Penalty under Section 112 of the Customs Act cannot be imposed on a Customs Broker without evidence of knowledge of undervaluation or statements legally validated under Section 138B of the Act.

FINAL ORDER NO. 85579/2026

PER: P. ANJANI KUMAR

Intelligence gathered by the officers of Directorate of Revenue Intelligence¹DRI indicated that M/s. Clear & Opaque and M/s. Reds & Blue had indulged in evasion of Customs duty by undervaluation of goods, i.e. wood treatment chemicals, resins, varnishes, lacquers. Investigations and searches were conducted at various places including the residence and office of Lalit Mange²the appellant,Director of M/s. Durga Clearing Pvt. Ltd. Various statements were also recorded. On conclusion of the investigation, a show cause notice was issued to M/s. Clear & Opaque and their partners Pratik Mehta and Faiyz Ahmed Shaikh, M/s. Reds & Blues through proprietor Shri Obaidur Rehman Sheikh. The show cause notice was also issued proposing to impose penalty on the appellant, Director of the Customs Broker. The proposals in the show cause notice were confirmed by order-in-original dated 12.05.2016. It is reported that the other noticees have settled their case before the Settlement Commission.

2. Shri Mihir Mehta, learned counsel for the appellant submits that the Principal Commissioner of Customs (General) passed an order dated 27.02.2018 against the Customs Broker firm of the appellant and revoked the licence under Customs Brokers Licensing Regulations, 2013 on the very same allegations contained in the impugned show cause notice. The matter had reached this Tribunal who vide final order No. A/87146/2023 dated 10.11.2023 set aside the order to the extent it appropriated the security deposit. Learned counsel submits that the appellant has not contravened any provisions to render himself liable for penalty under Section 112 (b) as he has not contravened any provisions of sub–section (d) and (m) of Section 111 of the Customs Act, 1962³the Act. The appellant had neither acquired possession of nor was in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any manner dealing with any goods which he knew or had reason to believe were liable to confiscation and hence no penalty can be imposed. Learned counsel submits that the impugned order does not specify which of the act rendered the goods liable to confiscation; the activity of Customs Broker in receiving the documents from an intermediary does not result in violation of any provisions under Section 111 of the Act. Learned counsel also pointed out that the main charge of undervaluation has not been proved as held by this Bench in the proceedings against the Customs Broker. As regards the transportation services provided by the appellant through his another firm as he had no knowledge of undervaluation, the activity of transportation of goods and delivery at the godown of Pratik Mehta, instead of the premises of the importer does not render the goods in itself liable for confiscation. More so, when the charge of undervaluation itself is held to be not proved, the goods cannot be held to be prohibited goods under Section 111(d) of the Act. In this regard, learned counsel relies on the decision of the Kerala High Court in the case of Proprietor Carmel Exports and Imports vs. Commissioner of Customs, Cochin ⁴2012 (276) ELT 505 (Ker.). Learned counsel, therefore, submitted that the findings of the Commissioner that the goods were imported in violation of FT (D&R) Rules, 1993 and the paragraphs 2.12(a) and 2.9.2 of the Foreign Trade Policy are no