2026 (2) TMI 53 - HC - Customs

Penalty on Customs House Agents challenged for lack of mens rea and misapplication of penalty provisions, writ allowed restoring relief.

High Court review found that penalties were imposed on a Customs House Agent without findings of mis-declaration, fraud, overvaluation, or mens rea; ... Penalty for improper importation of goods - mis-declaration - overvaluation and failure to advise/importer - Obligations of Customs Broker / due diligence - Mens rea requirement for penalties - Judicial review under Article 226 - Customs House Agents Licensing Regulations, 2018 Regulation 10(d),(n),(o),(q) - HELD THAT:- It is the case of the respondent authority that the petitioner, being a CHA, has tried to abet and aid the goods which were mis-declared and, hence, the provisions of Section 112(a) of the Customs Act would get attracted, which would have consequences leading to the imposition of penalty. From the tenor of the order which is being passed by the respondents, we find that there is no whisper of any finding relating to any mis-declaration, fraud or overvaluation, or any mens rea on the part of the petitioner, which would even remotely connect the petitioner with such acts that would satisfy the ingredients of Section 112(a) of the Customs Act. The intention of the advisory Circular dated 23.10.2024 is clear and falls in line with the settled legal principle for imposition of penalties against CHA in those cases where there is no evidence of complicity in the illegal importation of goods or wrong intent or prior knowledge about the violation, penalty cannot be imposed on the Customs Brokers. Before imposing the penalty on the petitioner, the respondent-authority had the option to suspend, revoke the license under the Regulation 14, and 16 of CBLR, 2018, in case the act of the petitioner deserved such action looking to his conduct. However, such steps are not resorted. Thus, we find that the respondent authority by invoking the provisions of 112(a), 112(b) and 114AA of the Customs Act, 1962 has committed a jurisdictional error by misapplying the statutory provisions. Thus, instead of relegating the petitioner for availing the remedy of filing of appeal which invites pre-deposit of 7.5% of Rs. 7,00,00,000/- the amount of penalty, we find that this is a fit case to invoke the inherent powers under Article 226 of the Constitution of India for setting aside such action. Thus, the present writ petition stands allowed. Issues: (i) Whether the penalties imposed on the Customs House Agent under Sections 112(a), 112(b) and 114AA of the Customs Act, 1962 for alleged mis-declaration, overvaluation and failure to advise/importer were legally sustainable.Analysis: The Court examined the respondent authority's findings and the statutory provisions invoked. The adjudicating order recorded that the CHA 'might not have knowledge' of mis-declaration and might have acted on documents supplied by the importer and was not shown to be a beneficiary of the alleged fraud. Section 112(a) attracts civil liability except where the provision expressly requires mens rea for abetment; Section 112(b) and Section 114AA require knowledge or intent. Regulation 10 of the CBLR, 2018 prescribes obligations of a customs broker including verification and advising the client, but breach of those obligations does not automatically establish the mens rea necessary to attract penalties under Sections 112(b) and 114AA or the abetment limb of Section 112(a). The Court also noted CBIC circulars and instructions cautioning against routine imposition of penalties on customs brokers in absence of evidence of complicity, prior knowledge or abetment. The authority misapplied penal provisions by imposing statutory penalties without findings of culpable knowledge, intent or abetment by the CHA and without considering alternative regulatory remedies under the CBLR, 2018.Conclusion: The penalties imposed under Sections 112(a), 112(b) and 114AA of the Customs Act, 1962 on the petitioner are quashed and set aside; the writ petition is allowed, and the penalty order is set aside in favour of the petitioner.