2018 (6) TMI 1089 - AT - Customs

Benefit of reduced penalty - Section 28 of the Customs Act, 1962 - it was alleged that duty, interest and penalty, though, admittedly, tendered initially through demand draft within the prescribed thirty days, had not been credited to the exchequer - Held that - The impugned order admits to the submission of the demand draft within the stipulated deadline and the failure to encash it. Notwithstanding this, the first appellate authority has taken the view that, while it is open to the appellant to take suitable action as per the law, the benefit of reduced penalty is premised upon strict compliance with the requirements of section 28(6) of the Customs Act, 1962. It appears that the dereliction has been on the part of the tax authorities in failing to deposit the demand draft tendered by the appellant. The appellant has also has been subjected to interest in consequence which was also discharged without demur - the appellant is eligible to benefit of reduced penalty for having tendered duty and interest as well as penalty within the prescribed time in accordance wih section 28 of the Customs Act, 1962. Appeal allowed.

Summary

Issues:
1. Benefit of reduction in penalty under section 28 of the Customs Act, 1962.
2. Failure of tax authorities to encash the demand draft and its impact on eligibility for reduced penalty.

Analysis:
1. The appellant, M/s Saksham Impex Pvt Ltd, challenged the order-in-appeal rejecting their plea for a reduction in penalty from 25% to 15% under section 28 of the Customs Act, 1962. The impugned order was based on the ground that although the duty, interest, and penalty were tendered initially through a demand draft within the prescribed thirty days, it was not credited to the exchequer until a fresh submission of the demand draft in September 2015. The appellant contended that they had discharged their obligations within the stipulated time, and the failure of the tax authorities to encash the demand draft should not affect their eligibility for the reduced penalty.

2. The appellant argued that the submission of the demand draft should be considered as compliance with the requirements of section 28(6) of the Customs Act, 1962, entitling them to the benefit of reduced penalty. They relied on previous Tribunal decisions to support their contention. The Authorized Representative reiterated the contents of the impugned order, emphasizing strict compliance with the law for availing the benefit of reduced penalty. The Tribunal noted that the failure to encash the demand draft was due to the tax authorities' dereliction, and the appellant had also discharged the interest liability without objection.

3. Citing precedents, the Tribunal held that the submission of the demand draft by the appellant should be deemed as payment of duty, as established in previous Tribunal decisions. Considering the appellant's compliance with the statutory requirements and the tax authorities' failure to deposit the demand draft, the Tribunal allowed the appeal and reduced the penalty imposed on the appellant to 15%. The decision highlighted the importance of timely compliance and the impact of tax authorities' actions on the eligibility for reduced penalties under the Customs Act, 1962.