Customs Broker Can’t Be Penalised for Export of Ergotamine Preparation; S. 117 Not Invocable Where Specific Penalty Provision Exists: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside a penalty imposed on customs broker M/s Unnati Cargo and held that a customs broker cannot be penalised for facilitating export of a pharmaceutical preparation containing Ergotamine where the preparation itself does not fall within the category of controlled substances requiring a No Objection Certificate (NOC) from the Narcotics Commissioner. The bench of Binu Tamta (Judicial Member) has observed that Section 117 of the Customs Act, being a residuary provision, cannot be invoked where a specific penalty mechanism already exists under the Customs Broker Licensing Regulations (CBLR). The dispute arose from a shipping bill filed in April 2022 by exporter M/s Aprazer Healthcare Pvt. Ltd. through its authorised customs broker, M/s Unnati Cargo, for export of pharmaceutical products to Iraq with an FOB value of approximately Rs.14.68 lakh. During examination of the consignment, customs authorities found "Migran" tablets containing Ergotamine Titrate and also detected undeclared Ledifos medicines in excess of the declared quantity. Authorities believed the goods were liable for confiscation as Ergotamine is listed as a controlled substance under Schedule-B of the NDPS (Regulation of Controlled Substances) Order and export allegedly required prior NOC from the Narcotics Commissioner. The department alleged that the customs broker had violated Regulation 10(d) of the CBLR by failing to advise the exporter regarding compliance with the NDPS framework and by filing export documents without ensuring necessary authorisation. Following adjudication proceedings, goods were confiscated and a penalty of Rs.50,000 was imposed on the customs broker under Section 117 of the Customs Act. The appellate authority later upheld the penalty. Before the Tribunal, counsel for the appellant argued that Section 117 of the Customs Act could not be applied because Regulation 18 of CBLR itself provides a specific mechanism for penalties arising out of violations of customs broker obligations. It was also contended that Schedule-B of the NDPS Order covers only "Ergotamine and its salts" and not preparations containing Ergotamine. The Revenue, however, maintained that customs brokers act as compliance facilitators and are expected to possess sufficient understanding of customs and allied laws. It argued that a customs broker should have verified whether export authorisation from the Narcotics Commissioner had been obtained and could not escape responsibility by claiming lack of knowledge. Revenue also relied on precedents emphasising that customs brokers are obligated to verify declarations and advise clients appropriately. After examining the issue, the Tribunal relied heavily upon its earlier ruling in Videojet Technologies (I) Pvt. Ltd., where it had held that the NDPS Schedule did not automatically extend to preparations containing a controlled substance unless specifically mentioned. The Tribunal observed that Schedule-B expressly mentions "Ergotamine and its salts" but does not extend coverage to "preparations thereof", unlike certain other entries in the schedule which specifically include preparations. Since the product in question contained only about 1% Ergotamine, the Tribunal concluded that it was merely a preparation of Ergotamine and did not independently qualify as a controlled substance requiring NOC. The Tribunal further noted that even the department itself had sought technical clarifications from multiple authorities including the Narcotics Commissioner, CRCL and the Indian Pharmacopoeia Commission to determine whether the product fell under controlled substance regulations. In such circumstances, expecting a customs broker to independently possess specialised technical knowledge was held to be unreasonable. With regard to the undeclared Ledifos medicines found in the consignment, the Tribunal observed that the exporter had pleaded ignorance regarding the packing process and had stated that the medicines had been purchased separately. The Tribunal held that attributing knowledge of such excess goods to the customs broker would be excessive and unjustified. The Tribunal also accepted the argument relating to Section 117. It held that Section 117 is merely a residuary provision and can be invoked only when no other penalty provision exists. Since Regulation 18 of CBLR specifically provides for penalties against customs brokers for violations of the regulations, imposition of penalty under Section 117 was held to be legally unsustainable. The CESTAT set aside the impugned order and allowed the appeal filed by M/s Unnati Cargo, bringing an end to the penalty proceedings against the customs broker. Case Details Case Title: M/s. Unnati Cargo Versus Commissioner of Customs (Export) Citation: JURISHOUR-1348-HC-2026(DEL) Case No.: Customs Appeal No.51812 of 2025 Date: 22.05.202 Counsel For Appellate: Salil Arora, Advocate Counsel For Respondent: Ram Pravesh Prasad, Authorised Representative Click Here To Read Order Read More: Dept. Appeal Doesn’t Automatically Stay Appellate Order; GST Registration Restoration Directions Must Be Followed Without Specific Stay: Allahabad HC

Customs Broker Can’t Be Penalised for Export of Ergotamine Preparation; S. 117 Not Invocable Where Specific Penalty Provision Exists: CESTAT

Membership Required

Latest articles

CESTAT Quashes Confiscation and Penalty on Excess Imported Soybean Oil

Electronic Records Without Statutory Certification Requirements Can’t Justify Undervaluation Allegations: CESTAT

Customs Dept. Can’t Deny Exemption Benefits Based On Laboratory Test Reports Not Drawn As Per ISI: CESTAT

Service Tax Not Payable on Hostel Buildings Rented to Educational Institutions: CESTAT

More like this

CESTAT Quashes Confiscation and Penalty on Excess Imported Soybean Oil

Electronic Records Without Statutory Certification Requirements Can’t Justify Undervaluation Allegations: CESTAT

Customs Dept. Can’t Deny Exemption Benefits Based On Laboratory Test Reports Not Drawn As Per ISI: CESTAT

About us

Company

Categories