Penalty u/s 112(a) and 114AA cannot be Imposed on Customs Broker as Revenue fails to Prove Direct Involvement in Wrong Doing: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Principal Bench, New Delhi has set aside penalties imposed under Section 112(a) and Section 114AA of the Customs Act, 1962 holding that the Revenue failed to prove any direct or intentional involvement of the customs broker in the alleged misdeclaration of imported goods.

The issue began when the Commissioner of Customs (Export), ICD, Tughlakabad, New Delhi, fined HIM Logistics, a licensed customs broker, more than ₹25 lakh under Sections 112(a) and 114AA, claiming that the broker had assisted in the unauthorized importation of goods and had used false documents in the process.

The dispute related to an import consignment filed on behalf of M/s Jagdamba Enterprises, whose IEC holder later claimed that his credentials had been misused by a third party, Pawan Kumar Ralli.

The appellant argued that it had duly complied with all Know Your Customer (KYC) obligations under the Customs Brokers Licensing Regulations (CBLR) and that there was no evidence to suggest that it had knowingly participated in any wrongdoing.

The Tribunal observed that Section 112(a) attracts penalty only if the person concerned intentionally abets acts rendering goods liable to confiscation under Section 111 of the Customs Act.

The Tribunal noted that no material evidence was produced to show that appellant had any knowledge of the misdeclaration or that it had actively aided in the alleged offence.

It also observed that the penalty under Section 114AA which penalises knowingly making or using false documents could not be sustained since the revenue failed to establish any deliberate or wilful misstatement by the broker.

The CESTAT found that the KYC documents submitted were genuine and the firm had previously cleared multiple consignments for the same importer without any violation being detected.

It further noted that merely alleging that the broker did not physically verify the importer’s premises does not amount to connivance or intentional misconduct.

The bench comprising Justice Dilip Gupta (President) and Ms. Hemambika R. Priya (Member-Technical) relied on various precedents, including earlier orders in R.P. Sethi, Setwin Shipping, and rulings of the Bombay and Gujarat High Courts, which held that without mens rea or active complicity, penalty under Section 112(a) or 114AA cannot be imposed.

The Customs Broker had already faced licence revocation proceedings under CBLR, which had been set aside earlier by the Tribunal, the Bench concluded that there was no valid ground to sustain separate penalties for the same facts.

The tribunal allowed the appeal filed by the appellant, quashed the penalties imposed under Sections 112(a) and 114AA, and reiterated that a customs broker cannot be punished unless clear evidence shows direct knowledge or abetment in any offence under the Customs Act.

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