Customs Brokers Cannot Be Punished For Bona Fide Classification Claims Made On Basis Of Importer Instructions: CESTAT Mumbai

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside a penalty imposed on a licensed Customs House Agent (CHA), holding that merely claiming an exemption or classification as per the importer's instructions does not amount to misdeclaration or misconduct. A Bench comprising Dr. Suvendu Kumar Pati (Judicial Member) and M.M. Parthiban (Technical Member) allowed the appeal filed by the assessee, Narendra Forwarders Pvt. Ltd., a Customs Broker, and quashed the penalty of ₹1 lakh imposed under Section 112 of the Customs Act stating that Customs Brokers cannot be punished for bona fide classification claims made on the basis of importer instructions and available records, particularly when the importer ultimately succeeds on merits. In the case at hand, the dispute arose from imports made in 2007 by M/s Wadhwa Associates and Realtors Pvt. Ltd., which engaged the assessee Customs Broker for clearance of fabricated aluminium products. The goods were classified under a tariff entry that allowed exemption from additional customs duty, and the Bills of Entry were initially assessed and cleared accordingly. The Directorate of Revenue Intelligence (DRI) questioned the classification and alleged that the goods were wrongly classified, making them ineligible for exemption. The importer paid the differential duty along with interest even before any show cause notice was issued. The Revenue Customs Department issued a show cause notice proposing penalty on the Customs Broker. Although the importer's classification dispute was eventually decided by the Tribunal in the importer's favour, the Commissioner (Appeals) still upheld the penalty against the broker. This led the Customs Broker to file the present appeal. The CESTAT noted that once the importer's classification was upheld and the exemption was found to be correctly claimed, there was no basis to penalise the Customs Broker. It observed that claiming a particular classification or exemption, especially when supported by documents and later upheld by the Tribunal, cannot be treated as misdeclaration. The bench observed that when the importer had already paid the duty and interest before issuance of the show cause notice, and the penalty on the importer itself was set aside, penalty on the Customs Broker could not survive. The Bench also relied on settled legal principles and earlier decisions holding that Customs Brokers cannot be penalised merely because a classification dispute arose between the importer and the Revenue. In view of the above, the Bench allowed the appeal of the assessee setting aside the order of the Commissioner (Appeals) and quashed the penalty imposed on the Customs Broker, granting consequential relief. Case Title: Narendra Forwarders Pvt. Ltd. Vs. Commissioner of Customs (Import), Nhava Sheva Case No.: Customs Appeal No. 86159 of 2015 Appearance for Appellant: Shri J.C. Patel Appearance for Respondent: Shri C.S. Vinod, Assistant CommissionerClick Here To Read/Download Order

Customs Brokers Cannot Be Punished For Bona Fide Classification Claims Made On Basis Of Importer Instructions: CESTAT Mumbai

Rajnandini Dutta

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