Customs broker penalty unsustainable where factory-sealed consignments and genuine KYC documents showed no knowledge of concealed contraband.

Penalty under the Customs Act against a customs broker, its director and employees was found unsustainable where the export consignments were factory-sealed, the KYC documents were genuine, and no evidence showed knowledge of concealed contraband. The record indicated valid documentation, including IEC, PAN, bank account details, Aadhaar card and self-sealing permission, and the seals were intact at investigation. The dropping of proceedings under the Customs Brokers Licensing Regulations, 2018 further supported the absence of culpability. On that basis, the necessary foundation for penal action was not established and the penalties were set aside.

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Issues: Whether penalties under the Customs Act were leviable on the customs broker, its director, and employees when the export consignments were factory-sealed, the KYC documents were genuine, and there was no evidence that they had knowledge of the contraband goods.

Analysis: The consignments were exported through a valid customs broker on the basis of genuine KYC documents, including IEC, PAN, bank account, Aadhaar card, and self-sealing permission. The seals were found intact at the time of investigation. The record did not establish that the customs broker or its director had knowledge of the red sanders being concealed in the consignment. The proceedings initiated under the Customs Brokers Licensing Regulations, 2018 had also been dropped, which supported the absence of culpability. In these circumstances, the necessary foundation for penal action was not made out.

Conclusion: Penalties were not imposable and were set aside in favour of the assessee.

Ratio Decidendi: Penalty on a customs broker under the Customs Act cannot be sustained in the absence of evidence of knowledge or involvement in the export of contraband, particularly where the consignments were factory-sealed and the documentary verification was genuine.

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