2018 (1) TMI 570 - AT - Customs

Penalty u/s 112(b)(ii) of the CA, 1962 - differential amount of CVD paid on being pointed out - Held that - in view of the fact that the differential duty along with interest was paid before initiation of the show cause proceedings and such amount was appropriated into the Government account in the adjudication order, penalties cannot be imposed in absence of any specific substantiation by the Revenue with regard to the involvement of the appellant in the fraudulent activity - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Imposition of penalty under Section 112(b)(ii) of the Customs Act, 1962.

In the present case, the issue revolved around the imposition of a penalty under Section 112(b)(ii) of the Customs Act, 1962. The appellant, a Customs House Agent (CHA), was penalized for short levying and short paying duty on imported consignments of cigarettes. The appellant argued that the error in the Electronic Data Interchange (EDI) system led to the duty being paid at an old rate instead of the updated rate specified in the budget. The appellant rectified the mistake by paying the differential duty along with interest before the show cause notice was issued. The Revenue, on the other hand, maintained its stance as per the adjudication order.

Upon hearing both sides, the Member (Judicial) observed that the Customs Value Duty (CVD) rate had been increased, but the EDI system was not updated to reflect the change, leading to the underpayment of duty. The appellant's prompt action in rectifying the error by paying the differential duty with interest was noted, indicating no fraudulent intent. The Member found no specific evidence implicating the appellant in fraudulent activities. Consequently, the penalty imposed on the appellant was deemed unjustified.

The judgment emphasized that penalties cannot be imposed without concrete evidence of the appellant's involvement in fraudulent activities. Since the duty shortfall was rectified before the initiation of show cause proceedings and the amount was deposited into the Government account, the penalty was set aside, and the appeal was allowed in favor of the appellant. The decision underscored the importance of demonstrating specific substantiation for imposing penalties under the Customs Act, ensuring fairness and accountability in customs enforcement matters.