Customs broker due diligence failures can trigger confiscation-linked penalty when importer verification and authorisation checks are ignored.

A customs broker may be exposed to confiscation-linked penalty where it fails to verify the importer's credentials, acts without proper authorisation, and submits an incorrect report in the import process. On the facts discussed, the goods were found to be misdeclared as readymade garments, while the broker had not discharged basic due diligence or KYC obligations; penalty under Section 112(a)(i) was therefore sustained. The text also notes that objections based on vagueness and limitation were rejected because the notice traced the broker's role, the verification failures, and the reported service defects, and the show cause notice and corrigendum were upheld.

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Issues: (i) Whether the customs broker had failed to discharge due diligence and KYC obligations in relation to the import, thereby rendering the goods liable to confiscation and attracting penalty under Section 112(a)(i) of the Customs Act, 1962; (ii) Whether the show cause notice and corrigendum were vitiated by vagueness or limitation.

Issue (i): Whether the customs broker had failed to discharge due diligence and KYC obligations in relation to the import, thereby rendering the goods liable to confiscation and attracting penalty under Section 112(a)(i) of the Customs Act, 1962.

Analysis: The imported consignment was declared as readymade garments but, on examination, was found to consist of old and worn clothing of poor quality without tags or labels, supporting the conclusion that the declaration was false and the goods were overvalued. The customs broker had no direct contact with the importer, acted without proper authorization, did not verify the importer's credentials or business address, and did not check the required authorization for restricted goods. The record also showed an incorrect report regarding service of notices and persistent failure to establish basic due diligence. These facts justified the inference that the broker had not acted with the care expected of a customs broker and had participated in conduct rendering the goods liable to confiscation.

Conclusion: The issue is decided against the appellant. Penalty under Section 112(a)(i) of the Customs Act, 1962 was held to be rightly imposed.

Issue (ii): Whether the show cause notice and corrigendum were vitiated by vagueness or limitation.

Analysis: The objection based on vagueness was rejected because the proceedings were founded on the customs broker's role in the import process, the failure to verify the importer, and the false report regarding service of the hearing notice. The limitation challenge was also not accepted, as the delay in bringing the customs broker into the proceedings was linked to the investigation and the broker's own conduct in attempting service and reporting on the importer's address. On the facts found, the notice was treated as valid and not time-barred.

Conclusion: The issue is decided against the appellant. The show cause notice and corrigendum were upheld.

Final Conclusion: The customs broker's omissions and false reporting were treated as sufficient to sustain the penalty and the adjudication, and the appeal was dismissed in full.

Ratio Decidendi: A customs broker who fails to conduct basic verification of the importer, acts without proper authorization, and submits an incorrect report in relation to the import proceedings can be held to have rendered the goods liable to confiscation and become liable to penalty under Section 112(a)(i) of the Customs Act, 1962.

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