Sri Velavan Logistics Services Private Limited Vs Commissioner of Customs (CESTAT Chennai)
In the case of M/s. Sri Velavan Logistics Services Private Limited v. The Commissioner of Customs [Customs Appeal No. 40352 of 2022 dated December 21, 2022], the CESTAT, Chennai, ruled that customs brokers cannot be held liable for the undervaluation of goods. The court held that the valuation of goods is determined by the contract between the exporter and importer, and customs brokers do not have any influence in this matter. Consequently, the penalty imposed on the customs broker under Section 114 of the Customs Act was deemed unlawful and was set aside.
Background:
M/s. Sri Velavan Logistics Services Private Limited, the appellant in this case, is a customs broker. They received a Show Cause Notice on August 3, 2019, alleging their involvement in exporting undervalued goods. The market survey indicated that similar products were sold at INR 59/- per piece, including GST, while the actual value of the exported goods, as determined under Rule 6 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007, was INR 119/- per piece. The importer had accepted this value. The appellant was held accountable under Regulations 11(n) and 11(d) of the Customs Broker Licensing Regulations, 2013, and faced a penalty under Section 114 of the Customs Act, 1962.
The Adjudicating Authority, in their Order-in-Original dated March 8, 2021, rejected the Free on Board value under Rule 8(1) read with Rule 7 of the CV Rules and imposed a penalty of INR 10,00,000/- on the appellant. The appellant then appealed to the first Appellate Authority, but their appeal was rejected based on a violation of Regulation 11(n) of the CBLR, as stated in the Order-in-Appeal dated May 10, 2022. Dissatisfied with this decision, the appellant filed the present appeal.
Issue:
The main question was whether it was justified for the Revenue to impose a penalty under Section 114 of the Customs Act on the appellant for an alleged violation of Regulations 11(n) and 11(d) of the CBLR.
Court’s Decision:
