TaxTMI 
TaxTMI 
2026 (4) TMI 1686
X X X X Extracts X X X X
X X X X Extracts X X X X
....prietor for exporting goods declared by the exporter as energy drinks. The said consignments were to be exported to one Balaji Food Stuff Trading LLC, UAE. b) On January 29, 2024, the goods covered under the said shipping bills underwent 100% examination conducted by the Shed Officers stationed at the Transworld Terminals Private Limited Customs Freight Station (CFS), in the presence of officers from the Special Intelligence and Investigation Branch (Port), a representative of the Customs Freight Station (the custodian) and an authorized representative of the Customs Broker, as documented under the Panchanama dated January 29, 2024. c) As the declared value of the goods appeared to be grossly inflated therefore based on the reasonable belief that the same were liable for confiscation under Section 113 of the 1962 Act, the goods were seized under Section 110(1) of the said Act on February 16, 2024. d) Upon verification of the export documents and the data of the Indian Customs Electronic Data Interchange System (ICES) it was observed that the exporter had claimed total incentives of Rs. 1,37,138.09/- (Rupees One lakh thirty-seven thousand one hundred thirt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion no. 2.10.6 (1) of Food Safety and Standards (Food products Standards and Food Additives) Regulations, 2011 but the ones collected from the bottles containing Quarter Energy Drink did not conform to such standard and were unsafe. h. As the two types of energy drinks found in the relevant container were of two different manufacturers namely Hamdard Laboratories and of Balaji Agro Foods therefore letters were sent to both the manufacturers seeking wholesale price of their beverages. The said two manufactures wrote back informing about their respective prices, which were far less than the declared FOB. This was indicative of the exporter's intention to defraud the exchequer by claiming higher export benefits on the strength of highly overvalued FOB of the goods. i. On April 23, 2024 the exporter requested for provisional release of the goods as the buyer had allegedly cancelled the order. Accordingly, on May 13, 2024 provisional release of 180ml Red Rush RoohAfza bottles/crates (which conformed to the FSSAI standards) was allowed with approval of the Commissioner of Customs (Port) on execution of bond for a sum of Rs.1,84,27,953.60 (Rupees One crore eighty four l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se notice on May 01, 2025 thereby denying the charges levelled against him and asserting inter alia that the petitioner was not at all concerned with the declaration and the overvaluation of export goods and that the petitioner had accepted the said job of the exporter through an intermediary Shri Hariom Mishra in the usual course of business upon verifying all the requisite KYC documents. p. The show cause noticees were given an opportunity of being heard. The petitioner duly attended the hearing and the Additional Commissioner of Customs (Port), ultimately passed the order in original dated July 22, 2025 which has been impugned in the present writ petition. SUBMISSIONS ON BEHALF OF THE PETITIONER: 3. Ms. Chowdhary, learned Counsel appearing for the petitioner made the following submissions:- a. The notice dated February 13, 2025 called upon the petitioner to show cause as to why penalty would not be imposed upon the petitioner on account of the petitioner's failure "to perform due diligence" in the case and for accepting export documents from an unauthorised person without making any further effort to check for the genuine existence of the exporter. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rson. j. A ruling of the Hon'ble Division Bench of this Court in the case of Commissioner of Customs (Admn. & Airport), Kolkata Vs M/S Sunglory Agency CUSTA 13 of 2023 decided on October 11, 2023 was cited in support of the proposition that a customs broker is not required to physically visit the premises of each of its clients for verification and that verification using documents and data information if the same are authentic, should be enough to discharge the customs broker's obligations. k. The respondent/Customs Authority, while passing order impugned, failed to take into consideration the decision of the Appellate Tribunal rendered in the case of World Cargo Movers Vs Commissioner of Customs, New Delhi 2002 (139) E.L.T. 408 (Tri-Del) which held that it was no part of the job of the customs broker to compare the invoice price with the market price of identical goods for the purpose of checking correctness of the value declared in export documents. l. A judgment of the Hon'ble Supreme Court in the case of Union Of India And Others Vs Kamlakshi Finance Corporation Ltd. 1992 Supp (I) SCC 433 was pressed to contend that the adjudicating authority could n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that a customs broker has a duty of due diligence and that in case at hand the petitioner has failed to perform his duty in accordance with the said Regulations by accepting the export documents despite having knowledge about the gulf of difference in the price of the aforesaid bottles. REJOINDER SUBMISIONS BY THE PETITIONER 5. Ms. Chowdhary, learned Advocate appearing for the petitioner rejoined by submitting as follows: a. It will be evident from the scrutiny of the statements made by the petitioner that the petitioner was shown the relevant website pertaining to the aforesaid energy drink on the date of recording of his statements and it was in such context that the statement cited by the Customs Authorities was made. b. There is nothing on record to suggest that the petitioner knew about the alleged difference in price at the time of filing the export documents and shipping bills. c. In any case, valuation does not form part of the duty required to be discharged by the customs broker. A judgement of the Hon'ble Division Bench of the Hon'ble Delhi High Court in the case of Kunal Travels (Cargo) Versus C C (I & G), IGI Airport, New Delhi 2017 (354....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. 