2026-VIL-1807-CESTAT-CHE-CU
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CUSTOMS CESTAT Cases

Customs - Penalty on Customs Broker under Section 114(i) of the Customs Act, 1962 for alleged failure to verify antecedents and KYC particulars of the exporter in an attempted export of prohibited goods - Appellant, a Customs Broker, handled a Shipping Bill for export of floor mats, and the container, after leaving the CFS, was found to contain red sanders allegedly substituted for the declared cargo - Appellant had obtained authorisation, verified the exporter's IEC through DGFT and ICEGATE and examined the previous shipping bill, while the adjudicating authority found inadequate verification of antecedents and imposed penalty, which was upheld in appeal - Appellant contended that there was no evidence of knowledge, participation or control over the container after clearance - Respondent contended that a Customs Broker must know its client and that mens rea is not essential - Whether the alleged failure to verify antecedents and KYC particulars rendered the goods liable to confiscation or amounted to abetment so as to attract penalty under Section 114(i) - HELD - Section 114(i) requires an identifiable act, omission or abetment attributable to the person which rendered the goods liable to confiscation under Section 113, and a mere regulatory lapse is not sufficient. The SCN does not allege that the Appellant participated in the substitution or knowingly filed false documents, the substitution took place after the container left the CFS, and no material connects the Appellant with it. Absence of direct contact with the exporter does not by itself establish knowledge, collusion or facilitation, and the decision relied upon by Revenue is distinguishable since the broker therein acted through a proxy and signed blank documents. Although mens rea is not essential, proof of an intended act, omission or abetment is not dispensed with - The Department failed to establish the requisite nexus and the penalty under Section 114(i) is not sustainable - Penalty under Section 117 of the Customs Act, 1962 on Customs Broker where the alleged omission is insufficient for penalty under Section 114(i) - Whether penalty under Section 117 can be sustained independently - HELD - Section 117 is a residuary provision and cannot be invoked in the absence of an identifiable contravention of the Customs Act or failure to comply with a statutory obligation attracting such penalty. Once the alleged omission is found insufficient to attract Section 114(i), it cannot, without an independently established contravention, sustain a penalty under Section 117 - The penalty imposed under Section 114(i) read with Section 117 is set aside and the appeal is allowed.
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