CESTAT Rules, Allegation Of Non-Verification Of Physical Premises Of Importer Not Sufficient To Fasten Customs Broker With Penalty
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Justice Dilip Gupta (President) and Ms. Hemambika R. Priya (Technical Member), held that a customs broker cannot be penalized under the Customs Act, 1962, merely on the basis of the allegation that physical verification of the importer’s premises was not conducted. The Tribunal found that the customs broker, Him Logistics Pvt. Ltd., had followed proper procedures and there was no evidence of mala fide conduct or active involvement in any misdeclaration.
The case arose when Him Logistics Pvt. Ltd., a customs broker holding CHA Licence No. 07/2004, was penalized under Sections 112(a) and 114AA of the Customs Act for its role in facilitating the clearance of goods on behalf of M/s. Jagdamba Enterprises. The dispute originated from the clearance of an import consignment under Bill of Entry dated 27.09.2014, where discrepancies were found during examination. Undeclared goods and quantity mismatches were noted, and the container was detained. The importer, Naresh Kumar Jha, disowned the goods and alleged that his Importer Exporter Code (IEC) had been misused by Pawan Kumar Ralli, who had introduced himself to the customs broker and provided KYC documents.
Following investigation, a show cause notice was issued to the customs broker proposing penalties under Sections 112(a) and 114AA. The adjudicating authority subsequently imposed penalties of ₹5,71,532 and ₹20,04,659 under the respective sections. This order was challenged in appeal.
In its detailed analysis, the Tribunal observed that Section 112(a) requires proof of a person doing or abetting an act that renders goods liable to confiscation under Section 111. For abetment, there must be intentional or deliberate involvement in the wrongdoing. The Tribunal noted that the appellant had consistently filed customs documents for M/s. Jagdamba Enterprises in the past, and there had been no adverse findings in earlier consignments.
The Tribunal relied on various judgments, including Shree Ram v. State of U.P. [1975 3 SCC 495] and Amrit Lakshmi Machine Works v. Commissioner of Customs [2016 (335) E.L.T. 225 (Bom.)], to emphasize that abetment requires mens rea—intentional aiding or active complicity. Mere facilitation or routine clearance services without knowledge of wrongdoing does not meet this threshold.
On the issue of penalty under Section 114AA, which deals with knowingly or intentionally making or using false declarations or documents, the Tribunal held that there was no evidence of such conduct by the customs broker. The appellant was in possession of valid KYC documents that were not proven to be forged or fake. Moreover, the Tribunal noted that the customs broker had handled eleven previous consignments for the same importer without incident.
The Tribunal also addressed the argument that physical verification of the importer’s premises was not conducted. It categorically held that such verification is not mandated under the Customs Brokers Licensing Regulations (CBLR), 2013, or any circular prescribing Know Your Customer (KYC) norms. Relying on judgments in Setwin Shipping Agency, International Cargo Services [2010 (250) ELT 141 (Tri.-Mumbai)], and Commissioner of Customs v. Him Logistics Pvt. Ltd [[2017 (348) ELT 625 (Del)]], the Tribunal reaffirmed that physical verification is not a legal requirement for customs brokers.
Additionally, the Tribunal noted that for the same alleged violation, the customs broker’s license was earlier revoked under the CBLR. However, that revocation order was already set aside by CESTAT in 2019, and the broker’s license had been restored after the Tribunal found that all required KYC documents were obtained and due diligence was followed.
In light of these findings, the Tribunal concluded that:
The appellant had not committed any intentional act or omission that would attract penalties under Section 112(a) or 114AA of the Customs Act.
Allegations based on absence of physical verification were insufficient to prove mala fide intent.
The customs broker had complied with its obligations under the law.
Accordingly, the Tribunal set aside the impugned penalty order and allowed the appeal in full.
Appearance
Shri Shivendu Sharma, Advocate for the Appellant
Shri Rajesh Singh, Authorized Representative for the Respondent
Cause Title: HIM Logistics Private Limited V. Commissioner of Customs
Case No: Customs Appeal No.53566 Of 2018
Coram: Hon’ble Mr. Justice Dilip Gupta [President], Hon’ble Ms. Hemambika R. Priya [Member (Technical)]
[Read/Download order]
