Absence Of CHALR Violations In SCN: CESTAT Sets Aside Customs Penalties u/s 112 [Read Order]
CESTAT underscores that penalties under customs law demand specific allegations and evidence, ruling that CHALR procedural breaches cannot automatically trigger penal consequences.
![Absence Of CHALR Violations In SCN: CESTAT Sets Aside Customs Penalties u/s 112 [Read Order]](https://images.taxscan.in/h-upload/2026/02/23/2126803-absence-of-chalr-violationsjpg.webp "Absence Of CHALR Violations In SCN: CESTAT Sets Aside Customs Penalties u/s 112 [Read Order]")
The New Delhi Principal Bench of the Customs, Excise, and Service Tax AppellateTribunal (CESTAT) has set aside the imposition of customs penalties under Section 112 of the Customs Act, 1962,. The Tribunal held that penalties cannot be sustained in as much as the show causenotice (SCN) makes allegations only in respect of contraventions of the Customs House Agents Licensing...
The New Delhi Principal Bench of the Customs, Excise, and Service Tax AppellateTribunal (CESTAT) has set aside the imposition of customs penalties under Section 112 of the Customs Act, 1962,.
The Tribunal held that penalties cannot be sustained in as much as the show causenotice (SCN) makes allegations only in respect of contraventions of the Customs House Agents Licensing Regulations (CHALR) and not in respect of any offenses under the Customs Act.
The appeal was filed by Cargo Placement & Shipping Agencies Pvt. Ltd., a licensed customs broker. The Department of Customs alleged that the appellant through its G-card holder and General Manager did not exercise due diligence and proper supervision leading to the filing of Bills of Entry for fake importers and facilitating illegal imports.
On these grounds, the Commissioner imposed penalties under Section 112(a)(i) of the Customs Act. However, the SCN mainly relied on the breach of Regulation 19 of CHALR 2004, regarding supervisory defaults, and took action under Regulation 20 for license-related effects. The SCN did not explicitly state how the ingredients of Section 112 were made out.
The appellant argued that the imposition of penalties under the Customs Act cannot be done in the absence of allegations and evidence of knowledge, intent, or abetment of smuggling.
The Department’s regulatory breach under CHALR may invite other proceedings, but it cannot automatically attract statutory penalties under Section 112.The Department argued that there was sufficient evidence to demonstrate acts of omission and commission to justify penalties.
The Tribunal held that allegations of default in supervising employees or failure to comply with CHALR obligations cannot by the fact itself justify imposition of penalties under Section 112 of the Customs Act without making specific and clear imputations in the SCN about knowledge or participation in activities making the goods liable for confiscation.
The Bench headed by Justice Dilip Gupta (President) and P.V. Subba Rao (Member Technical) upheld the appeal filed by the appellant. The Tribunal held that the SCN did not contain specific imputations under the Customs Act and the SCN merely referred to Section 112 without specifying the reason for imposing the penalty.
The Tribunal held that in the absence of specific CHALR violations being made liable for violations of the Customs Act, penalties under Section 112 could not be sustained. The appeal was allowed reiterating that regulatory defaults and violations of statutory provisions exist in separate domains unless specifically made so.
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