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 “Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Dated: 21.03.2025

CESTAT New Delhi- Confession Statements Require Corroboration CB cannot be held responsible for fraud

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, ruled in favor of CHA, a Custom House Agent (CHA) and proprietor of M/s. Brightline (C&F) Agency, by setting aside penalties imposed under Section 114(iii) and Section 114AA of the Customs Act, 1962.

Case Background

• The Directorate of Revenue Intelligence (DRI), Ahmedabad Zonal Unit, investigated M/s. Agogo Overseas for over-invoicing exports of LED Flash Light Torches to illegally claim higher export incentives under the Merchandise Export from India Scheme (MEIS).
• Based on intelligence, a shipping bill (No. 3003627 dated 26.03.2019) was put on hold, and an examination at Nhava Sheva Port confirmed gross over-valuation and misdeclaration.
• The Customs Department alleged that CHA, acting as the Customs Broker, knowingly facilitated the fraudulent export by preparing and filing shipping documents.
• A Show Cause Notice (SCN) was issued on 03.03.2020, followed by Order-in-Original No. 49/2020 (dated 13.09.2020), imposing a penalty of ₹1 lakh under Section 114(iii) and ₹1 lakh under Section 114AA.
• The penalty was upheld in Order-in-Appeal No. 1240/2022-23 (dated 19.12.2022), prompting CHA to appeal before CESTAT.

Key Arguments by the Appellant (CHA)

• No Knowledge of Over-Valuation:
  • The appellant was introduced to M/s. Agogo Overseas by a forwarding agent and had received KYC documents from the exporter’s proprietor.
  • There was no evidence that he was aware of the fraudulent over-valuation before filing the documents.
• Improper Reliance on Statements:The Customs Department relied solely on his recorded statement, which was later retracted as involuntary and given under pressure.
• As per Supreme Court rulings, a confession alone cannot form the basis for penal action unless corroborated with independent evidence.

• Improper Reliance on Statements:
  • The Customs Department relied solely on his recorded statement, which was later retracted as involuntary and given under pressure.
  • As per Supreme Court rulings, a confession alone cannot form the basis for penal action unless corroborated with independent evidence.

• Incorrect Application of Section 114 & 114AA:
• The department failed to prove intent to commit fraud or knowledge of false documentation, which are essential requirements under Sections 114 and 114AA.

• Absence of Corroborative Evidence:
• The allegation that he charged 1% of the IGST/Drawback claim for processing fraudulent exports was not backed by any independent evidence.

Findings & Final Decision by CESTAT

1. No Evidence of Intent to Commit Offense:

• The appellant’s role was limited to filing export documents based on information provided by the exporter.
• The tribunal ruled that the act of filing documents does not amount to an “attempt to improperly export goods” under Section 114(iii).

2. Confession Statements Require Corroboration:

• The tribunal noted that an uncorroborated admission cannot be the sole basis for penalty, as per Supreme Court precedents.
• The statement was retracted, and there was no independent proof of the alleged fraudulent activity.

3. Failure to Prove Violation of Customs Act:

• The Customs Department failed to prove that CHA knowingly participated in the overvaluation scheme.
• The tribunal ruled that mere procedural compliance by a Customs Broker cannot be equated with deliberate fraud.

Final Verdict:

• The penalties of ₹1 lakh under Section 114(iii) and ₹1 lakh under Section 114AA were set aside.
• The appeal was allowed in favor of CHA, confirming that there was no evidence of intentional wrongdoing.

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Source: CESTAT New Delhi

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