Penalty u/s 114AA imposed alleging Aircraft Imported for Directors’ private use: CESTAT deletes Penalty finding No False Declaration [Read Order]

In a recent judgement, the Principal Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT )  in New Delhi deleted the penalty imposed on the assessee under Section 114AA of the Customs Act 1962.

The assessee Sarang Wadhawan is the managing director of M/s Privilege Airways Private Limited, and Privilege Airways imported a luxury aircraft, declaring it for non-scheduled passenger operations. Upon investigation into this importation, it was found that the plane was used by Housing Development Infrastructure Ltd (HDIL), where the assessee Sarang Wadhawan also served as managing director.

The Customs Department argued that the import conditions were violated and imposed penalties under Section 114AA of the Customs Act, 1962. The department alleged that Wahawan had signed a false undertaking at importation. An appeal to the Commissioner of Customs (Preventive) ordered the penalties be dropped upon Sarang Wadhawan, stating that though the assessee may have signed the undertaking at the time of importation of the aircraft declaring it to be used for providing non-scheduled operator (passenger) services and that it cannot be said that the undertaking given by him was false or incorrect.

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Section 114AA of the Customs Act finds that if a person knowingly or intentionally makes, signs, uses or causes to be made, signed or used any declaration, statement or document which is false or incorrect in any material particular in the transaction of any business for the Act, shall be liable to pay the penalty not exceeding five times the value of the goods in question.

The tax department, aggrieved by the order of the Commissioner of Customs (Preventive), proceeded with an appeal to the CESTAT, where the tribunal observed that as the assessee had not filed any false undertaking and that the Commissioner of Customs (Preventive) was correct to refrain from imposing penalty under section 114AA of the Customs Act.

The two-member bench of CESTAT, which consisted of Justice Dilip Gupta (President) and P.V Subba Rao (Technical Member), held no merit in the appeal. As a result, the appeal made by the customs department was dismissed.

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