2017 (4) TMI 733 - AT - Customs

Imposition of redemption fine and penalty - valuation - 5% commission payable to the local agent in India - case of the appellants is that they filed live Bill of Entry and declared the value basing upon the invoice routed through their bank. The non inclusion of 5% agency commission noted on the packing of the consignment was only a bonafide mistake - department was of the view that this 5% agency commission should also be included in the assessable value. Held that - The facts of the case reveal that the mis-declaration occurred because the overseas supplier did not include 5% agency commission in the invoice and instead noted the same on the packages only. The Ld. Counsel has relied upon the judgement in the case of Delphi Automotive Systems Ltd. Vs CC (E), New Delhi 2016 (8) TMI 926 - CESTAT NEW DELHI ,where in similar state of facts, the Tribunal has reduced the penalty to ₹ 10,000/-. Following the same, the penalty u/s 114A can be reduced to ₹ 10,000/- - The ingredients of Section 114AA does not stand attracted in the present case. The said section has been wrongly appled by the authorities below - the redemption fine imposed is on higher side. The same can be reduced to ₹ 10,000/-. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Redemption fine and penalty imposed on the appellants for non-inclusion of 5% agency commission in the assessable value of imported goods.
2. Applicability of penalties under sections 114A and 114AA of the Customs Act, 1962.
3. Justifiability of the redemption fine and penalties imposed by the authorities.
4. Consideration of CENVAT credit and differential duty amounts in determining the penalties and redemption fine.

Analysis:

Issue 1: Redemption fine and penalty imposition
The appellants, engaged in manufacturing defense equipment, imported goods from Germany and cleared them on payment of Customs duty. The dispute arose when the department noticed the non-inclusion of a 5% agency commission in the assessable value. Despite the appellants' explanation of a genuine mistake, the original authority imposed customs duty, interest, penalties under sections 114A and 114AA, and a redemption fine of &8377; 1.00 lakh. The appellants contended that the omission was unintentional, supported by their substantial duty payments and eligibility for CENVAT credit. The authorities justified the penalties and redemption fine based on the misdeclaration of value, revealing an intent to evade duty.

Issue 2: Applicability of penalties under sections 114A and 114AA
The appellants challenged the penalties imposed under sections 114A and 114AA, arguing that the penalties were excessive and not warranted. The authorities defended the penalties, emphasizing the misdeclaration of value and the need for deterrence against duty evasion. The appellants sought relief based on the minimal short payment compared to their duty payments, asserting the omission of the agency commission was an inadvertent error.

Issue 3: Justifiability of penalties and redemption fine
The appellants contended that the penalties and redemption fine were harsh, especially considering the nominal short payments and their compliance with duty payments. The authorities maintained that the penalties were appropriate given the misdeclaration and intent to evade duty. The appellants highlighted their reliance on the invoice routed through their bank, which did not include the agency commission, leading to the inadvertent omission in the declared value.

Issue 4: Consideration of CENVAT credit and differential duty
The tribunal considered the differential duty amounts, CENVAT credit eligibility, and the circumstances of the misdeclaration. After evaluating the facts and legal precedents, the tribunal modified the impugned order. The redemption fine was reduced to &8377; 10,000, and the penalty under section 114A was also reduced to &8377; 10,000, while setting aside the penalty under section 114AA. The tribunal acknowledged the inadvertent nature of the omission and the appellants' compliance with duty payments, leading to the adjustment of the penalties and redemption fine.

This detailed analysis covers the issues involved in the legal judgment, addressing the arguments presented by the appellants and the authorities, leading to the tribunal's decision to modify the penalties and redemption fine imposed on the appellants.