An authorised courier cannot be penalised for concealed prohibited goods absent knowledge or participation.

M/s TNT India Pvt. Ltd., an authorised courier, filed Courier Shipping Bill No. 21109 dated 22 December 2012 for export of three packages declared to contain 106 churidhar tops. Examination revealed white crystalline powder concealed within the stitched and embroidered portions of the garments. Although the initial test identified the substance as methaqualone, the Central Revenue Laboratory subsequently identified it as pseudoephedrine hydrochloride, for export of which a No Objection Certificate from the Central Bureau of Narcotics was required and had not been obtained

The consignment had been booked through M/s Universal Worldwide Express Courier & Cargo and routed through M/s Worldwide Express, which maintained an account and business arrangement with TNT. The Department alleged that TNT had permitted unauthorised outsourcing without the Commissioner’s permission and had accepted the consignment on the basis of only one identity document, contrary to the applicable KYC requirements. The consignor’s address was also found to be false

The adjudicating authority imposed penalties of ₹40 lakhs under Section 114(i) and ₹60 lakhs under Section 114AA of the Customs Act, 1962. The Commissioner (Appeals) upheld the penalties. During the pendency of the proceedings, TNT’s operations were transferred to FedEx under a Business Transfer Agreement dated 2 February 2022, and FedEx pursued the appeal

Whether the adjudicating and appellate authorities travelled beyond the Show Cause Notice by treating the authorised courier as the consignor/exporter and by attributing knowledge, misdeclaration, or conscious participation in the attempted export of prohibited goods

Whether TNT contravened Regulation 13(i) of the Courier Imports and Exports (Clearance) Regulations, 1998/2010 by accepting only one identity document for verification of the consignor

Whether the use of intermediaries for collection or pick-up of the consignment, without obtaining the Commissioner’s prior permission, violated Regulation 13(j) of the applicable Courier Regulations

Whether the concealed pseudoephedrine hydrochloride and the alleged deficiencies in courier documentation justified penalties under Sections 114(i) and 114AA of the Customs Act, 1962

The Court applied Regulations 13(i) and 13(j) of the Courier Imports and Exports (Clearance) Regulations, 1998 and the corresponding obligations under the 2010 Regulations: an authorised courier must verify the antecedents, identity, IEC and functioning of its client through reliable, independent and authentic documents, while outsourcing of functions required or permitted under the Regulations requires the Commissioner’s written permission

The Court held that an adjudication order cannot introduce, for the first time, material facts or a legal foundation not contained in the Show Cause Notice; the notice must disclose the essential factual and legal basis enabling the noticee to defend itself

It relied on M/s ABK-AOTS-DOSOKAI v. Commissioner of GST & Central Excise, Saci Allied Products Ltd. v. Commissioner of Central Excise, Manikya Plastichem Pvt. Ltd. v. Commissioner of Central Excise and Vikram Jain v. Commissioner of Customs on this principle

Section 114(i) applies where a person does or omits to do an act rendering goods liable to confiscation, or abets such act, while Section 114AA requires a knowingly or intentionally false or incorrect declaration, statement or document

The Court further relied on Bombino Express Pvt. Ltd. v. Commissioner of Customs, affirmed by the Bombay High Court, for the proposition that mere pick-up or collection activity, as distinct from a regulatory assessment or clearance function, does not attract the prohibition on outsourcing under Regulation 13(j)

The Court found that the Show Cause Notice proceeded against TNT only in its capacity as an authorised courier for alleged unauthorised outsourcing and KYC deficiencies. It did not allege that TNT was the consignor/exporter, had failed to obtain the consignor’s authorisation, knowingly adopted a false declaration, or consciously aided the attempted export of pseudoephedrine. Those findings therefore constituted new material facts and a different legal foundation, rather than mere particulars or evidentiary inferences, and could not sustain the penalties

On Regulation 13(i), the Court held that the Regulation itself did not mandate production of two identity documents. The genuine driving licence supplied proof of identity and address, and the absence of a second document, without evidence that the consignor’s identity or address remained unverifiable, did not establish a regulatory breach. Circular No. 7/2015-Cus., although prospective, supported this distinction

On Regulation 13(j), the activity shown to have been outsourced was physical collection or pick-up of the package. That was not an assessment or clearance function contemplated by the Courier Regulations, and the Department failed to establish that TNT had outsourced a regulated function requiring prior permission

Finally, the concealment was ingeniously embedded within the embroidery and could be detected only by cutting open the garments. The record contained no cogent evidence that TNT knew of, participated in, or facilitated the concealment or misdeclaration. Mere filing of the courier declaration on the consignor’s information, installation of TNT software at an intermediary’s premises, or receipt of the goods through an intermediary did not establish knowledge, collusion, or intentional use of a false document. Accordingly, the statutory ingredients of Sections 114(i) and 114AA were absent

The impugned order, insofar as it related to the appellant, was set aside, with consequential relief, if any, in accordance with law