2014 (12) TMI 690 - HC - Customs

Penalty u/s 114 - Demand of differential duty - Mandatory penalty - whether the Appellate Tribunal is having power to reduce penalty from 25% to the tune of ₹ 30,000 - Held that - As per the dictum given by the Hon ble Apex Court 2008 (9) TMI 52 - SUPREME COURT , imposition of penalty is mandatory. Since the imposition of penalty is mandatory as prescribed in the Act, question of reduction does not arise. Under the said circumstances the reduction given by the Appellate Tribunal is not legally sustainable and further the Appellate Tribunal has not given any proper reason for reducing the penalty and it has reduced the penalty only on the basis of undertaking alleged to have been given by the respondent and therefore the order passed by the Appellate Tribunal is liable to be set aside and the matter is liable to be remitted to the file of the Appellate Tribunal for considering the legal point involved in the present Civil Miscellaneous Appeal afresh and since the matter is liable to be remitted to the file of the Appellate Tribunal, the substantial questions of law formulated in the present Civil Miscellaneous Appeal need not be decided now. - Decided in favour of Revenue.

Summary

Issues:
Challenge to final order reducing penalty under Section 114A of the Customs Act, 1962 by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai.

Analysis:
1. The respondent, engaged in the business of readymade garments, imported machinery and was liable to pay duty of &8377; 9,46,205. A penalty of 25% was imposed under Section 114A of the Customs Act, 1962, later reduced to &8377; 30,000 by the Appellate Tribunal.

2. Substantial questions of law included whether the Tribunal correctly reduced the penalty despite suppression of facts, and whether the duty payment would remove the respondent from the EPCG Scheme.

3. The key issue was whether the Appellate Tribunal had the power to reduce the penalty from 25% to &8377; 30,000 under Section 114A of the Customs Act, 1962.

4. The appellant argued that penalty imposition is mandatory under the Act, citing the case of Union of India v. Dharamendra Textile Processors, where the Supreme Court held that reduction of penalty is not permissible.

5. The Appellate Tribunal reduced the penalty based on an undertaking by the respondent to pay interest on the duty, which was deemed legally unsustainable without proper reasoning.

6. The High Court held that since penalty imposition is mandatory, the Tribunal's reduction lacked legal basis. The matter was remitted to the Tribunal for reconsideration based on the Supreme Court's ruling, and the substantial questions of law were not decided.

7. The Civil Miscellaneous Appeal was allowed without costs, setting aside the Tribunal's order and directing a fresh consideration based on the Supreme Court's decision.

Conclusion:
The High Court allowed the appeal, emphasizing the mandatory nature of penalty imposition under the Customs Act, 1962. The Tribunal's reduction lacked legal basis, leading to the remittal of the matter for reconsideration in line with the Supreme Court's ruling.