CBLR Regulation 10(d) | Penalty Under Customs Act Inapplicable Without Specific Provision for NDPS Violation : CESTAT

In a significant ruling on customs broker liability, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has clarified that Section 117 of the Customs Act, 1962 cannot be invoked when Customs Broker Licensing Regulations, 2018 (CBLR) contain specific penalty provisions. The Tribunal set aside a Rs. 50,000 penalty imposed on a customs broker for facilitating the export of pharmaceutical preparations containing Ergotamine without a No Objection Certificate (NOC) from the Narcotics Commissioner, holding that the product was merely a preparation of Ergotamine and not covered under Schedule-B of the NDPS (Regulation of Controlled Substances) Order, 2013. The judgment underscores the primacy of specific regulatory provisions over general penalty clauses in customs law.

Background & Facts

The Dispute

The appellant, M/s. Unnati Cargo, a licensed customs broker, filed Shipping Bill No. 1025080 dated 28.04.2022 on behalf of the exporter, M/s. Aprazer Healthcare Pvt. Ltd. (IEC- AAQCA2323K), for the export of pharmaceutical medicines valued at Rs. 14,68,408/- to Iraq. Among the consignment, box no. 13 and 17 contained the medicine "MIGRAN" (comprising Caffeine (100mg) + Ergotamine Titrate (1mg) + Paracetamol (250mg) + Prochlorperazine (2.5mg)), valued at Rs. 16,221/-. Additionally, 50 bottles of Ledifos (Ledipasvir 90mg & Sofosbuvir 400mg), undeclared in the packing list, were found in box no. 1.

Key Facts

• Ergotamine, a controlled substance under Schedule-B of the NDPS (Regulation of Controlled Substances) Order, 2013, requires an NOC from the Narcotics Commissioner for export as per Clause 10 of the Order.
• The exporter failed to provide the required NOC for Ergotamine.
• The consignment was seized on 06.05.2022 under Section 110 of the Customs Act, 1962 on grounds of misdeclaration and attempted export of restricted goods.
• The customs broker was alleged to have violated Regulation 10(d) of CBLR, 2018 by not advising the exporter to comply with NDPS provisions.
• The appellant requested waiver of Show Cause Notice (SCN) and Personal Hearing (PH), which was accepted by the Department.

Procedural History

• 06.05.2022: Goods seized under Section 110 of the Customs Act.
• 14.11.2022: Adjudicating Authority passed Order-in-Original, confiscating the goods and imposing a penalty of Rs. 50,000/- on the appellant under Section 117 of the Customs Act.
• 11.08.2025: Commissioner of Customs (Appeals) dismissed the appeal (Order-in-Appeal No. CC(A) CUS/D-I/Export/NCH/900/2025-26).
• 13.05.2026: Appeal heard by CESTAT.
• 22.05.2026: CESTAT pronounced final order.

Relief Sought

The appellant sought setting aside of the penalty imposed under Section 117 of the Customs Act, arguing that:

1. Regulation 18 of CBLR, 2018 provides a specific penalty for violations of Regulation 10(d), precluding the application of Section 117.
2. The product "MIGRAN" was a preparation of Ergotamine, not "Ergotamine and its salts," and thus not covered under Schedule-B of the NDPS Order.

The Legal Issue

The central legal questions before the Tribunal were:

1. Whether Section 117 of the Customs Act can be invoked to impose a penalty on a customs broker for violating Regulation 10(d) of CBLR, 2018, when Regulation 18 provides a specific penalty for such violations.
2. Whether the product "MIGRAN," containing Ergotamine Titrate (1mg), qualifies as a preparation of Ergotamine or falls under "Ergotamine and its salts" as listed in Schedule-B of the NDPS Order.

Arguments Presented

For the Appellant

1. Specific Penalty Provision: Argued that Section 117 is a residuary provision and cannot be invoked when Regulation 18 of CBLR, 2018 provides a specific penalty for violations of Regulation 10(d). Cited the principle that specific provisions override general ones.
2. Interpretation of Schedule-B: Contended that Schedule-B lists "Ergotamine and its salts" but does not include preparations thereof. Since "MIGRAN" contained only 1mg of Ergotamine Titrate, it was a preparation, not a controlled substance requiring an NOC.
3. Precedent Reliance: Relied on M/s Videojet Technologies (I) Pvt. Ltd. v. Joint Commissioner of Customs Preventive Commissionerate, New Delhi (Final Order No. 50753/2025), where CESTAT held that preparations containing controlled substances (like MEK) do not require an NOC unless explicitly listed.
4. Lack of Technical Knowledge: Argued that the Department itself sought clarifications from multiple authorities (Narcotics Commissioner, CRCL, Indian Pharmacopoeia Commission) to determine if the product was a controlled substance. Expecting a customs broker to possess such technical expertise was unreasonable.

For the Respondent

1. Compliance Obligation: Submitted that the customs broker is obligated under Regulation 10(d) of CBLR, 2018 to ensure compliance with NDPS provisions and advise exporters accordingly. Failure to do so constitutes a violation of CBLR.
2. Controlled Substance: Argued that "MIGRAN" contained Ergotamine Titrate, a controlled substance under Schedule-B, and thus required an NOC. The customs broker’s failure to verify this rendered the export illegal.
3. Undeclared Goods: Highlighted the presence of undeclared Ledifos in the consignment as further evidence of the customs broker’s lack of diligence.
4. Precedent Reliance: Cited M. Younus Ali v. Commissioner of Customs (Export), Chennai (2017 (2) TMI 47) and Shri Rama Thenna Thayalan v. CESTAT & Commissioner of Customs (2021 (12) TMI 47), emphasizing that customs brokers cannot escape liability by claiming ignorance or relying on exporter declarations.
5. Minor Penalty: Contended that the Rs. 50,000/- penalty was minor given the seriousness of the violation.

