Exporter’s Address Found Fake: CESTAT Quashes Penalty on Customs Broker Citing Due Diligence and Bona Fide Belief [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that penalty cannot be imposed on a Customs Broker when they have verified all required documents, even if the exporter’s address later turns out to be fake.

Daga Shipping Agents Pvt. Ltd., the appellant, is a licensed Customs Broker in Kolkata. The appellant filed a shipping bill on 26 August 2019 for export of 37,500 pieces of capacitors on behalf of Poonam Export, New Delhi.

For verification, the appellant obtained documents including the exporter’s Importer Exporter Code, Aadhaar card, PAN card, income tax return, bank letter, GST certificate, and authorization letter.

Shortly after filing the shipping bill, the consignment was detained on the ground of overvaluation. Summons issued to the exporter were returned by the postal authority with remarks that the address was insufficient and that no such firm existed.

The adjudicating authority imposed a penalty of Rs. 3,00,000 on the Customs Broker under Sections 114 and 114AA of the Customs Act, 1962, holding that the broker had failed to properly verify the exporter’s identity and functioning as required under Regulation 10 of the Customs Brokers Licensing Regulations, 2018. The Commissioner (Appeals) upheld the penalty. Aggrieved, the appellant approached the CESTAT.

The appellant’s representative argued that they had acted in accordance with law by collecting and verifying all the necessary documents. They further argued that the Customs Broker cannot be held responsible for the actual functioning of the exporter at the declared address or for the contents of the consignment.

The revenue’s counsel argued that the broker had failed in its duty under the licensing regulations to verify the authenticity of the exporter’s address and that this lapse resulted in revenue loss.

The two-member bench comprising Ashok Jindal (Judicial Member) and Sanjiv Srivastava (Technical Member) observed that the appellant had in fact collected and verified all the required documents and that the revenue had not disputed this fact.

The tribunal explained that the mere allegation that the exporter was introduced by a third party could not be a ground for penalty. The tribunal pointed out that the Customs Broker had acted with due diligence and bona fide belief.

The tribunal held that the penalty imposed under Sections 114 and 114AA was not sustainable. The impugned order was set aside and the appeal was allowed with consequential relief.

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