Incorrect Penalty Imposition on Firm under Customs and Excise Laws: CESTAT Remands Matter to AA [Read Order]

The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) remitted the matter to the Adjudicating Authority(AA), citing incorrect penalty imposition on a firm under the Customs Act, 1962, and the Central Excise Rules, 1944.

Swagat Synthetics,appellant-assessee,was penalized under the Customs Act, 1962, and the Central Excise Act, 1944, for alleged involvement in paper transactions. The AA imposed penalties under Section 112 of the Customs Act and Rule 26 of the Central Excise Rules.

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The assessee argued that the penalty under Section 112 was incorrect, as it was a 100% Export Oriented Unit (EOU) that only received finished goods and had no role in importing raw materials or the alleged diversion by M/s. Micro Polyester P. Ltd. It also contended that the penalty under Rule 26 was wrongly imposed, as a firm does not qualify as a "person" under the rule.

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The department counsel argued for upholding the order, stating that the assessee had facilitated the wrongful transaction. It was also noted that the case laws cited by the assessee were not considered by the AA, justifying a remand.

A single member bench comprising Somesh Arora (Judicial Member) found that the adjudicating commissioner had not considered the case law stating that penalties under Rule 26 apply only to individuals, not firms. It also noted that the scope of Section 112 regarding firms was not examined. The appellate tribunal remitted the matter to the adjudicating authority for reconsideration in light of the case law and the applicability of Section 112 and Rule 26 to the assessee, being a firm.

In short, the appeal filed by the assessee was allowed by way of remand.

To Read the full text of the Order CLICK HERE

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