In a significant relief to Hindustan Inox Limited and its directors, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has quashed the penalties imposed under Section 112(a) of the Customs Act, 1962. The penalties were initially imposed on the directors of the company by the Commissioner of Customs.
The issue revolved around the import of stainless steel coils and plates from China, for which Hindustan Inox availed duty exemptions under the Advance Authorization Scheme. However, the Department of Revenue Intelligence (DRI) initiated investigations, interpreting that the company wrongly claimed an exemption from Countervailing Duty (CVD) under Section 9 of the Customs Tariff Act, 1975. This led to a show cause notice and the subsequent imposition of penalties on the company and its directors, alleging that they knowingly avoided CVD on the imported goods.
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In its detailed order, the Customs Tribunal observed that the CVD exemption under Notification No. 18/2015-Customs was indeed clarified through an amendment issued later under Notification No. 79/2017-Customs dated 13.10.2017.
The goods in question were imported prior to the amendment, and the appellants had a bona fide belief that they were eligible for the exemption at the time of import.
The Tribunal held that there was no element of willful misstatement or suppression of facts by the appellants. Hindustan Inox had cleared the goods with the necessary documents, and the customs authorities at the port had allowed the clearance without objections. The penalties imposed under Section 112(a) were therefore found to be unsustainable.
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The CESTAT Bench of S.K. Mohanty, Member (Judicial) and M.M. Parthiban, Member (Technical) thus set aside the penalties imposed on the directors under Sections 112(a) and 114AA of the Customs Act, citing that the procedural misinterpretations and subsequent investigation did not involve any intentional violation of customs law.
The Tribunal also referred to various judicial precedents that reaffirmed the importance of considering the intent and good faith of the appellants in cases involving procedural disputes.
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