The Court's Analysis

The Tribunal conducted a two-pronged analysis of the legal issues:

Interpretation of Schedule-B of NDPS Order

The Tribunal examined Schedule-B of the NDPS Order, which lists "Ergotamine and its salts" at Serial No. 6. It observed that the schedule does not mention "preparations of Ergotamine", unlike other entries (e.g., Serial No. 4: "Ephedrine, its salts and preparations thereof").

"Applying the same principle, I find that Schedule-B only refers to ‘Ergotamine and its salts’ and not preparations thereof. The contents of Ergotamine being only 1%, would lead to the conclusion that the product in question is only preparation of Ergotamine and the same is not covered under Serial No.6 of Schedule-B."

The Tribunal relied on its earlier decision in M/s Videojet Technologies (I) Pvt. Ltd., where it held that preparations containing controlled substances (like MEK) do not require an NOC unless explicitly listed in the schedule. Since "MIGRAN" was a preparation of Ergotamine and not "Ergotamine and its salts," the Tribunal concluded that no NOC was required for its export.

Applicability of Section 117 of the Customs Act

The Tribunal analyzed Section 117, which empowers authorities to impose penalties for contraventions of the Customs Act where no specific penalty is provided. However, it noted that Regulation 18 of CBLR, 2018 is a self-contained provision that specifically deals with penalties for violations of CBLR regulations:

"Regulation 18 deals with imposition of penalty for violation of the provisions of the Regulations... In view of the specific provisions above, the learned Counsel is right in contending that no penalty can be imposed under the provisions of Section 117 of the Act."

The Tribunal held that Section 117 is a residuary provision and cannot be invoked when Regulation 18 provides a specific penalty for the alleged violation. Since the appellant’s alleged violation pertained to Regulation 10(d) of CBLR, the specific penalty provision under Regulation 18 applied, precluding the use of Section 117.

Role of Customs Broker and Due Diligence

The Tribunal acknowledged the broader responsibilities of customs brokers under CBLR but noted the peculiar facts of the case. The Department itself had sought technical clarifications from multiple authorities to determine if the product was a controlled substance. The Tribunal observed:

"Expecting a Customs Broker to possess such technical knowledge is unreasonable. In that view, no positive responsibility can be attributed on the Customs Broker on this issue requiring in-depth analysis and chemical testing."

Regarding the undeclared Ledifos, the Tribunal accepted the exporter’s explanation of ignorance and held that it was unreasonable to attribute knowledge of the misdeclaration to the customs broker.

The Verdict

The Tribunal set aside the impugned order dated 11.08.2025 and allowed the appeal. The penalty of Rs. 50,000/- imposed on the appellant under Section 117 of the Customs Act was quashed, and no alternative penalty was imposed under Regulation 18 of CBLR, 2018. The Tribunal held that:

1. The product "MIGRAN" was a preparation of Ergotamine, not covered under Schedule-B of the NDPS Order, and thus no NOC was required for its export.
2. Section 117 of the Customs Act cannot be invoked when Regulation 18 of CBLR, 2018 provides a specific penalty for the alleged violation.

What This Means For Similar Cases

Specific Penalty Provisions Override General Clauses

• Section 117 is residuary: Practitioners must argue that Section 117 can only be invoked when no other penalty provision exists in the relevant statute or regulations. In cases involving CBLR violations, Regulation 18 is the exclusive penalty provision.
• Precedent reliance: The judgment reinforces the principle that specific provisions override general ones, as established in M/s Videojet Technologies (I) Pvt. Ltd. Customs brokers facing penalties under Section 117 should scrutinize the governing regulations for specific penalty clauses.

Interpretation of Controlled Substances Under NDPS

• Preparations vs. salts: The judgment clarifies that Schedule-B of the NDPS Order lists specific controlled substances and their salts but not preparations thereof unless explicitly mentioned. Customs brokers and exporters must analyze the chemical composition of products to determine if they fall under the schedule.
• Technical expertise: The Tribunal’s observation that customs brokers cannot be expected to possess in-depth technical knowledge of controlled substances provides a defense in cases of ambiguity. However, brokers must still exercise due diligence and seek clarifications when in doubt.

Limits of Customs Broker Liability

• Knowledge requirement: The judgment suggests that liability under CBLR requires proof of knowledge or negligence. Mere facilitation of export without active misdeclaration may not suffice to impose penalties, especially when the Department itself seeks clarifications.
• Undeclared goods: While the presence of undeclared Ledifos was noted, the Tribunal accepted the exporter’s plea of ignorance. This underscores that liability for undeclared goods depends on proof of knowledge or collusion between the broker and exporter.

Practical Takeaways for Customs Brokers

• Compliance checklist: Brokers should maintain a checklist of controlled substances under NDPS and verify NOC requirements before filing shipping bills.
• Documentation: Ensure that packing lists, invoices, and export documents accurately reflect the contents of the consignment to avoid allegations of misdeclaration.
• Legal advice: In cases of ambiguity, brokers should seek legal or technical clarifications from relevant authorities (e.g., Narcotics Commissioner) to avoid penalties.