2026 (3) TMI 1090 - AT - Customs

Customs Broker Liability limited where no causative act; penalty under Section 114(iii) set aside on appeal.

Whether a customs broker can be penalised under Section 114(iii) of the Customs Act for facilitating overvaluation of exports was examined; the tribunal ... Liability of a customs broker for exporter's misdeclaration - proof of broker's role - facilitation of overvaluation of export consignments to obtain excess drawback - penalty under Section 114(iii) of the Customs Act, 1962 - Whether the penalty imposed on the customs broker under Section 114(iii) for alleged overvaluation of exported goods is sustainable in the absence of any finding as to the broker's specific role in over invoicing. - HELD THAT:- The Tribunal held that a customs broker acts on the instructions of the exporter and the primary responsibility to ensure correctness of particulars in shipping bills, including valuation, lies with the exporter. The adjudicating authority did not record any specific finding that the broker committed any omission or commission that rendered the goods liable to confiscation or that the broker had facilitated over invoicing. The Tribunal relied on earlier decisions treating CHAs as agents who must act on exporter instructions and requiring positive proof of the broker's culpability before imposing penalty under Section 114(iii). Because the investigation and impugned orders did not establish the appellant's role in the alleged overvaluation, the penalty could not be sustained. [Paras 6, 7, 8, 9] An identical issue came up for consideration before the Tribunal at Delhi in the case of World Cargo Movers v. Commissioner of Customs, New Delhi [2001 (10) TMI 139 - CEGAT, NEW DELHI], wherein, under similar facts and circumstances, the penalty imposed on the CHA under Section 114 ibid. was set aside. The ld. adjudicating authority has not given any finding as to the specific role played by the appellant herein in the alleged offence, for imposition of penalty under Section 114(iii) of the Customs Act, 1962. In the impugned order also, the Ld. Commissioner (Appeals) has not recorded any finding regarding the role of the appellant in the alleged overvaluation of goods. Therefore, we observe that the investigation has not established the role of the appellant in the alleged over-invoicing of the export goods with a view to avail excess drawback. Penalty imposed on the appellant under Section 114(iii) is not sustainable and is set aside. Final Conclusion: The appeal is allowed; the penalty imposed on the customs broker under Section 114(iii) of the Customs Act, 1962 is set aside for failure to establish the broker's role in the alleged overvaluation. Issues: Whether the penalty imposed on the customs broker under Section 114(iii) of the Customs Act, 1962 for alleged facilitation of overvaluation of export consignments to obtain excess drawback is sustainable.Analysis: The Tribunal examined whether the appellant (customs broker) had any role in valuation of goods or whether there was a specific finding that any omission or commission by the broker rendered the goods liable to confiscation. The records showed that description and quantity in the shipping bills matched the physical goods and that valuation differences arose from a market enquiry re calculating FOB by revenue. The appellant acted on documents/instructions provided by the exporter and no evidence or adjudicatory finding identified a specific wrongful act by the broker affecting valuation. The Tribunal applied established precedents holding that the burden of correctness of export declarations, including valuation, lies on the exporter and that a CHA/ customs broker can be penalised under Section 114 only if there is a finding that its act or omission caused liability to confiscation or otherwise materially contributed to the offence.Conclusion: The penalty imposed on the appellant under Section 114(iii) of the Customs Act, 1962 is not sustainable and is set aside; appeal allowed in favour of the assessee.