[Cites 7, Cited by 0]
Calcutta High Court
Commissioner Of Customs (Preventive) vs Shri Pramod Nahata on 9 April, 2026
Author: Rajarshi Bharadwaj
Bench: Rajarshi Bharadwaj
OD 6
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
CUSTA/84/2025
IA NO: GA/1/2025, GA/2/2026
COMMISSIONER OF CUSTOMS (PREVENTIVE)
Vs
SHRI PRAMOD NAHATA
BEFORE:
The Hon'ble JUSTICE RAJARSHI BHARADWAJ
AND
The Hon'ble JUSTICE UDAY KUMAR
Date : 09th APRIL, 2026.
Appearance:
Mr. Kaushik Dey, Adv.
Mr. Tapan Bhanja, Adv.
Mr. Gourab Karmakar, Adv.
...for the appellant.
Mr. Shovendu Banjerjee, Adv.
Mr. Soumyajit Mishra, Adv.
...for the respondent.
The Court:
1. Re: GA 1 of 2025 (Condonation of Delay)
1.1. Before we enter into the merits of the admission of this appeal, we
first address the application for condonation of delay, registered as GA 1
of 2025. There is an admitted delay of 118 days in preferring this appeal.
We have perused the averments made in the application and heard the
learned counsels for the appellant and respondent. We are satisfied that
the appellant was prevented by sufficient cause from filing the appeal
within the prescribed period of limitation. In the interest of justice and to
ensure that the matter is considered on its legal standing, the delay is
hereby condoned.
1.2. Accordingly, GA 1 of 2025 is allowed and disposed of.
2. Re: Admission of Appeal
2.1. The matter is now taken up for hearing on the point of admission.
This statutory appeal, preferred under Section 130 of the Customs Act,
1962, is directed against the Final Order passed by the Learned
Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata,
dated 24th January 2025. By the impugned judgment, the Learned
Tribunal set aside the penalties imposed upon the Respondent, who was
acting as a Director of a Customs Broker firm, under Sections 112(a) and
114AA of the Act.
2.2. The Tribunal held that the Respondent was not liable for the alleged
tax evasion, finding no evidence of mens rea or active participation in the
fraud. The Tribunal further observed that the Respondent had merely
discharged a ministerial duty by submitting documents provided by the
importer. Aggrieved by this total exoneration and the consequent
dropping of all penal proceedings, the Revenue has moved this Court,
contending that the Tribunal failed to appreciate the vital and intentional
role played by the Customs Broker in a high-value fraud.
3. FACTUAL MATRIX
3.1. The dispute originated from a specialized investigation conducted by
the Directorate of Revenue Intelligence (DRI) concerning a series of 82
import consignments of readymade garments from Bangladesh. These
imports were cleared by M/s. Future Enterprises Ltd. (the Importer)
under the South Asian Free Trade Area (SAFTA) Agreement, whereby the
goods were granted 100% duty exemption. This exemption was
predicated on the goods meeting the "Rules of Origin," which stipulate
that the value of non-originating materials used in the production must
not exceed 70% of the FOB (Free on Board) Value, ensuring significant
value addition within the SAFTA region.
3.2. Upon detailed scrutiny, the Revenue alleged a systematic evasion of
duty by the Importer, who, in collusion with overseas suppliers,
suppressed the value of "Free of Cost" (FOC) materials, such as fabrics
and accessories supplied from third countries, to artificially keep the
non-originating material content below the permissible threshold.
Furthermore, the Revenue found that the Certificates of Origin (COO)
submitted to substantiate the exemption were either tampered with or
contained misstated facts regarding the cost structure of the garments.
3.3. The Respondent, in his capacity as the Director of the Customs
Broker firm, was the authorized agent responsible for filing the Bills of
Entry and navigating the clearance process. The essence of the Revenue's
case against the Respondent is predicated upon the assertion that as a
licensed Customs Broker, he was a "vital link" in the transaction. The
revenue alleged that the Respondent knowingly facilitated the fraud by
submitting these defective documents and intentionally suppressing
material information from the Customs authorities, thereby violating the
Customs Brokers Licensing Regulations (CBLR).
