2026 (4) TMI 80 - AT - Customs

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 ... Imposition of Penalty on customs broker - absence of evidence showing knowledge of contraband export - Business of Customs broker facilitation and clearance of export and import consignments - Factory-sealed consignments. Penalty on customs broker - Knowledge of prohibited export - Factory-sealed consignments - HELD THAT:- The Tribunal found that the export consignments were factory-sealed and, during investigation, the seals were found intact. The customs broker had obtained the exporter's KYC documents, including IEC, PAN card, bank account details, Aadhaar card and self-sealing permission, and these were found genuine. On these facts, Revenue failed to establish that the customs broker, its director or employees had any knowledge of the actual stuffing of red sanders or of any attempt to export contraband goods. The Tribunal also noted that proceedings initiated against the customs broker under the CBLR, 2018 had already been dropped. In the absence of evidence of knowledge, penalty was held not imposable. [Paras 6] Penalties imposed on all the appellants were held unsustainable and were set aside. Final Conclusion: The Tribunal held that no penalty could be sustained against the customs broker, its director and employees, since there was no evidence that they had knowledge of the prohibited goods concealed in the factory-sealed consignments. The appeals were accordingly allowed and the penalties were dropped. 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.