The Allahabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) reduced the penalty to ₹10 lakh and set aside another penalty under Section 114AA of the Customs Act, 1962,for the export of counterfeit ‘VimalGutkha.’
Shri Sanjay Prabhakar, Proprietor,appellant-assessee,was penalized for facilitating the export of counterfeit “VimalGutkha” in violation of the Customs Act, 1962, and the Customs Broker Licensing Regulations, 2013. Acting on intelligence, DRI officers seized misdeclared goods from a container cleared for export to Kuwait under Shipping Bill No. 7549865 dated 24.07.2017.
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Investigations revealed that the appellant used unauthorized personnel, failed to verify client credentials, and knowingly facilitated the export of counterfeit goods. Penalties of ₹50,00,000 were imposed under Sections 114(i) and 114AA and were upheld by the Adjudicating Authority, prompting an appeal before the tribunal.
The assessee’s counsel argued that the impugned order violated natural justice, as the request for cross-examination of co-noticees was denied. It was further contended that self-incriminating statements obtained under coercion and later retracted should not be relied upon. The counsel also argued that a Customs House Agent (CHA) could not be penalized without proof of malafide intent or knowledge of violations, citing precedents supporting this view.
The lower authority maintained that the appellant knowingly facilitated the export of counterfeit VimalGutkha worth ₹2.52 crores, violating the Customs Act, 1962, and the Customs Broker Licensing Regulations, 2013. Claims of coercion and denial of cross-examination were deemed baseless, and the penalties of ₹50,00,000 under Sections 114(i) and 114AA were upheld.
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The original authority noted that the assessee, a customs broker, failed to comply with obligations under the Customs Broker Licensing Regulations, 2013, and knowingly facilitated the export of counterfeit VimalGutkha worth ₹2.52 crores.
The assessee had used unauthorized personnel for customs clearance, failed to verify client details, and neglected to report the misdeclared goods. Claims of coercion and requests for cross-examination were rejected, and penalties under Sections 114(i) and 114AA of the Customs Act, 1962, were imposed for aiding smuggling.
Both the original and impugned orders concluded that the assessee had failed to fulfill obligations as a Customs Broker under Regulation 11 of the Customs Broker Licensing Regulations, 2013, resulting in a penalty under Sections 114(i) and 114AA of the Customs Act, 1962. However, the tribunal determined that these sections were not appropriate for non-compliance with Regulation 11, citing the Fast Cargo Movers case, which established that specific regulations should govern violations related to customs brokers.
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Although the assessee’s failure to perform duties under various regulations was acknowledged, no evidence showed involvement in smuggling. The penalty imposition under Sections 114 and 114AA required proof of intent, which was absent.Theassessee’s retracted statement still indicated some involvement in the attempted export.
A single-member bench comprising Sanjiv Srivastava (Technical Member) considering that proceedings against two officers had been dropped due to innocent negligence, the penalty was reduced to ₹10,00,000. Further, the penalty under Section 114AA was set aside, as the assessee only filed shipping bills based on provided documents and was not responsible for document forgery.
In short,the appeal filed by the assessee was partly allowed.
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