9. The show cause notice dated February 13, 2025 framed the following charge against the petitioner:- "Shri Sudipta Bose, Customs Broker M/s Bose Enterprise, being authorised CB failed miserably to perform 'due diligence' in this case by accepting documents from an unauthorised person Shri Hariom Mishra, without making any further effort to check for the genuine existence of the exporter. It is the obligation of the Customs Broker to advise his client to comply with the provisions of the Act, however Shri Sudipta Bose failed to perform his duty as per Customs Broker Licensing Regulations, 2018. The failure of the CB would have otherwise allowed the fraudulent export to take place resulting in substantial loss to the government exchequer in the form of export benefits which the exporter was not eligible to claim. Hence for its acts of omission and commission, which rendered the impugned export goods liable to confiscation under Section 113 of the Customs Act, 1962 the CB M/s Bose Enterprise, appears to be liable for penal action under Section 114(iii) of the Customs Act, 1962" 10. The petitioner has thus been charged on two counts: a). Failure to exercise ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Pradeep Mishra, who had introduced himself as dealing hand of the exporter. The noticee in his statement recorded under Section 108 of the Customs Act, 1962 has stated that he had verified IEC from DGFT website, verified GSTIN from gst.gov.in website, bank details provided by the exporter were itself verified by the bank and it is impossible to verify the functioning of his client at the declared address since the exporter is a Ludhiana-Delhi based merchant trader. Therefore, it is evident that Customs Broker has made no efforts to meet the exporter in person nor physically verified the firm addresses. When the declared value of goods is Rs.2,59,40,250/- and there are huge export benefits and input tax credit is involved, it is difficult to digest that the Customs Broker would not take minimum steps to know the exporter and just rely on a third party to facilitate the fraudulent exports. Therefore, culpability of the Customs Broker in this case of grossly overvalued export attempt cannot be ruled out. I therefore hold that the Customs Broker is indeed involved in the attempt to fraudulently export the grossly overvalued goods and by their act of omission and commission whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the purport of Regulation 10(n) seems to be fairly well settled. 17. On a combined reading of the petitioner's stand and the order impugned, it would be evident that the proper officer has not returned any finding as regards the KYC documents which the petitioner claims to have verified and the exercise undertaken by the petitioner for verifying the exporter's IEC, GSTIN and the bank details. The proper officer seems to have focussed on an area beyond the Regulations while ignoring the relevant material that required his attention. In fact the following submissions of the petitioner, made in reply to the show cause notice, do not appear to have been addressed by the proper officer at all in the order impugned: "As a Customs Broker, in routine course of our business, we obtained the export processing job against five Shipping Bills of M/s KSH International through an intermediary Shri Hariom Mishra on receipt of all the requisite KYC documents such as Authorisation Letter, Customer Information Sheet (Signature verified by Bank), cancelled cheque in the name of KSH International, PAN Card of the Proprietor and the GST Registration Certificate of the firm. All these docum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment. If such a finding is there a Writ Court may be slow to interfere as the same would be a finding of fact. However without such a finding, the order imposing penalty may be one without jurisdiction. 21. Now in the instant case, the finding, if at all the same can be said to be one, is that the petitioner did not physically verify the exporter's address. Can, in the facts of the present case, mere non physical verification of the exporter's address by the petitioner or not meeting with the exporter personally amount to either an act or omission or abetment in such act or omission? Going by the Regulations as already discussed hereinabove, that by itself may not be sufficient to clothe the proper officer with authority to impose penalty under Section 114(iii) of the 1962 Act. This is all the more so since in the present case the proper officer has not returned any finding at all as regards verification of the KYC documents of the exporter and other documentary verification claimed to have been done by the petitioner. 22. Moreover, as already indicated earlier, it would be clear from the last few lines of paragraph 34.3 of the order impugned, which has already been extracted....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id of the same by holding that the judgment was in respect of a different case. The aforesaid observation is by no means enough to get rid of a judgment cited by a litigant. The Additional Commissioner of Customs was under an obligation to consider the judgment and to disclose as to why the ratio of that judgment is not applicable to the facts and circumstances before him. He obviously did not do so. Mr. Choudhury has drawn our attention to a Division Bench judgment of Bombay High Court in the case of Century Textiles Industries Ltd. v. Union of India, reported in 2008 (232) ELT 389 (Bombay) wherein the following views were taken: "It appears from the record that the petitioner was relying upon the law laid down by the Supreme Court in the case of Government of India v. Madras Rubber Factory Limited reported in 1995 (77) ELT 433 (SC). That judgment has been referred to in the original order, but perusal of the order passed by the Commissioner (Appeals) shows that the Commissioner (Appeals) has not considered that judgment and has not given any reasons why the case of the petitioner is not covered and how that judgment is distinguishable and without recording such finding, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd veritable documents. The misdeclaration would be attributable to the client if wrong information were deliberately supplied to the customs house agent. (Emphasis by underscoring) 29. Regulation 10(e) of the 2018 Regulations (which has been relied on by the revenue) is in pari materia with Regulation 13(e) of the earlier i.e. the 2004 avatar of the 2018 Regulations. Seen in the light of the aforesaid judgment, it will be clear from the facts of the present case that here again there is no finding that the petitioner has knowingly (not "innocently") filed the relevant documents furnished to him by his client. 30. The Court is aware that the revenue had referred to the voluntary statement made by the petitioner on February 20, 2024, especially the petitioner's answer to question no.10, which had been put to him to attribute knowledge to the petitioner. The same was sought to be refuted by the petitioner by submitting that such answer had been given by the petitioner upon the website of Hamdard being shown to him and that there is nothing on record to suggest that the petitioner knew about the alleged difference in price at the time of filing the export documents and ....