2023 (12) TMI 382 - AT - Customs

Interpretation of statute - Section 114A of the Customs Act, 1962 - whether the penalty under Section 114A of the Customs Act, 1962 be equivalent to the duty or interest or it should be duty and interest? - HELD THAT - This issue has considered by the Hon ble Karnataka High Court in the case of THE COMMISSIONER OF CUSTOMS AND SERVICE TAX, BANGALORE VERSUS M/S. SONY SALES CORPORATION, 2021 (3) TMI 174 - KARNATAKA HIGH COURT where it was held that The expression used is or which is disjunctive between duty or interest and further use of expression as the case may be clearly suggest that aforesaid provision refers to two different persons and two different situations viz., one in which a person will be liable to duty and in other he may be liable to pay interest only and provisions that in both the situations the person liable to duty would be liable to penalty equal to duty and person liable to interest would be liable to penalty equal to interest. Therefore, in view of law laid down by Constitution Bench of Supreme Court, the word or cannot be interpreted as and . Following the aforesaid judgment of the Hon ble High Court, it is found that interpretation recorded by the ld. Commissioner (Appeals) in computing the penalty under Section 114A of the Customs Act, 1962 is unsustainable in law - the impugned order set aside - appeal allowed.

Summary

Issues involved: Interpretation of penalty under Section 114A of the Customs Act, 1962.

Summary:
The appeal was filed against an Order-in-Appeal passed by the Commissioner of Customs (Appeals), Bangalore, regarding the re-classification of imported computer parts and accessories and the denial of benefits under Notification No. 06/2006-CE. The Revenue disputed the appellant's classification, leading to the confirmation of a differential duty, interest, and penalty. The ld. Commissioner (Appeals) allowed the Revenue's appeal, determining the penalty under Section 114A of the Customs Act, 1962 to be equivalent to the duty plus interest payable. The appellant contended that adding interest to the duty for computing the penalty was contrary to legal principles established by the Hon'ble Karnataka High Court and the Tribunal in previous cases.

Upon hearing both parties and examining the records, the Tribunal considered the central issue of whether the penalty under Section 114A should be equivalent to the duty or interest, or both. Referring to the judgment of the Hon'ble Karnataka High Court in a specific case, the Tribunal noted that the provision contained a positive condition for the levy of penalty equal to duty or interest, without any negative condition. The Tribunal emphasized that the use of the term "or" in the provision indicated two distinct situations where a person liable to duty or interest would be subject to a penalty equal to the respective amount. Therefore, the Tribunal found the interpretation applied by the ld. Commissioner (Appeals) to be legally unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any necessary consequential relief as per law.