2024 (1) TMI 592 - AT - Customs

Levy of penalty under Section 114A of CA - Suppression of facts or not - whether penalty is to be imposed when the appellant has accepted the classification and paid the entire duty along with penalty much before the issuance of the show cause notice? - HELD THAT - It is an admitted fact that the goods were correctly described in the relevant documents except for the classification being inadvertently mentioned as 9031 instead of 9016. It is also a fact that till 2007, the rate of duty under both the Headings was same. The documents including the invoices from the foreign supplier which were placed before the Customs Authorities also contained correct description namely precision balances of sensitivity of 5 cg declared as parts of weighing equipment . It is also on record that without contesting the classification, the appellant had immediately paid the entire differential duty along with interest much prior to the issuance of the show cause notice. Therefore, the question of alleging suppression in the present case does not arise. The decision relied upon by the authorities in the case of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. 2009 (5) TMI 15 - SUPREME COURT is not applicable inasmuch as that was the case of clear suppression of facts. In the present case, as already discussed, description of goods was not suppressed. In the present case, the appellant had paid the differential duty in 2009 and the notice was issued only in 2011 to appropriate the amounts and impose penalty. The Hon ble High Court of Karnataka in the case of CC VERSUS POWERICA LTD. 2011 (9) TMI 665 - KARNATAKA HIGH COURT held that If in law there is a prohibition for initiation of the proceedings to recover the duty and penalty after it is paid before the issue of show cause notice, certainly in such a proceedings which is not maintainable, question of imposing penalty would not arise. In other words, if duty and penalty is paid even before the issue of show cause notice and the said fact is informed to the proper officer, he shall not initiate any proceedings to recover the duty and interest, much less for imposition of penalty. The penalty set aside - appeal allowed.

Summary

Issues involved:
Classification of imported goods under Customs Tariff Heading, imposition of penalty under Section 114A of the Customs Act, 1962 for alleged suppression of facts to evade payment of duty, appeal for waiver of penalty under Section 28(2B).

Classification Dispute:
The appellant initially classified the imported goods under CTH 9031, later found to be rightly classifiable under CTH 9016. The appellant accepted the correct classification and paid the differential duty along with interest. The dispute arose when the Respondent imposed a penalty under Section 114A alleging suppression of facts to evade duty. The Commissioner (Appeals) rejected the appellant's request for waiver of penalty under Section 28(2B), leading to the appeal before the Tribunal.

Appellant's Arguments:
The appellant argued that although the Chapter Heading was wrongly mentioned in the Bills of Entry, the product description as parts of weighing equipment was accurate. They attributed the misclassification to their Customs House Agent and emphasized their history of compliant import practices. Citing precedents, they contended that mere short-payment of duty does not constitute suppression or misstatement. They sought waiver of penalty under Section 28(2B, having paid the duty prior to the notice issuance.

Revenue's Position:
The Revenue maintained that penalty under Section 114A was rightly applied due to the demand under proviso to Section 28(1).

Tribunal's Decision:
The Tribunal noted that the goods were correctly described in documents despite the classification error. The appellant promptly paid the differential duty upon discovery, negating any intent to suppress facts. Citing legal precedents, the Tribunal emphasized that suppression entails deliberate non-disclosure to evade duty. Referring to a High Court ruling, the Tribunal highlighted that payment of duty and penalty before notice issuance precludes penalty imposition. Consequently, the Tribunal set aside the penalty, ruling in favor of the appellant.