3.4. The Adjudicating Authority originally accepted the Revenue's
contention, confirming the demand for duty and imposing significant
penalties on the Respondent under Section 112(a) and Section 114AA of
the Customs Act, 1962. However, upon an appeal preferred by the
Respondent, the Learned Tribunal reversed this decision. The Tribunal
found that the Revenue's method of quantifying the "non-originating
material" was ad hoc and lacked a sound legal basis. More importantly,
the Tribunal arrived at a factual finding that the Respondent acted
merely as a ministerial conduit, processing documents handed over by
the principal importer without any proven knowledge of the alleged
underlying forgeries.
3.5. The Tribunal also addressed the procedural legality of the demand,
observing that the adjudication order was passed beyond the one-year
statutory mandate prescribed under Section 28(9) of the Customs Act.
Finding the proceedings hit by limitation and lacking evidence of mala
fide intent on the part of the Broker, the Tribunal vacated the penalties
in toto. It is this comprehensive exoneration that the Appellant/Revenue
seeks to challenge in the present appeal, asserting that the Respondent's
role was more than just clerical and had a direct impact on the massive
loss of revenue.
4. SUBMISSIONS OF THE APPELLANT
4.1. Mr. Kaushik Dey, Learned Advocate appearing on behalf of the
Appellant/Revenue, while pressing for the admission of this appeal, has
first submitted that the Learned Tribunal failed to appreciate the gravity
of the contraventions committed by the Respondent in his professional
capacity. He contends that the Respondent, as a Customs Broker, was
under a statutory mandate to verify the correctness of the information
handled by him. Ld. Advocate alleges that the Respondent acted in a
manner diametrically opposite to the provisions of the SAFTA Agreement
Rules of Origin and the Customs Brokers Licensing Regulations. The
Revenue asserts that the Respondent facilitated imports based on
Certificates of Origin that were demonstrably tampered with or based on
misdeclared values, thereby breaching the trust reposed in the licensing
system.
4.2. It is further canvassed on behalf of the Appellant that the role of the
Respondent was "vital" and cannot be characterized as merely
"ministerial" or "conduit-like." It is the Revenue's case that the
Respondent served as the primary interface between the Importer and
the Customs Department. It is alleged that he intentionally suppressed
material facts, specifically the omission of "Free of Cost" (FOC) material
values, from the Customs authorities. This suppression was allegedly a
calculated move to ensure the illicit availment of duty exemptions,
resulting in a massive loss to the exchequer directly attributable to this
orchestrated misdeclaration.
4.3. Regarding the preliminary objection on maintainability, Mr. Dey
submits that the CBIC Instruction dated 02.11.2023 does not act as a
bar to this appeal. He argues that since the penalty against the
Respondent is "yet to be quantified" following the Tribunal's decision to
set aside the order, the monetary limit cannot be strictly applied to deny
the Revenue its right of appeal. Furthermore, he asserts that the nature
of the fraud, which involves the integrity of international trade
agreements, brings this matter within the "Exceptional Category" of the
litigation policy, allowing the Revenue to contest adverse judgments
irrespective of the specific amount involved.
4.4. In support of the contention that the "tax effect" is substantial, Mr.
Dey places heavy reliance on the decision of this Hon'ble Court in 2023
(72) G.S.T.L 202 (Cal), also reported as (2023) 3 Centax 282 (Cal). Ld.
Advocate submits that the ratio of the cited case establishes that where a
Customs Broker or an authorized representative is found responsible for
filing wrong information on behalf of an importer, the total revenue stake
of the investigation must be the benchmark. He further submits that the
total tax effect in the subject investigation exceeds Rs. 12 Crore, and
therefore, the aggregate loss caused to the exchequer justifies the
admission of the appeal.
