The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside penalties imposed on a licensed Customs Broker and its G-Card holder, holding that they cannot be penalized for an importer’s misdeclaration of goods in the absence of evidence establishing prior knowledge or active involvement in the alleged customs duty evasion.
The Bench of Justice Ashok Jindal (Member-Judicial) and K. Anpazhakan (Member-Technical) allowed the appeals filed against an order of the Commissioner of Customs (Port), Kolkata, which had imposed penalties of ₹1 lakh each under Section 112(a)(ii) of the Customs Act, 1962.
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The dispute arose from the import of four consignments declared as Baby Vests and Baby Track Pants. During an investigation conducted by the Directorate of Revenue Intelligence (DRI), the authorities alleged that the consignments were misdeclared with respect to the quantity of goods imported. The imports had been made in the name of an importer, while the Customs Broker processed the Bills of Entry and handled customs clearance based on the documents supplied by the importer.
The investigation also examined another container allegedly containing concealed foreign-brand cigarettes. However, since no Bill of Entry had been filed for that container, the adjudicating authority itself dropped proceedings relating to the cigarette smuggling allegations against the Customs Broker and its G-Card holder. The penalties were ultimately confined to the alleged misdeclaration involving the baby garments.
The Customs Department alleged that the Customs Broker failed to properly verify the identity, antecedents and credentials of the importer as required under the Customs Brokers Licensing Regulations (CBLR), 2013. On that basis, the Commissioner concluded that the broker had facilitated the fraudulent imports and imposed penalties under Section 112(a)(ii) of the Customs Act.
The appellants argued that their role was limited to processing import documents and filing Bills of Entry on the basis of documents furnished by the importer. They contended that they neither possessed prior knowledge of any alleged misdeclaration nor participated in the importer’s actions.
The broker also pointed out that proceedings under the Customs Brokers Licensing Regulations had already been initiated on the same facts. In those proceedings, the Tribunal had earlier set aside the revocation of the Customs Broker licence while upholding forfeiture of the security deposit. The appellants argued that imposing an additional penalty under Section 112(a) on identical allegations was legally unsustainable.
After examining the record, the Tribunal found that the department had failed to produce any evidence demonstrating that the Customs Broker or its G-Card holder had prior knowledge of the alleged misdeclaration regarding the quantity of imported goods.
The Bench observed that the broker’s responsibility was confined to processing import documents and filing Bills of Entry based on documents supplied by the importer. There was no material showing that the broker had participated in or knowingly assisted the alleged customs duty evasion.
Importantly, the Tribunal noted that the Revenue had failed to place any corroborative evidence establishing that the appellants aided or abetted the importer in misdeclaring the goods. Mere processing of documentation could not, by itself, justify penal action under Section 112(a)(ii) of the Customs Act.
Holding that the essential ingredients required for imposing penalties under Section 112(a)(ii) were absent, the Tribunal concluded that the impugned order could not be sustained. It accordingly set aside the penalties imposed on both the Customs Broker and its G-Card holder and allowed the appeals with consequential relief.
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