Case Law Details
Transmarine Corporation Vs Commissioner of Customs (CESTAT Chennai)
The appeals were filed by two Customs Brokers against a common Order-in-Original dated 08.03.2024 by which the Commissioner of Customs, Chennai-II imposed penalties of ₹3,00,000 each under Sections 112(a) and 114AA of the Customs Act, 1962. The penalties arose from proceedings relating to imports made by M/s Larsen & Toubro Limited, Mumbai.
The importer was engaged in the import of wheel loaders. The Revenue alleged that the importer had incorrectly classified the imported goods in order to avail a concessional rate of customs duty. Insofar as the Customs Brokers were concerned, it was alleged that they had knowingly overlooked the true nature and correct Customs Tariff Item (CTI) of the imported wheel loaders. According to the Revenue, this conduct facilitated the evasion of customs duty by enabling the importer to claim concessional duty benefits.
A show cause notice dated 31.07.2023 was issued proposing, among other things, the imposition of penalties under Sections 112(a) and 114AA on the two Customs Brokers as co-noticees. Although the brokers filed replies to the notice, the Commissioner, being dissatisfied with their explanations, confirmed the proposed penalties through the impugned order. This led to the filing of the present appeals.
The Tribunal noted that there was no dispute regarding the facts of the case. It also took note of an earlier Final Order dated 28.10.2025 passed by the same Bench in the importer’s case. In that order, the Tribunal had upheld the classification adopted in the Order-in-Original. However, it had also held that the show cause notice had been issued beyond the normal period of limitation, and consequently, the demand of duty, interest, and penalty was restricted to the normal period.
Importantly, the Tribunal had further observed in the importer’s case that the dispute involved a question of classification, which was interpretational in nature. On that basis, it held that no mala fide intention could be attributed to the importer.
Applying the same reasoning to the present appeals, the Tribunal held that where the importer itself had been exonerated from allegations of mala fide conduct because the issue was interpretational, the Customs Brokers could not be faulted merely for filing Bills of Entry based on the importer’s instructions. In such circumstances, the question of abetment did not arise.
The Tribunal further held that the finding relating to the invocation of the extended period of limitation in the importer’s case would equally apply to the first appellant. Since the importer had been granted relief on these grounds, there was no justification for sustaining the penalties imposed on the Customs Broker.
With respect to the second appellant, who was also a Customs Broker operating from Kolkata, the Tribunal held that the same benefit extended to the importer should also be available to this appellant. The reasons that justified relief in the case of the importer and the first appellant were equally applicable to the second appellant.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The Appeal Nos. C/40417/2024 & C/40418/2024 are filed by the 1st Appellant & 2nd Appellant respectively against the common Order-in-Original No.105317/2024 dated 08.03.2024 passed by the Commissioner of Customs, Chennai-II, whereby the Commissioner has imposed a penalty of Rs.3,00,000/- under Section 112 (a) of the Customs Act, 1962 and Rs.3,00,000/- under Section 114AA ibid on each of the Appellants. Admittedly, both the Appellants are Custom Brokers for the importer namely M/s. Larsen & Toubro Limited, Mumbai and relevant facts for disposal of these Appeals as could be gathered from the impugned order are that the importer viz. M/s.Larsen & Toubro Ltd., Mumbai is engaged in the import of wheel loaders; the Revenue felt that the classification declared by the importer was incorrect and the importer in order to avail concessional rate of duty had wrongly classified the imported goods in question. Insofar as the allegations against the Appellants are concerned, the Appellants had knowingly overlooked the details as to the nature of the goods and Customs Tariff Item (CTI) of the imported wheel loaders and thereby caused evasion of huge amount of Customs duty by suppressing true nature and CTI of the wheel loaders in question, which resulted in the importer claiming inter alia the concessional rate of Customs Duty.
2. The above allegation prompted the Commissioner to issue SCN No.71/2023 dated 31.07.2023 on various Noticees thereby inter alia proposing the imposition of penalty under Sections 112 (a) and 114AA ibid on these two Appellants as co-noticees. It appears from the record that the Appellants/co–noticees filed their reply to the SCN but, the Commissioner not satisfied with the reply, vide Order-in-Original No.105317/2024 dated 08.03.2024 has confirmed the penalties as proposed in the SCN. The same has lead to the filing of these Appeals.
3. Heard Smt. A. Aruna, learned Advocate for the 1st Appellant and Smt. Rajni Menon, learned Departmental Representative defended the impugned imposition of penalty; there was no representation for the 2nd Appellant despite service of Notices by the Registry. Hence, the Appeals were taken up for hearing on merits; after hearing both sides, the only question that arises for my consideration in these Appeals is, ‘whether the imposition of penalty Sections 112 (a) and 114AA ibid is correct?
4. Facts are not in dispute; I have carefully gone through the pleadings both verbal as well as written synopsis filed for the 1st Appellant and also carefully perused the impugned Order-in-Original. There is also not dispute that in respect of the importer viz., M/s. Larsen & Toubro Limited, Mumbai this Chennai CESTAT Bench has vide Final Order No.41171/2025 dated 28.10.2025 confirmed the classification proposed and confirmed in the Order-in-Original (supra). But since the SCN was issued beyond the normal period, it was held in the Final Order (supra) that the demand of duty, interest and penalty should be restricted to the normal period alone. For the very same reasons, the Bench has also felt it proper that since the issue involved classification which was an interpretational one, hence, no mala fides could be impregnated into the conduct of the importer.
5. Extending the above rationale, when the importer itself stands exonerated for want of mala fide intentions and the issue involved was an interpretational issue, the Customs Broker, who is the 1st Appellant herein cannot be found fault with for simply filing the Bills of Entry at the instructions of the importer. Hence, there cannot be any question as to abetment. The other reason, i.e. the SCN being issued by invoking the larger period of limitation would also apply in the case of the 1st Appellant as well.
6. In view of the above discussion, especially when the importer itself has been exonerated, I do not find any justification in the impugned order imposing/confirming penalties under Sections 112 (a) and 114AA ibid and hence, to this extent, the impugned order in so far as the 1st Appellant is concerned, is set aside.
7. The 2nd Appellant also appears to be a Customs Broker operating from Kolkata, the benefit based on the reasons discussed in the preceding paragraphs, extended to the importer should also come to the rescue of this Appellant and hence, to this extent, the penalty imposed on the 2nd Appellant also stands deleted.
8. Resultantly, impugned order insofar as the present Appellants are concerned, stands set aside and the Appeals are allowed as indicated above.
(Order pronounced in open court on 02.06.2026)
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