This judgment decides only the penalty imposed on the appellant under section 112(b)(i) of the Customs Act, 1962. It does not decide the confiscation of the goods or the liability of any other noticee, and it does not hold that cross-examination is an absolute right in customs proceedings.
- Case
- Harish Goyal v. Commissioner of Customs
- Court
- High Court of Delhi
- Decision
- Citation
- 2026:DHC:9971-DB
- Bench
- Avneesh Jhingan; Shail Jain
- Judgment by
- Avneesh Jhingan
- Case numbers
- Customs Appeal No. 132 of 2022
- Outcome
- Customs appeal under section 130 of the Customs Act, 1962 allowed: the substantial question of law is answered in favour of the appellant, and the Tribunal's order and the penalty order are set aside.
The decision
The Delhi High Court has set aside a penalty of Rs 10 lakh imposed on Harish Goyal, a customs house agent, under section 112(b)(i) of the Customs Act, 1962, for allegedly facilitating the import of misdeclared firecrackers. A division bench of Justices Avneesh Jhingan and Shail Jain allowed his appeal on 6 November 2026, holding that the penalty rested only on the statements of co-noticees, without independent evidence, and that the refusal of cross-examination violated natural justice.
The Court answered the substantial question of law — whether the appellant was rightly penalised under section 112(b)(i) — in his favour, and set aside both the Tribunal's order of 4 May 2022 and the penalty order.
Background: firecrackers behind bicycle parts
Goyal was the proprietor of M/s Krishna Clearing and Forwarding Agency at Ludhiana and acted as customs house agent for M/s Rahul Traders and M/s Kirat Sales. The litigation arose from the import of two containers under a bill of lading dated 4 August 2016, declared to contain bicycle parts. On 5 September 2016, the Directorate of Revenue Intelligence examined the containers at the Inland Container Depot, Tughlakabad, and found Chinese-made firecrackers concealed behind a small quantity of bicycle parts and pumps. The goods were seized before filing of the bill of entry.
The department's case was that Rahul Sehgal, proprietor of Rahul Traders, had planned with others to import firecrackers in the guise of freely importable goods, misusing the KYC documents of Kirat Sales. A show cause notice was issued on 2 March 2017. The Additional Commissioner passed an order-in-original on 28 February 2018, holding that the import of prohibited goods by misusing Kirat Sales' KYC documents had been facilitated by the appellant, and imposed a penalty of Rs 10 lakh on him under section 112(b)(i). The Customs, Excise and Service Tax Appellate Tribunal dismissed his appeal on 4 May 2022.
The issue before the Court
The substantial question of law framed by the Court on 24 August 2023 was whether the appellant was rightly and justifiably penalised under section 112(b)(i) of the Customs Act, 1962. Goyal contended that he worked as a customs house agent at Ludhiana and not at Delhi, that he had neither filed the bill of entry nor handled clearance of the consignments, and that there was no evidence establishing his involvement in the import.
The rule: statements, cross-examination and parity
The Court accepted that cross-examination is not an absolute right, but held that it falls within the ambit of natural justice and is in consonance with section 138B of the Customs Act, which governs the use of statements in adjudication. Where a penalty rests on the statements of other persons, the person penalised must have a fair opportunity to test them — and the Tribunal cannot proceed on a wrong factual premise about whether that opportunity was even sought.
The Court also applied the principle of parity: where co-noticees in the same proceedings have had their penalties quashed for want of independent evidence, the department cannot sustain a penalty on the appellant on the same kind of material without independent evidence against him.
The reasoning: no independent evidence, and a denied cross-examination
The adjudicating authority itself had held that the appellant's role in the import of the seized consignment was not proved — but imposed the penalty on the ground that he had knowledge of the misdeclaration and had arranged a meeting between Rahul Sehgal, Saurabh Aggarwal and two Delhi-based customs house agents, Ajay Sagar and Purshottam. The Court found there was no evidence against the appellant except the statements of the co-noticees. The persons with whom he had allegedly arranged the meeting were not proceeded against, and no role was attributed to them in the import.
The knowledge of misdeclaration was inferred from the statement of Jaskirat Singh — that Kirat Sales' KYC documents were given to the appellant and handed over by him to Rahul Traders — and from the fact that the appellant's office telephone number appeared in the contact details of Rahul Traders in shipping-line correspondence. No documentary evidence directly indicating the appellant's role in the import came into the department's possession, and the goods had been seized before the bill of entry was filed.
The foundation of the department's case was further eroded when the penalty on Rahul Sehgal — treated as the importer — was quashed by the Tribunal on 17 August 2021, and the penalty on co-noticee Saurabh Agarwal was quashed on 11 February 2020 on the ground that, apart from the appellant's statement, there was no evidence against him. The Court held that, in the absence of independent evidence against the appellant, the different treatment of the appellant from the co-noticees could not be sustained.
The appellant had specifically asked to cross-examine Ajay Sagar, Purshottam and Jaskirat Singh, whose statements were being relied upon against him. The request was denied on the ground that no useful purpose would be served and the matter would be delayed. The Tribunal, however, proceeded on the wrong factual premise that the appellant had not sought cross-examination of these three persons.
The outcome
The substantial question of law was answered in favour of the appellant, and the impugned order and the penalty order were set aside. The appeal was allowed.
BANTHRY ANALYSISFor law students
This is a short judgment with two transferable lessons. First, a penalty that rests on statements must satisfy section 138B and natural justice together: the department may rely on statements, but if it denies cross-examination, it must at least record the request correctly and give a sustainable reason — and the Tribunal cannot uphold the penalty on a mistaken premise that no cross-examination was sought. Second, parity matters in penalty proceedings: when the department's own case against the alleged principal importer collapses, and co-noticees are let off for want of independent evidence, it cannot hold one noticee liable on the same thin material.
Notice also what the Court did not decide. It did not hold that a customs house agent can never be penalised for facilitating a misdeclaration, nor that knowledge of a misdeclaration is irrelevant. It held that, on this record, knowledge was inferred from too little — a statement and a telephone number — with no documentary evidence of the appellant's role.
READING PROMPTSQuestions for a closer reading
- On what evidence did the adjudicating authority impose the Rs 10 lakh penalty, and why did the Court hold that evidence insufficient?
- Why did the Court hold that the denial of cross-examination violated natural justice in this case, and what factual error did the Tribunal make on that point?
- How did the quashing of the penalties on the co-noticees affect the appellant's case?
