CESTAT quashes Penalty against Company since Notice was issued to Directors [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi bench has held that the penalty order passed against the Company shall be deemed as invalid since the customs department issued notice only to the Directors of the Company.

The Directorate of Revenue Intelligence started investigation against the appellant based on the information received that certain importers of Melamine were indulging in anti-dumping duty. Consequently, show-cause notices were issued in the names of directors of the company, a copy of which was served on the appellant-Company. However, the department concluded the proceedings demanding penalty from the Company.

Considering an appeal filed by the Company, the Tribunal bench comprising CESTAT President Justice Dilip Gupta and Technical Member P V Subba Rao noted the fact that the show cause notice was not issued to the appellant.

“It was issued only to five persons including Amit Agarwal, who is the Director of the appellant. The appellant has stated that since it was not required to file reply to the show cause notice, no reply was filed,” the bench observed.

While allowing the appeal filed by the company, the Tribunal added that “show cause notice is the basis on which any order can be passed against a person. This is the basic requirement of the principles of natural justice. As the show cause notice was not issued to the appellant, the appellant did not file any reply. The appellant cannot be faulted for not filing a reply since the show cause notice did not call upon the appellant to file a reply. Thus, for this reason alone, the impugned order against the appellant deserves to be set aside. It would, therefore, not be necessary to examine whether the Directorate of Revenue Intelligence had the jurisdiction to issue the show cause notice under section 28(4) of the Customs Act.”

To Read the full text of the Order CLICK HERE

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