2014 (11) TMI 859 - AT - Customs

Exemption under Notification No.28/97 Cus. dt. 1.4.97 - Penalty u/s 11A - Suppression of facts - Held that - Appellant imported machinery under EPCG licence subject to the condition that the said machinery would be used in their factory for manufacture of the final product. There is no dispute that the machineries were installed in a textile showroom cum shop of the appellant s sister concern at Chennai, without any intimation to the department, and in gross violation of condition of the Exemption Notification. It is apparent that the appellant deliberately suppressed the fact of installation of the machineries at their showroom with an intention to evade payment of appropriate Customs duty on the imported machinery and it would liable to be confiscated under Section 111 (o) of the Customs Act, 1962. - Appellant installed the machineries in their show room without utilizing in the factory premises, is a clear case of misrepresentation and penalty of Section 114A of the said Act is imposable - Decided against assessee.

Summary

Issues:
1. Reduction of penalty imposed under Section 114A of the Customs Act, 1962.
2. Decision on imposition of penalty under Section 114A in cases of misrepresentation or suppression of facts.
3. Interpretation of penalty provisions in light of relevant legal precedents.

Analysis:

Issue 1: Reduction of penalty under Section 114A
The case involved the import of machinery under the EPCG scheme, with a condition that the machinery would be used in the factory for manufacturing. However, the machinery was installed at a different location without informing the department, leading to a violation of the exemption notification. The appellant was found to have deliberately suppressed this fact to evade customs duty, which could lead to confiscation under Section 111(o) of the Customs Act, 1962.

Issue 2: Imposition of penalty for misrepresentation
The Hon'ble High Court directed the Tribunal to consider the imposition of penalty based on the Supreme Court's decision in the case of Union of India Vs Dharamendra Textile Processors. The Tribunal noted the similarity between penalty provisions under Section 11AC of the Central Excise Act and Section 114A of the Customs Act. Section 114A mandates a penalty equal to the amount of duty or interest in cases of collusion, misstatement, or suppression of facts. The Tribunal found that the appellant's actions constituted misrepresentation, justifying the penalty under Section 114A.

Issue 3: Interpretation of penalty provisions
The Tribunal upheld the penalty imposed by the Adjudicating authority under Section 114A, emphasizing that penalties are justified in cases of misrepresentation. The Tribunal clarified that the penalty should be in accordance with the law, as stipulated by Section 114A. The Tribunal also highlighted the importance of timely payment of duty and penalty to avoid higher penalties. The penalty was upheld, with a reduction in the redemption fine to Rs. 30,000.

In conclusion, the Tribunal upheld the penalty under Section 114A of the Customs Act, 1962, emphasizing the importance of complying with duty payment regulations and the consequences of misrepresentation or suppression of facts in customs matters.