tribunal observed that the sole allegation against the customs broker throughout the proceedings was an alleged violation of Regulation 10 of the CBLR.

It noted that in earlier licensing proceedings, the Commissioner of Customs had already recorded a categorical finding that there was no evidence of active knowledge or connivance, the customs broker had exercised due diligence, the importer possessed valid documents, and the broker merely processed the Bill of Entry based on documents supplied by the importer. 

The Bench held that these findings had attained finality and significantly weakened the department’s case.

CESTAT further held that Section 112(a)(i) can be invoked only where a person’s conduct directly contributes to goods becoming liable for confiscation under Section 111 of the Customs Act.

However, neither the adjudicating authority nor the Commissioner (Appeals) recorded any finding that Bagri had committed any act, omission, or abetment resulting in confiscation of the goods.

The Bench relied on earlier Tribunal decisions, including Exim Services and P.S. Bedi & Company, which laid down that before imposing penalty under Section 112, authorities must specifically establish that the customs broker’s conduct rendered the goods liable to confiscation.

Absent such findings, the penalty cannot survive in law. 

Allowing the appeal, CESTAT held that the penalty imposed under Section 112(a)(i) was legally unsustainable.

The Tribunal set aside the ₹10 lakh penalty imposed on customs broker and granted consequential relief. 

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Customs Can’t Impose Penalty Solely on Co-Accused’s Uncorroborated Statement: CESTAT