Customs penalty on Ludhiana agent quashed: Delhi HC finds only co-noticee statements behind it
A Delhi High Court Division Bench set aside a customs penalty on a clearing agent in a firecracker import hidden behind bicycle parts, holding that CESTAT wrongly assumed he never sought cross-examination and that he could not be treated worse than co-noticees whose penalties were quashed.
Two containers declared as bicycle parts were found to hold Chinese-made firecrackers, the Directorate of Revenue Intelligence said. On 6 November 2026 the Delhi High Court set aside a Rs 10 lakh penalty on the Ludhiana customs house agent blamed for helping the import, saying the department had little against him beyond what co-noticees said.
A Division Bench of Justice Avneesh Jhingan and Justice Shail Jain allowed Harish Goyal's appeal under Section 130 of the Customs Act, 1962. Justice Jhingan wrote the judgment, which is marked reportable.
Firecrackers behind bicycle parts
Mr Goyal runs Krishna Clearing and Forwarding Agency in Ludhiana. He acted as customs house agent for two firms, Rahul Traders and Kirat Sales, which belonged to Rahul Sehgal and Jaskirat Singh respectively.
The consignment arrived under a bill of lading dated 4 August 2016. On 5 September 2016 the DRI examined the two containers at the Inland Container Depot, Tughlakabad, in New Delhi, and allegedly found firecrackers concealed behind a small quantity of bicycle parts and pumps.
The goods were seized. The next day DRI officers searched Mr Goyal's Ludhiana office and took away documents, a mobile phone and a laptop.
How the penalty was built
A show cause notice followed on 2 March 2017. The department relied on statements from Mr Goyal, a Deputy Manager (Imports) at the shipping line, and two Delhi-based agents, Ajay Sagar and Purshottam.
On 28 February 2018 the Additional Commissioner of Customs at ICD Tughlakabad imposed a penalty of Rs 10,00,000 on Mr Goyal under Section 112(b)(i). The order accepted that his role in the import itself was not proved.
It penalised him instead for two things. He was held to have known the goods were misdeclared, and to have arranged a meeting between Mr Sehgal, a co-noticee named Saurabh Aggarwal and the two Delhi agents.
The knowledge finding rested on Jaskirat Singh's statement that Kirat Sales' KYC documents went through Mr Goyal to Rahul Traders. It also rested on the fact that Mr Goyal's office number appeared in Rahul Traders' contact details in the shipping line's emails.
His request to cross-examine Mr Sagar, Purshottam and Jaskirat Singh was refused. The adjudicating authority said it would serve no purpose except delay, and noted that Mr Sehgal, held to be the importer, had stayed away from the investigation. CESTAT dismissed his appeal on 4 May 2022.
What each side argued
Mr Pradeep Jain appeared for Mr Goyal. He said his client worked from Ludhiana, filed no bill of entry and handled no clearance at Tughlakabad, and that nothing tied him to the import.
He argued that the penalty rested on third-party statements without cross-examination, which breached natural justice. He also pointed to CESTAT orders of 11 February 2020 and 17 August 2021 that had set aside penalties on Mr Aggarwal and Mr Sehgal.
Mr Anurag Ojha, Senior Standing Counsel, appeared for the Commissioner of Customs. He said Mr Goyal's own statement of 13 October 2016, the Delhi agents' statements and the shipping line's correspondence together showed that he knew of the import, arranged the meeting and facilitated use of the KYC documents.
Non-filing of the bill of entry did not absolve him, Mr Ojha said, and cross-examination was refused to avoid delay.
The importer's penalty fell first
On 24 August 2023 the court framed the question for decision:
“Whether the appellant was rightly and justifiably penalized under Section 112(b)(i) of the Customs Act, 1962.” (para 3)
The bench found no evidence against Mr Goyal except the statements of co-noticees. The court recorded that the persons with whom he had arranged the meeting were not proceeded against, so no role in the import was attributed to them.
The department's case that Rahul Traders was the real importer, the court said, fell flat. CESTAT quashed Mr Sehgal's Rs 41,16,424 penalty on 17 August 2021, and that eroded the foundation of the allegations against Mr Goyal.
Cross-examination refused on a wrong premise
Mr Goyal had specifically asked to cross-examine Mr Sagar, Purshottam and Jaskirat Singh. The bench noted that CESTAT proceeded on a wrong factual premise, namely that he had not sought it.
The court accepted that cross-examination is not an absolute right. It held, however, that it falls within the principle of natural justice and is in line with Section 138(B) of the Act.
Treated differently from co-noticees
CESTAT had also quashed the Rs 5 lakh penalty on Mr Aggarwal on 11 February 2020, finding nothing against him apart from Mr Goyal's own statement. Proceedings against Jaskirat Singh had been dropped during adjudication.
The bench said the penalty on Mr Goyal was upheld although the goods were seized before any bill of entry was filed. No document directly showing his role in the import had come into the department's hands. It concluded:
“the different treatment of the appellant from co-noticees cannot be sustained” (para 16)
Order
The Division Bench answered the substantial question of law in Mr Goyal's favour. It set aside the CESTAT order of 4 May 2022 and the penalty order, and allowed the appeal.
The judgment was reserved on 2 November 2026 and pronounced on 6 November 2026. It records no order on costs.