Penalty Under Section 117 Not Sustainable Against Customs Broker If Separate Penal Provisions Exist Under Licensing Regulations

The Hon'ble CESTAT, Principal Bench, New Delhi, in M/s. Unniyal Cargo Movers Pvt Ltd Versus Commissioner of Customs (Prev), New Customs House, New Delhi - 2026 (6) TMI 1108 - CESTAT NEW DELHI held that a penalty under Section 117 of the Customs Act, 1962 cannot be sustained against a Customs Broker if specific penal provisions are already provided under the Customs Broker Licensing Regulations.

Facts:

M/s. Unniyal Cargo Movers Pvt. Ltd. ('The Appellant'), a customs broker, acted on behalf of an exporter, M/s. Shine Impacts, which filed shipping bills at ICD Tughlakabad, Delhi. The exported goods were declared as 'other textile material of 70% polyester and 30% PVC blind fabric rolls for curtains' under Customs Tariff Heading 63039990. Based on information that the exporter had mis-declared the value and quantity of the goods to claim higher incentives, the Customs Authorities initiated proceedings against the appellant. A Show Cause Notice ('SCN') dated August 4, 2021, was issued, proposing penalties under Sections 114(iii), 114 AA, and 117 of the Customs Act, 1962, which were initially confirmed by the original adjudicating authority on March 30, 2022.

On appeal, the Commissioner of Customs (Appeals), vide an order dated March 30, 2025, modified the adjudication order by setting aside the penalties under Sections 114(iii) and 114 AA. However, the Commissioner upheld the penalty under Section 117 on the grounds that the appellant failed to observe due diligence in verifying the exporter's identity and functioning at the declared address, thereby violating Regulation 10(n) of the Customs Broker Licensing Regulations, 2018. Aggrieved by the confirmation of the penalty under Section 117, the appellant filed the present appeals before the Tribunal.

Issues:

Whether a penalty under Section 117 of the Customs Act, 1962 can be legally sustained against the Customs Broker?

Held:

The Hon'ble CESTAT, Principal Bench, New Delhi, in M/s. Unniyal Cargo Movers Pvt Ltd Versus Commissioner of Customs (Prev), New Customs House, New Delhi - 2026 (6) TMI 1108 - CESTAT NEW DELHI held as under:

• Observed that Section 117 of the Customs Act, 1962, is a residuary clause meant to attract penalties only in cases where 'no express penalty is elsewhere provided' for a specific contravention or failure.
• Noted that since the Customs Brokers are explicitly governed by the Customs Broker Licensing Regulations, 2018, which contain distinct penal provisions for various types of non-compliance, it cannot be argued that no penal provisions are provided elsewhere. Consequently, the provisions of Section 117 do not apply to the appellant.
• Also held that there was no evidence brought on record by the Revenue to prove that the appellant had actively participated or indulged in the fraudulent exportation of goods.
• Furthermore, the Department failed to show that any independent action had been taken against the Customs Broker under the Licensing Regulations of 2018 for the alleged breach of Regulation 10(n). Finding no merit in the confirmation of the penalty.

Hence, the Tribunal set aside the impugned order and allowed the appeals in favour of the appellant.

Relevant Sections and Regulations:

Section 117 of the Customs Act, 1962:

117. Penalties for contravention, etc., not expressly mentioned.-Any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to a penalty not exceeding [one lakh rupees].

Regulation 10(n) of the Customs Broker Licensing Regulations, 2018:

10. Obligations of Customs Broker.- A Customs Broker shall -

(n) verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN), identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information;