No Penalty on Customs Broker Without Proof of Fraud; Appeal Dismissed Due to Low Tax Effect: Calcutta High Court

The Calcutta High Court has dismissed a revenue appeal filed by the Commissioner of Customs (Preventive) against Shri Pramod Nahata, holding that no penalty can be imposed on a Customs Broker in the absence of evidence establishing fraud, mens rea, or active involvement in duty evasion. The bench of Justice Rajarshi Bharadwaj and Justice Uday Kumar has observed that the appeal itself was not maintainable due to the absence of any quantified tax effect, in light of the monetary limits prescribed under the litigation policy. The Bench while dealing with the matter, first condoned a delay of 118 days in filing the appeal in the interest of justice. However, upon examining the merits, the Court declined to admit the appeal under Section 130 of the Customs Act, 1962, finding no substantial question of law arising from the Tribunal’s order. The dispute originated from an investigation by the Directorate of Revenue Intelligence (DRI) into alleged misuse of duty exemptions under the South Asian Free Trade Area (SAFTA) Agreement in relation to imports of readymade garments from Bangladesh. The Revenue alleged that the importer had suppressed the value of free-of-cost materials to wrongfully avail 100% duty exemption, and that the Customs Broker had played a crucial role in facilitating the fraud. Penalties were imposed on the respondent under Sections 112(a) and 114AA of the Customs Act by the adjudicating authority. However, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, set aside the penalties, holding that there was no evidence of mens rea or deliberate suppression by the Customs Broker. The Tribunal found that the respondent had merely discharged a ministerial function by filing documents provided by the importer and had no knowledge of any alleged irregularities. Challenging this finding, the Revenue contended before the High Court that a Customs Broker has a statutory obligation to verify the correctness of documents and cannot escape liability by claiming to be a mere conduit. It was argued that the respondent had suppressed material facts, particularly regarding free-of-cost materials, and facilitated fraudulent imports resulting in significant revenue loss exceeding ₹12 crore. On the other hand, the respondent argued that the appeal was not maintainable due to the Central Board of Indirect Taxes and Customs (CBIC) Instruction dated November 2, 2023, which prescribes a monetary threshold of ₹1 crore for filing appeals before High Courts. Since the Tribunal had completely set aside the penalty, there was no “tax effect” in the present case. The respondent further submitted that a Customs Broker cannot be expected to verify the origin of goods beyond the face of Certificates of Origin issued by competent foreign authorities. The High Court upheld the Tribunal’s findings, emphasizing that the issue was purely factual in nature. It observed that the Tribunal, being the final fact-finding authority, had conclusively held that the respondent had no knowledge of the alleged fraud and had merely acted in a ministerial capacity. In the absence of any perversity in these findings, no substantial question of law could be said to arise. Significantly, the Court also ruled that the Revenue could not rely on the total alleged duty evasion by the importer to justify the appeal against the Customs Broker. It clarified that the monetary limit must be assessed with respect to the specific liability of the respondent, which in this case was nil due to complete exoneration. The Court further held that the case did not fall within any of the exceptions to the monetary limit policy, such as constitutional validity or recurring legal issues. Consequently, the appeal was dismissed at the admission stage itself, along with connected applications. Case Details Case Title: Commissioner Of Customs (Preventive) Vs Shri Pramod Nahata Citation: JURISHOUR-792-HC-2026(CAL) Case No.: CUSTA/84/2025 Date: 09/04/2026 Counsel For Petitioner: Kaushik Dey Counsel For Respondent: Shovendu Banjerjee Click Here To Read Order Read More: ICAI Removes CA’s Name for 1 Year Over Professional Misconduct, Action Upheld by Appellate Authority and Bombay High Court

No Penalty on Customs Broker Without Proof of Fraud; Appeal Dismissed Due to Low Tax Effect: Calcutta High Court

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