HC Quashes Penalty on CHA for Lack of Reasoned Findings

The petitioner, Sudipta Bose, a Customs House Agent (CHA), challenged a penalty of Rs. 50 lakh imposed under Section 114(iii) of the Customs Act, 1962. The penalty arose from export transactions carried out by M/s KSH International involving “Hamdard” branded products, where the department alleged over-invoicing based on price differences with the manufacturer’s website. The petitioner contended that as a customs broker, he merely processed documents provided by the exporter and had no knowledge of any alleged over-valuation. It was argued that there was no material on record to establish conscious involvement or intent. However, the adjudicating authority proceeded to impose the penalty without specifically addressing these contentions.

Main Issue: Whether a penalty under Section 114(iii) of the Customs Act can be sustained when the adjudicating authority fails to consider the defence of lack of knowledge and passes a non-speaking order.

HC Decided: The High Court set aside the penalty order and remanded the matter for fresh adjudication. It held that the impugned order suffered from a fundamental flaw as it failed to deal with the petitioner’s specific defence regarding absence of knowledge. The Court observed that imposition of penalty requires a finding on conscious involvement or knowledge, particularly in cases involving intermediaries like customs brokers.

Whether such knowledge existed is a disputed question of fact, which must be examined with reasons. The adjudicating authority, however, did not analyse or rebut the petitioner’s explanation and proceeded mechanically. Such an order, lacking reasoned consideration, amounts to a non-speaking order and violates principles of natural justice. Therefore, the matter was remitted for a fresh, reasoned decision after considering all submissions.

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