Customs broker penalty requires reasoned findings on culpable omission, not mere absence of physical verification of premises.

A customs broker penalty was found unsustainable where the adjudicating order failed to consider the broker's reply, supporting KYC material, and cited precedents, breaching natural justice. The court also noted that due diligence under the Customs Broker Licensing Regulations requires verification of IEC, GSTIN, client identity and declared business address through reliable documents or information, but does not mandate physical inspection of premises or personal meeting with the exporter. On penalty under Section 114(iii) of the Customs Act, a reasoned finding that the broker's act or omission rendered the goods liable to confiscation was essential. The penalty was set aside and the matter remanded for fresh adjudication.

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Issues: (i) Whether the penalty order was vitiated for failure to consider the petitioner's reply, supporting materials, and cited precedents, thereby violating natural justice; (ii) Whether a customs broker can be penalised under the due diligence obligations of the 2018 Regulations for not physically verifying the exporter's premises or for alleged overvaluation of export goods; (iii) Whether a penalty under Section 114(iii) of the Customs Act, 1962 could stand without a finding that the petitioner's act or omission rendered the goods liable to confiscation.

Issue (i): Whether the penalty order was vitiated for failure to consider the petitioner's reply, supporting materials, and cited precedents, thereby violating natural justice.

Analysis: The reply specifically asserted verification of KYC documents and relied on earlier decisions on the limited role of a customs broker. The impugned order recorded the reply but did not deal with the material content of the defence, did not explain why the KYC verification was insufficient, and did not address the binding or persuasive precedents cited. A quasi-judicial authority is required to consider relevant material and give reasons when departing from or not applying cited authorities.

Conclusion: The order suffered from violation of natural justice and was not sustainable on that basis.

Issue (ii): Whether a customs broker can be penalised under the due diligence obligations of the 2018 Regulations for not physically verifying the exporter's premises or for alleged overvaluation of export goods.

Analysis: Regulation 10(n) requires verification of IEC, GSTIN, identity of the client and functioning at the declared address through reliable documents, data or information. It does not mandate personal meeting with the exporter or physical inspection of premises. The legal position also recognises that valuation and market-price comparison do not ordinarily fall within the customs broker's work domain. On the facts, the adjudicating authority treated the absence of personal verification as decisive without examining whether the documentary KYC exercise was sufficient.

Conclusion: Mere non-physical verification or non-personal meeting could not, by itself, justify fastening penalty on the petitioner.

Issue (iii): Whether a penalty under Section 114(iii) of the Customs Act, 1962 could stand without a finding that the petitioner's act or omission rendered the goods liable to confiscation.

Analysis: Liability under Section 114(iii) requires a factual finding that the person did or omitted to do an act, or abetted such act or omission, which rendered the goods liable to confiscation. The impugned order proceeded mainly on a possibility arising from the absence of physical verification and did not return a clear finding on culpable conduct based on the documentary verifications said to have been undertaken by the petitioner. Such a jurisdictional finding was essential before penalty could be imposed.

Conclusion: The penalty could not be sustained in the absence of the requisite jurisdictional finding.

Final Conclusion: The penalty portion of the order was set aside and the matter was sent back to the adjudicating authority for a fresh reasoned decision after notice to the petitioner and consideration of all relevant material.

Ratio Decidendi: A penalty on a customs broker under Section 114(iii) cannot be upheld unless the adjudicating authority records a reasoned finding of culpable act, omission, or abetment rendering the goods liable to confiscation, and due diligence under the Customs Broker Licensing Regulations does not require physical verification of the client's premises.

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