2019 (5) TMI 1035 - HC - Customs

Waiver of Penalty u/s 111(d) of Customs act, 1962 and redemption fine - Whether the CESTAT has been vested with the discretion to waive the imposition of fine and penalty under mandatory provisions of Section 112(a) and 125 of Customs Act in a case of misdeclaration and misclassification of goods especially when it has upheld that duty liability of the first respondent on such misdeclaration/misclassification? HELD THAT - It is not in dispute that the order dated 17.04.2003 was passed by the Commissioner as a de nova proceedings pursuant to an order passed by the Tribunal remanding the matter for fresh consideration, vide order dated 14.12.2000. Therefore, it has to be seen as to whether there was any proposal at the first instance for levy of redemption fine. Admittedly, there was no such proposal for levy of redemption fine, as in the understanding of the original authority, the goods were not liable for confiscation, since the goods were not available and having been cleared and duty having been paid, no order of confiscation is possible - the Tribunal rightly deleted the redemption fine imposed on the respondent/importer. Imposition of penalty - HELD THAT - Admittedly, maximum penalty equivalent to the amount of duty payable has been imposed - taking note of the peculiar facts and circumstances of the case and the dispute being one of a classification dispute, and it is the Department which took a U-turn in the matter after a very long period, when the Department was permitting the respondent/importer to clear the goods by classifying the same under chapter heading 8542, it is not a case where penalty could have been imposed - penalty rightly deleted. The appeal filed by the Revenue stands dismissed and the substantial questions of law are answered against the Revenue.

Summary

Issues:
1. Whether the CESTAT has discretion to waive fine and penalty under mandatory provisions of Customs Act in cases of misdeclaration and misclassification of goods.
2. Whether imposition of fine and penalty is justified when goods are liable for confiscation under Customs Act.

Analysis:
1. The appeal challenged an order by the Tribunal deleting the levy of redemption fine and penalty on the respondent. The Tribunal held that the importer couldn't be penalized for a classification dispute as it involved interpretation of tariff entry. The appellant argued that penalty should be imposed under Section 112(a) of the Customs Act. The appellant cited the Pine Chemical Suppliers case and emphasized that penalty is automatic when goods are confiscated under Section 111(d) of the Act. The appellant also referred to cases like Comex Co. and Nithi Tools to support the imposition of penalty.

2. The respondent contended that the redemption fine was unjustified as no proposal was made for it during the original adjudication. The respondent also argued against the penalty under Section 112(a), stating that it was a classification dispute pending, and cited cases like Northern Plastic Ltd. and Akbar Badruddin Jiwani to support their stance. The Court examined the circumstances and found that the Department's change in classification after a long period warranted a lenient approach. The Court considered the Akbar Badruddin Jiwani case and held that penalty should not be imposed in this case due to the peculiar facts and the long-standing classification practice.

3. The Court ruled that the redemption fine was rightly deleted by the Tribunal as there was no initial proposal for it. Regarding the penalty under Section 112(a), the Court agreed with the Tribunal's decision to not impose a penalty due to the unique circumstances of the case. The Court dismissed the appeal by the Revenue, answering the substantial questions of law against them. No costs were awarded in the judgment.