The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that a penalty imposed on a person accused merely of abetting an alleged customs violation cannot survive once the principal allegations against the importer have been rejected.
The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) set aside the penalty imposed on appellant under Section 112(a)(ii) of the Customs Act, 1962, observing that when the foundation of the Revenue’s case ceases to exist, derivative penal proceedings also fall.
The appeal arose from an Order-in-Original dated June 14, 2019 passed by the Commissioner of Customs (Port), Kolkata. The Department had issued a common Show Cause Notice to several noticees alleging that M/s. Zeniak Innovation India Ltd. had improperly imported components of electric tricycles in Completely Knocked Down (CKD) condition by misdeclaring them as mere parts and components in order to evade customs duty.
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Unlike the principal noticee, Appellant was not alleged to have imported the goods himself. Instead, the Department claimed that he had facilitated the imports by allowing the use of his Import Export Code (IEC) and had thereby abetted the alleged customs violations. On this basis, a penalty of ₹4 lakh was imposed on him under Section 112(a)(ii) of the Customs Act.
The principal importer, M/s. Zeniak Innovation India Ltd., challenged the adjudication order before the Calcutta High Court. The High Court remanded the matter for fresh adjudication, following which a de novo Order-in-Original dated February 21, 2025 was passed.
The fresh adjudication was confined to the company and its directors, while stating that the earlier adjudication order would continue to operate against the remaining noticees, including Appellant.
Subsequently, CESTAT, by its Final Order dated July 2, 2026, allowed the appeals filed by M/s. Zeniak Innovation India Ltd. and its directors.
The Tribunal held that the imported consignments, which did not include essential components such as electric motors and batteries, could not be regarded as complete electric tricycles in CKD condition under Rule 2(a) of the General Rules for Interpretation. Consequently, the goods were correctly declared as parts and components, the allegation of misdeclaration failed, the differential customs duty demand was set aside, confiscation was held unsustainable, and all penalties imposed upon the importer and its directors were quashed. The Revenue’s appeals were also dismissed.
While deciding Appellant’s appeal, the Tribunal observed that the appellant had never been proceeded against as the importer. The only allegation against him was that he had allegedly aided or abetted imports undertaken by the principal importer.
The Bench noted that the proceedings against him were entirely dependent upon the existence of the principal customs violation. Since CESTAT had already held that the imports themselves involved no misdeclaration and that the Revenue’s allegations were unsustainable, there was no legal basis left for maintaining a penalty against a person accused only of abetment.
The Tribunal categorically observed that once the principal proceedings culminate in favour of the importer, no independent foundation remains for imposing penal consequences upon an alleged abettor.
The appellant had also argued that once the Calcutta High Court set aside the original adjudication order and directed de novo adjudication, the earlier order could not continue to survive against the remaining noticees.
However, having already concluded that the penalty was liable to be quashed because the principal allegations themselves had failed, the Tribunal found it unnecessary to decide this alternate legal contention.
Allowing the appeal, CESTAT set aside the ₹4 lakh penalty imposed upon Appellant under Section 112(a)(ii) of the Customs Act, 1962.
The Tribunal held that where the principal customs proceedings against the importer have failed and the alleged contravention itself has been found non-existent, a derivative penalty against an alleged abettor cannot independently survive. Accordingly, the order imposing penalty was quashed and the appeal was allowed.
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