Customs Broker cannot be penalized for export overvaluation without a finding of personal knowledge or physical verification defaults.

The petitioner, a proprietor of a Customs Broker firm (M/s Bose Enterprise), processed five shipping bills for M/s KSH International for the export of energy drinks to the UAE

Upon inspection, Customs authorities found the goods (energy drinks) to be grossly overvalued, and some samples were declared unsafe by FSSAI

A show-cause notice was issued alleging that the petitioner failed to exercise "due diligence" under the Customs Broker Licensing Regulations (CBLR), 2018, by accepting documents from a third-party intermediary without physically verifying the exporter’s existence

An order-in-original dated July 22, 2025, imposed a penalty of Rs. 50 lakh on the petitioner under Section 114(iii) of the Customs Act, 1962, based on the finding that the broker did not personally meet the exporter or physically verify their premises

The petitioner challenged this order via a writ petition, claiming a violation of natural justice and misapplication of law

1. Whether a Customs Broker is legally mandated to conduct physical verification of a client's premises or meet them in person to satisfy the "due diligence" requirement under Regulation 10(n) of CBLR, 2018

2. Whether the adjudicating authority's failure to consider binding precedents and specific documentary evidence submitted by the petitioner constitutes a violation of the principles of natural justice

Section 114(iii) of the Customs Act, 1962, which provides for penalties for acts or omissions that render goods liable to confiscation

Regulation 10(n) of the Customs Broker Licensing Regulations (CBLR), 2018, which requires brokers to verify the identity and functioning of clients using "reliable, independent, authentic documents, data or information"

The court relied on Commissioner of Customs vs. M/S Sunglory Agency, establishing that physical verification of every client's premises is not mandatory

per Union of India vs. Kamlakshi Finance Corporation Ltd., quasi-judicial authorities are bound by the precedents of higher tribunals (CESTAT)

Artee Overseas Pvt. Ltd. vs. Union of India dictates that failure to consider cited judgments in an order constitutes a breach of natural justice

The Court found that the proper officer exceeded the requirements of Regulation 10(n) by imposing an extra-statutory burden of "physical verification" and "personal meetings" upon the broker

The adjudicating authority failed to return any findings on the validity of the KYC documents (PAN, GSTIN, IEC, Bank details) that the petitioner claimed to have verified via government portals

The Court noted that the impugned order reached a conclusion of "culpability" based on mere "possibility" rather than a factual finding of abetment or deliberate omission required for a penalty under Section 114(iii)

Crucially, the authority ignored the binding CESTAT decision in World Cargo Movers, which holds that valuation of goods is generally outside the Customs Broker's domain

Consequently, the lack of reasoned analysis regarding the petitioner’s specific defenses and cited law rendered the order perverse and violative of natural justice

The petition was allowed in part; the impugned order was set aside regarding the penalty imposed on the petitioner. The matter was remanded to the adjudicating authority to pass a fresh, reasoned order after considering all material evidence and the legal principles regarding the scope of a Customs Broker's duty