Madras High Court Quashes ₹20 Lakh Penalty On Customs Broker, Finds No Proof Of Collusion

The Madras High Court on 17 September set aside the Rs. 20 lakh penalty imposed on Newport Shipping and Logistics, holding that the material relied upon by the Customs authorities did not establish the broker's knowledge, conscious involvement or collusion in the attempted export of prohibited bull/ox meat.

Justice Hemant Chandangoudar observed that a Customs Broker cannot be held liable for abetment of the attempted export of prohibited goods merely on the basis of routine activities such as filing shipping bills, arranging containers and processing documents, unless there is material showing that the broker knowingly aided or colluded with the exporter. The Bench held:

“No doubt, a Customs Broker is required to exercise due diligence regarding the correctness and completeness of the information submitted to the Customs authorities. However, the material on record must still establish that the petitioner knowingly aided or abetted the attempted export of prohibited goods. In the present case, there is no such material establishing knowledge, conscious involvement or collusion on the part of the petitioner.”

Newport Shipping and Logistics filed a petition challenging the penalty imposed by the Customs Department and subsequently upheld by the appellate authority. Customs authorities had intercepted consignments declared by the exporter as buffalo meat. Upon examination, the goods were found to be prohibited bull/ox meat. The Customs Broker was alleged to have assisted the exporter in clearing the goods for export.

A show cause notice was issued to the Customs Broker and the exporter. After considering the broker's reply and affording an opportunity of hearing, the adjudicating authority imposed a Rs. 20 lakh penalty on the broker. The appellate authority subsequently confirmed the penalty.

The Customs Broker argued that there was no material to show that it knew the actual nature of the goods or had colluded with or aided the exporter in attempting to export the prohibited goods. The Department contended that the broker had colluded with the exporter and facilitated the attempted export. It also argued that the writ petition was not maintainable as the broker had an alternative remedy before the CESTAT.

The Court noted that the penalty was substantially based on the broker's filing of two shipping bills, verification of documents including the health certificate and APEDA registration, booking of containers and arranging their transportation.

It held that these circumstances, by themselves, did not establish that the broker knew the goods were prohibited or had consciously aided or abetted the exporter. There was no material showing that the broker knew the actual nature of the goods or had colluded with the exporter.

Further, the Bench held that although a Customs Broker is required to exercise due diligence regarding the correctness and completeness of information submitted to Customs, there must still be material establishing knowledge, conscious involvement or collusion before abetment can be established.

Rejecting the objection regarding the alternative remedy, it observed that the existence of an appellate remedy does not bar the exercise of jurisdiction under Article 226 in an appropriate case. Since the finding of abetment was not supported by material establishing the broker's knowledge or conscious involvement, the Court held that it need not be relegated to the alternative remedy. It said:

“In the present case, the finding of abetment is not supported by any material establishing the petitioner's knowledge, conscious involvement or collusion with the exporter. The penalty has essentially been imposed on the ground that the petitioner failed to ascertain the source of procurement of the meat. In these circumstances, the petitioner need not be relegated to the alternative appellate remedy.”

Accordingly, the High Court set aside the Order-in-Original dated 30 May 2025 insofar as it imposed the Rs. 20 lakh penalty on Newport Shipping and Logistics, as well as the appellate order dated 19 November 2025 confirming the penalty.

For Petitioner: Mr. S. Baskaran, Advocate

For Respondent: Mr. M. Santhanaraman, Senior Standing Counsel