Customs duty cannot be demanded jointly and severally: CESTAT quashes penalty u/s 114A [Read Order]

Recently, the Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) held that the customs duty could not be demanded jointly and severally and quashed the penalty that was levied against the appellant, RVS Petrochemicals Limited, under Section 114 A of the Customs Act, 1962.

In this case, the appellant from the purchases made from a certain M/s. BGH Exim Ltd. had filed a bill of entry for the value of the invoice raised by BGH, and the goods were cleared on payment of duty.

Later on, the department alleged that the BHG had undervalued the goods by bifurcating the value of imported goods. The appellant was also made a party to this case and Differential custom duty was demanded jointly and severally from BGH and appellant and imposed penalty on the

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The penalty was proposed against the appellant under Sections 114A and 112 of the Customs Act.

It is to be noted that BGH settled its case with the Settlement Commission by agreeing to pay a differential duty of Rs. 1,05,23,322, along with interest and a penalty of Rs. 4,00,000. However, a penalty under Section 114A of the Customs Act was imposed, while the penalty under Section 112 was dropped. The appellants have now filed appeals seeking to set aside the Section 114A penalty.

The appellant’s counsel contended that M/s BGH Exim Ltd. had paid the customs duty and its case was settled by the Settlement Commission. As no demand is payable by the appellants, joint and several liability cannot apply, and the penalty under Section 114A is not sustainable.

The counsel also submitted that since the duty in the impugned order is not payable by the appellants, the penalty under Section 114A was wrongly imposed.

The CESTAT, after going through the provisions of Section 114A of the Customs Act, observed that under this section, a penalty can be imposed only when the duty is payable.

 CESTAT concluded that duty cannot be demanded jointly and severally and that in this case the duty was confirmed only against M/s. BGH Exim Ltd.

Judicial Member Ramesh Nair set aside the penalties that were imposed.

To Read the full text of the Order CLICK HERE

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