Delhi HC Rejects Customs’ Plea to Enhance Penalty in Red Sandalwood Export Case, Cites Limited Role of Freight Forwarder [Read Order]

The Delhi High Court recently dismissed an appeal by the Customs Department to impose an enhanced penalty under Section 114AA of the Customs Act on a freight forwarder involved in a case regarding the export of red sandalwood.

The dispute arose following an interception of consignments containing 1,103.1 kgs of Red Sandalwood (Red Sanders), an endangered species listed under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), which were allegedly misdeclared as “household goods” and exported without valid export certificates.

The respondent Mayank Gupta is a Delhi-based freight forwarder engaged in arranging air shipments for exporters. The respondent came under scrutiny after consignments containing red sandalwood which had been prohibited for export without CITES authorization were traced to airway bills issued by him on behalf of a fictitious firm by the name of M/s Sikki Auto India Pvt. Ltd., along with documents prepared by a customs broker and multiple freight forwarders.

The Adjudicating Authority, passed an Order-in-Original dated July 25, 2019 under Section 114 of the Customs Act, 1962, ordering the confiscation of the sandalwood, and imposed penalties on the persons involved, including a penalty of ₹10,00,000 on Mayank Gupta under Section 114 of the Customs Act.

While not the exporter himself, Gupta was found to have facilitated the shipment without verifying the credentials of the exporter, leading to the imposition of a monetary penalty under the Customs Act.

Before the High Court, the Commissioner of Customs (Export) was represented by Satish Aggarwala while none appeared on behalf of the respondent.

The case purported by the Revenue was that the respondent was the third and final forwarder who issued airway bills in the name of a non-existent firm, arranged space on airlines without obtaining the KYC of the principal exporter and thereby caused forged documents to be used in the export of prohibited goods.

The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain observed that the respondent had already been prescribed a penalty of ₹10 Lakh in lieu of his actions; an additional imposition under Section 114AA would amount to a penalty of five times the value of the goods.

Given the respondent’s limited and intermediary role and the existing ₹10 lakh penalty, the Delhi High Court concluded that the penalty already imposed was adequate, the Bench proceeded to dispose of the Revenue’s appeal against their motion, while leaving the broader question of law open for consideration in an appropriate proceeding.

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