4.5. Finally, Mr. Dey submits that the Tribunal's finding on limitation
under Section 28(9) is fundamentally flawed. He argues that the Tribunal
failed to consider the various COVID-19 relaxation notifications which
legally extended the time-limits for adjudication. He maintains that these
errors of law, coupled with the factual misappreciation of the Broker's
role, constitute substantial questions of law that necessitate the
intervention of this Court under Section 130 of the Customs Act.
5. SUBMISSIONS OF THE RESPONDENT
5.1. Mr. Shovendu Banerjee, Learned Advocate appearing on behalf of
the Respondent, has vehemently opposed the admission of the appeal by
raising a primary preliminary objection on maintainability alongside a
substantial defence regarding the legal standing and obligations of a
Customs Broker. He contends that the present appeal is not
maintainable in light of the National Litigation Policy. Reliance is placed
on the parent Instruction F. No. 390/Misc/163/2010-JC dated
17.08.2011 and the latest Instruction F. No. 390/Misc/30/2023-JC
dated 02.11.2023. The relevant portion of the Instruction dated
02.11.2023 is reproduced below:
"In exercise of the powers conferred by Section 131BA of the Customs Act,
1962... the Central Board of Indirect Taxes & Customs fixes the following
monetary limits below which appeal shall not be filed in the CESTAT, High
Court and the Supreme Court:
S. No. Appellate Forum Monetary Limit
1 SUPREME COURT Rs. 2 Crore
2 HIGH COURTS Rs. 1 Crore
3 CESTAT Rs. 50 Lakh
2. Adverse judgments relating to the following should be contested
irrespective of the amount involved:
a) Where the constitutional validity of the provisions of an Act or Rule is
under challenge;
b) Where Notification/ Instruction/Order or Circular has been held illegal
or ultra vires;
c) Classification and refund issues which are of legal and/or recurring
nature."
5.2. He underscores that the Board has fixed a mandatory monetary
limit of Rs. 1 Crore for preferring appeals before the High Court. Since
the Learned Tribunal has rendered a categorical finding that the
Respondent has no tax liability and has vacated the penalty in its
entirety, the "tax effect" in this appeal is nil. He argues that the Appellant
cannot circumvent this binding instruction by clubbing the Importer's
independent liability with that of the Broker.
5.3. Mr. Banerjee further submits that the Respondent's role as a
Customs House Agent (now Customs Broker) is strictly governed by the
Customs Brokers Licensing Regulations (CBLR). He contends that his
duty is limited to the diligent submission of documents as provided by
the client or importer to the Customs authorities. He argues that a
Broker is not an investigator and cannot be expected to verify the "origin"
of goods beyond the face of a Certificate of Origin issued by a foreign
sovereign authority, which in this case was the Export Promotion Bureau
of Bangladesh. He further maintains that since these certificates were
never revoked or declared fake by the issuing authority, no liability can
be fastened upon him for "filing wrong information" simply for placing
those documents before the Proper Officer.
5.4. Mr. Banerjee for the Respondent submits that for the invocation of
Section 112 or Section 114AA of the Customs Act, the Revenue must
establish a "guilty mind" or an intentional act of fraud. The Learned
Tribunal, being the final fact-finding authority, has already concluded
that the Respondent acted in good faith and as a mere conduit in the
transaction of business. This finding of fact, the Respondent argues,
precludes the existence of any "substantial question of law" necessary for
admission under Section 130. He asserts that the Revenue is merely
attempting to re-appreciate evidence which has already been conclusively
decided in favor of the Respondent.
5.5. To bolster the argument on maintainability and the scope of a
Broker's liability, Mr. Banerjee places heavy reliance on the judgment of
this Hon'ble Court in CUSTA 77 of 2026 (Shri Pramod Nahata vs.
