Unauthorized Benami Shipping Bills: CESTAT Upholds Rs. 10 Lakh penalty against Custom Broker [Read Order]

The New Delhi Bench of the Custom, Excise & Service Tax Appellate Tribunal ( CESTAT ) upheld Rs. 10 Lakh Penalty against the appellant for filing Benami Shipping bills without proper authorization from actual exporters and thus violating the CBLR obligations.

The Appellant, Planet World Cargo, a Custom Broker, filed this appeal challenging an order dated 15.11. 2022 passed by the Commissioner of Customs (Appeals). The order upheld a penalty of Rs. 10 Lakhs imposed on the appellant under section 114(iii) of the Customs Act, 1962, by the Joint Commissioner on 13.7.2021.

Section114(iii) of the Customs Act, 1962, explained that: Penalty for attempts to export goods improperly, etc.

“Any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable- [ in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater.] [ Substituted by Act 32 of 2003, Section 117, for Clause (iii) (w.e.f. 14.5.2003).]”

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The Directorate General of Revenue Intelligence (DRI) received information that goods were to be exported under three Shipping Bills dated 21.2.2019, filed in the name of KKS Export and Import were regarded as mis-declared goods.

The goods, described in the Shipping Bills as ‘Self Adhesive Vinyl Sheets’ were examined and were found to be of very poor quality. Test reports from the Central Revenue Control Laboratories (CRCL) dated 25.3.2019 confirmed the misdeclaration.

On further investigation, the Additional Director, DRI, issued a Show Cause Notice (SCN) dated 23.8.2019 to four persons: KKS, in whose name the Shipping Bills were filed; the appellant, who filed the Shipping Bills; and Mohd. Najib Abdulsattar Memon and Sumit Tandon. It also revealed that the appellant had filed these Shipping Bills at the behest of Mohd. Najib Abdulsattar Memon without any request or any authorization from KKS, the purported exporter.

The Additional Commissioner confiscated the export goods and imposed penalties on the appellant, Mohd. Najib Abdulsattar Memon and Sumit Tandon but KKS was not penalized as the purported exporter.

The Counsel for the appellant, represented by Sharad Shrivastava and Gunjan Tanwar, argued that the Additional Director, DRI was not the proper officer to issue the SCN as per the judgment of the Supreme Court in Canon India Pvt. Ltd. vs Commissioner of Customs [2021(376) ELT 3 (SC)], that a penalty under CBLR, 2018 precluded a penalty under Section 114(iii) of the Act for the same act, and they were not required to physically verify the exporter's existence or examine the goods received in sealed condition.

On the other hand, the Revenue Counsel, represented by Rakesh Kumar, supported the impugned order and asserted that they had no interference.

The Two-Member Bench comprising Justice Dilip Gupta (President) and P. V Subba Rao (Technical Member) clarified that the Canon India Judgement was not applicable to the issue SCN concerning confiscation and penalties under section 124 of the Customs Act, 1962 and had also subsequently been reviewed by the Supreme Court.

Section 124 of the Customs Act, 1962, explained that: Issue of show cause notice before confiscation of goods, etc.

“No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person-

(a)is given a notice in [writing with the prior approval of the officer of Customs not below the rank of a Deputy Commissioner of Customs, informing] [ Substituted by Act 29 of 2006, Section 28, for " writing informing" (w.e.f. 13.7.2006).] him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;

(b)is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and

(c)is given a reasonable opportunity of being heard in the matter”

The Tribunal stated that since the appellant had Benami (pseudonymous) Shipping Bills in the name of KKS, at the behest of Mohd. Najib Abdulsattar Memon they were fully responsible for any fraud or misdeclaration. It also held that penalties under CBLR, 2018 and Section 114 of the Customs Act, 1962 were distinct and could be imposed independently.

Thus, the impugned order was upheld and the appeal was dismissed. The Order was pronounced on 13.11.2025.

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