We are pleased to share a significant win achieved by our team before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, in the case of M/s H.C. Khanna & Company Vs Principal Commissioner of Customs, (Customs Appeal No. 55343 of 2023).
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🔹 Appearance
The appellant was represented by Dr. B.L. Garg, Advocate, C/o Judicious Consultants.
🔹 Background
The matter involved imposition of penalties on a Customs Broker under Section 117 of the Customs Act, 1962, on the allegation that the broker failed to ensure correct classification of imported goods and did not exercise due diligence.
🔹 Key Issue
Whether a Customs Broker can be penalized under Section 117 for alleged misclassification of goods by the importer?
Whether the SCN is valid if it is issued after the confirmation of Resolution Plan?
🔹 Our Submissions
Judicious Consultants, representing the appellant, argued that:
- The Customs Broker merely acts on the basis of documents and instructions provided by the importer.
- The responsibility for correct classification and declaration lies solely with the importer under the Customs law.
- There was no evidence of any deliberate act, negligence, or knowledge on part of the broker.
- Penalty provisions cannot be invoked in absence of any proven contravention.
Additionally, we highlighted that:
- The importers were undergoing insolvency proceedings and a resolution plan had already been approved.
- In light of settled law, all prior claims not forming part of the resolution plan stand extinguished, rendering the proceedings unsustainable.
🔹 Tribunal’s Findings
The Hon’ble Tribunal accepted the submissions and held that:
- A Customs Broker is not expected to examine or verify the technical classification of goods.
- The obligation to make correct declarations rests with the importer.
- No evidence existed to establish any violation or wrongdoing by the Customs Broker.
- Invocation of penalty under Section 117 was not justified.
- Further, once a resolution plan is approved, claims not forming part of it cannot be pursued.
Accordingly, the penalties imposed were set aside, and all appeals were allowed in favour of the appellant.
🔹 Significance of the Ruling
This decision reinforces that:
- Customs Brokers act as facilitators and cannot be penalized without evidence of wrongdoing.
- Liability under the Customs Act must align strictly with statutory obligations.
- Approval of a resolution plan has a decisive impact in extinguishing prior claims, including statutory dues not forming part of the plan.
⚖️ About Us
Judicious Consultants continues to represent clients in complex customs, GST, and indirect tax litigation, delivering strategic advisory and effective dispute resolution.
