CESTAT Reduces Personal Penalty to ₹2 Lakhs Based on Voluntary Offer and Revised Duty Assessment [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) Mumbai Bench, reduced a personal penalty from ₹5 lakhs to ₹2 lakhs based on the assessee’s voluntary offer and revised duty assessment.

Yusuf Dhanani, appellant-assessee, had challenged a personal penalty of ₹5 lakhs imposed under Section 112(a) of the Customs Act. The penalty was levied after the tribunal, in its order dated 10.05.2012, had set aside the earlier penalty of ₹20 lakhs and directed the authority to reconsider the amount.

The assessee's counsel argued that the penalty was not justified since the duty was confirmed only due to non-fulfilment of export obligation. The departmental representative countered that the assessee had already offered to accept a penalty of ₹2 lakhs, which was deposited as a pre-deposit. This statement, recorded in the earlier order, was taken as his acceptance to settle the matter by adjusting the same amount as penalty under Section 112(a)(ii) of the Act.

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A single member bench of Dr.Suvendu Kumar Pati(Judicial Member) noted that the assessee was a Director in M/s. Divya Chemicals Limited, which went into liquidation in 2002. The dispute related to imports made nearly thirty years ago. At the time, the law allowed a higher penalty under Section 112(a)(ii), but the provisions were later amended in 2015, capping the penalty at 10% of the duty from 14.05.2017.

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Initially, the adjudicating authority had imposed a penalty of ₹20 lakhs when the confirmed duty was ₹1,08,34,859.49. Later, the duty amount was recalculated as ₹70,96,187, and the assessee had voluntarily agreed to a reduced penalty of ₹2 lakhs, which had already been deposited.

Considering the age of the case, the revised duty amount, and the appellant’s willingness to settle, the CESTAT  held that restricting the penalty to ₹2 lakhs was justified.

In conclusion, the appeal was allowed, reducing the personal penalty from ₹5 lakhs to ₹2 lakhs, to be adjusted against the pre-deposit. The cross-objection from the respondent department was also dismissed.

To Read the full text of the Order CLICK HERE

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