2022 (7) TMI 931 - AT - Customs

Levy of penalty imposed under Section 114A of the Customs Act, 1962 - Mis-classification/declaration of wrong classification - wilful suppression of facts or not - acceptance and payment of differential duty alongwith interest - HELD THAT - The initial dispute was with regard to classification which, as canvassed by the appellant, was debatable, but however, having not disputed, they chose to accept the classification adopted by the Adjudicating Authority and also paid the differential duty along with applicable interest even before the completion of adjudication. It is precisely for this reason that in the Order-in-Original dated 27.03.2015 there is an order appropriating these amounts towards the differential duty and interest. Hence, declaring a wrong classification per se would not amount to collusion or any wilful mis-statement or suppression of facts and other than mere allegation, the Revenue has not placed on record any supporting document/s nor has it established the existence of collusion, etc. It is the settled position of law that mere acceptance and payment of differential duty would not ipso facto attract any penalty under the statute. Hence, the fact of payment of differential duty along with interest by the appellant and the order of appropriation reflected in the Order-in-Original is a sufficient ground to disbelieve the mala fides on the part of the appellant. The lower authorities have given much importance to the first proviso to Section 114A ibid. the first proviso is applicable only if an assessee chooses to avail the benefit of reduced penalty of twenty five per cent, if the duty or interest determined is paid within thirty days from the date of communication of the order, which is not the case of the appellant here, in the case on hand. The first test of collusion, etc., has to be established and only then could the penalty be imposed. Having not satisfactorily established collusion or any wilful mis-statement or suppression of facts, the penalty under Section 114A of the Customs Act, 1962 appears to have been imposed mechanically by the Adjudicating Authority, which is not in accordance with the statute. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to penalty imposed under Section 114A of the Customs Act, 1962.

Analysis:
The appellant challenged the penalty imposed under Section 114A of the Customs Act, 1962. The dispute arose when the Revenue alleged that the imported engineered wood was misclassified, resulting in short collection of duty. The Adjudicating Authority confirmed the additional duty demand and imposed a penalty of Rs.1,00,000 on the appellant. The First Appellate Authority set aside a portion of the penalty and directed the Adjudicating Authority to quantify the penalty correctly. Subsequently, the Adjudicating Authority imposed an enhanced penalty of Rs.36,97,501, which was upheld by the First Appellate Authority. The appeal before the Appellate Tribunal challenged the imposition of the enhanced penalty.

The Tribunal noted that the initial dispute was regarding the classification of the goods, which the appellant ultimately accepted and paid the differential duty along with interest. The Tribunal found that the appellant's actions did not amount to collusion or wilful misstatement, as they accepted the classification adopted by the Adjudicating Authority. Mere acceptance and payment of the differential duty, in this case, did not automatically attract a penalty under the statute. The Tribunal emphasized that there was no evidence of collusion or suppression of facts by the appellant.

The Tribunal highlighted the significance of the first proviso to Section 114A, which allows for a reduced penalty if the duty or interest is paid within thirty days from the date of communication of the order. However, in this case, the appellant did not avail of this benefit. The Tribunal emphasized that before imposing a penalty, the existence of collusion or wilful misstatement must be established. As the Revenue failed to prove collusion or wilful misstatement, the penalty imposed by the Adjudicating Authority appeared to be mechanical and not in accordance with the statute. Therefore, the Tribunal held that the penalty was not sustainable and set aside the impugned order, allowing the appeal.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that the penalty under Section 114A of the Customs Act, 1962 was not justified in this case.