Commissioner of Customs) dated 12.03.2026. It is submitted that in that
matter, which involved an identical set of facts and the same
Respondent, this Court held that if the Tribunal finds a Customs Broker
innocent of fraud and the penalty remains unquantified, the Revenue's
appeal is hit by the monetary limits of the 2023 Instruction. The
Respondent argues that the ratio of the said judgment squarely applies
to the present case, and as the Appellant has failed to show any
"exceptional circumstances" or recurring questions of law, the appeal
ought to be dismissed at the admission stage itself.
5.6. Therefore, Mr. Banerjee concludes that in the absence of a
quantified penalty and a proven link to the fraud, the appeal is an
exercise in futility and ought to be dismissed at the admission stage
itself.
6. DISCUSSION, FINDINGS AND CONCLUSION OF THE COURT
6.1. We have carefully considered the rival submissions, the detailed
factual matrix, and the legal precedents cited at the Bar. The primary
issue for our determination is whether the present appeal involves a
substantial question of law that warrants admission under Section 130
of the Customs Act, 1962, particularly in light of the mandatory
monetary thresholds prescribed for Revenue appeals.
6.2. Upon a perusal of the impugned order, we find that the Learned
Tribunal, acting as the final fact-finding authority, has rendered a
categorical finding that the Respondent was not a participant in the
alleged fraud. The Tribunal observed that the Respondent's role was
confined to the ministerial act of submitting documents, specifically the
Certificates of Origin, handed over to him by the importer. In the absence
of any evidence demonstrating that the Respondent had knowledge of the
alleged forgeries, or that he intentionally suppressed material facts, no
liability under Section 112 or Section 114AA can be sustained. These
findings occupy the realm of pure fact, and the Appellant has failed to
demonstrate any perversity in the Tribunal's reasoning that would
elevate these issues to the status of a substantial question of law.
6.3. Furthermore, the maintainability of this appeal is heavily curtailed
by the National Litigation Policy. The CBIC Instruction dated 02.11.2023
unequivocally fixes a monetary limit of Rs. 1 Crore for the Revenue to
prefer an appeal before the High Court. In the instant case, the Tribunal
has set aside the penalty against the Respondent in its entirety;
consequently, there is no "tax effect" or "quantified penalty" currently
existing against the Respondent. We find the Appellant's contention, that
the total investigation value of Rs. 12 Crore should be the benchmark, to
be legally untenable in the context of an appeal against a specific
individual who has been exonerated. As held by this Court in CUSTA 77
of 2026, the monetary limit must be assessed in relation to the specific
liability of the party before the Court. To allow the Revenue to club a
Broker's case with an Importer's independent tax liability would
effectively render the Board's own restrictive instructions nugatory.
6.4. We also find that this case does not fall within the narrow exceptions
provided in the 2023 Instruction. There is no challenge to the
constitutional validity of any provision, nor has any notification been
held ultra vires. The dispute is entirely fact-centric, revolving around the
degree of "due diligence" exercised by a Customs Broker in a specific
transaction. Such matters do not constitute "recurring questions of law
of significant public importance" as contemplated by the exceptions.
Additionally, while the Appellant raised a point regarding the statutory
limitation under Section 28(9), such a legal question becomes academic
once the primary finding of "no liability on merits" is upheld.
6.5. In view of the above, we are of the firm opinion that no substantial
question of law arises for our consideration. The appeal is hit by the
mandatory monetary limits prescribed by the CBIC and lacks the
necessary legal foundation for admission.
6.6. Accordingly, the appeal (CUSTA 84 of 2025) is not admitted and is
hereby dismissed.
6.7. Consequently, the connected applications for stay (GA 1 of 2025 &
GA 2 of 2026) also stands disposed of.
6.8. There shall be no order as to costs.
(RAJARSHI BHARADWAJ, J.)
(UDAY KUMAR, J.)
P.A.
