CESTAT Allahabad Sets Aside Penalties Imposed Under Customs Act and Handling of Cargo Regulations

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 13.01.2026

CESTAT Allahabad Sets Aside Penalties Imposed Under Customs Act and Handling of Cargo Regulations

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Allahabad recently delivered a significant judgment on January 12, 2026, in three interconnected appeals—Customs Appeal Nos. 70635, 70636, and 70637 of 2025. ​ These appeals were filed by M/s CONCOR CFS and appellants, challenging the penalties imposed by the Principal Commissioner of Customs, Noida, under various sections of the Customs Act, 1962, and the Handling of Cargo in Customs Areas Regulations, 2009. ​

Background of the Case

The case originated from an incident on November 15, 2018, when two loaded containers were issued entry permits by the staff of M/s CONCOR CFS at the Inland Container Depot (ICD), Dadri, Uttar Pradesh. ​ The containers were mistakenly entered into CONCOR CFS instead of All Cargo Logistics CFS due to a mix-up in the codes of the two facilities. ​ Subsequently, a dummy Export Application and Shipping Bill were generated by the employees of M/s CONCOR CFS to calculate dues and additional charges for handling and storage. ​ However, the containers remained at CONCOR CFS as the required customs permissions were not obtained. ​

Later, an exporter, M/s Kunal International, filed a Shipping Bill for the export of goods in the containers. The consignment underwent a 100% physical examination by SHED Customs, and the goods were eventually cleared for export on January 25, 2019. ​ However, a Show Cause Notice (SCN) was issued on March 31, 2023, alleging misuse of the dummy Export Application and Shipping Bill, proposing penalties against M/s CONCOR CFS, its employees, and other parties involved.

Key Allegations and Penalties Imposed ​

The SCN alleged that the dummy Export Application and Shipping Bill were used to allow the gate-in of the containers, which was deemed a violation of customs regulations. ​ The Principal Commissioner of Customs imposed penalties on the appellants as follows:

1. M/s CONCOR CFS: Penalties under Regulation 12(8) of the Handling of Cargo in Customs Areas Regulations, 2009, and Sections 114AA, 117, and 158(2) of the Customs Act, 1962. ​
2. Shri O. Sairam: Penalty under Section 114AA of the Customs Act. ​
3. Shri Subodh Kumar: Penalty under Section 114AA of the Customs Act. ​

Arguments Presented by the Appellants ​

The appellants challenged the impugned order, arguing that the penalties were imposed based on inadmissible evidence and incorrect findings. ​ They contended that the dummy Export Application and Shipping Bill were created solely for calculating dues and additional charges, and were not used for any fraudulent purposes. ​ Furthermore, they argued that the findings of the Adjudicating Authority were perverse and failed to establish the necessary ingredients for imposing penalties under the cited sections of the Customs Act and regulations. ​

Tribunal’s Observations and Judgment

After hearing both sides and reviewing the appeal records, the Tribunal made the following observations:

1. Incorrect Findings: The Tribunal found that the impugned order incorrectly concluded that the containers were allowed gate-in based on the dummy Export Application and Shipping Bill. ​ The evidence clearly showed that the gate-in occurred at 02:40 hours on November 16, 2018, while the dummy documents were generated later at 17:52 hours on the same day.
2. No Evidence of Misuse: The Tribunal noted that there was no evidence to suggest that the dummy documents were used for any fraudulent purposes or in the transaction of business under the Customs Act. ​
3. Inadmissible Evidence: The Adjudicating Authority relied extensively on statements from various individuals without following the procedure outlined in Section 138B of the Customs Act, which requires the statements to be admitted as evidence in a prescribed manner. ​ The Tribunal held that this reliance on inadmissible evidence rendered the findings unsustainable. ​
4. Misapplication of Penal Provisions: The Tribunal observed that penalties under Sections 114AA, 117, and 158(2) of the Customs Act were wrongly imposed. ​ Section 114AA applies only to fraudulent exporters, and there was no evidence of fraud in this case. ​ Section 158(2) is an enabling provision and not a penal provision, and Section 117 is a residual provision that cannot be invoked when other specific penal provisions are already applied. ​
5. No Malafide Intent: The Tribunal concluded that the case was one of inadvertent mistakes without any malafide intent on the part of the appellants. ​ Therefore, penalties under Regulation 12(8) of the Handling of Cargo in Customs Areas Regulations, 2009, were also unwarranted. ​

Final Order

The Tribunal set aside the impugned order dated March 28, 2025, to the extent it related to the appellants. ​ All three appeals were allowed, and the penalties imposed on M/s CONCOR CFS and appellants were revoked, granting consequential reliefs to the appellants. ​

Key Takeaways

This judgment highlights several important aspects of customs law and adjudication:

1. Adherence to Legal Procedures: The Tribunal emphasized the importance of following the procedure under Section 138B of the Customs Act when relying on statements as evidence. ​ Failure to do so renders such evidence inadmissible. ​
2. Misuse of Penal Provisions: The judgment clarified the scope and applicability of penal provisions under the Customs Act, particularly Sections 114AA, 117, and 158(2), ensuring that penalties are not imposed arbitrarily. ​
3. Inadvertent Mistakes vs. Malafide Intent: The Tribunal distinguished between genuine mistakes and intentional violations, underscoring that penalties should not be imposed in cases where there is no evidence of malafide intent. ​
4. Importance of Accurate Findings: The Tribunal pointed out the need for adjudicating authorities to base their decisions on accurate and substantiated findings, as incorrect conclusions can lead to unjust penalties. ​

This case serves as a reminder of the importance of due process and the need for fairness in adjudication proceedings. It also underscores the significance of ensuring that penalties are imposed only when there is clear evidence of violations and malafide intent.

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Source: CESTAT Allahabad

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