Mere Non-Disclosure without Deliberate Evasion Not Enough: CESTAT Quashes Rs. 2 Crore Penalty on Former Managing Director [Read Order]
CESTAT quashed the Rs. 2 crore penalty, ruling that mere non-disclosure without deliberate evasion does not justify punishment under customs law.
![Mere Non-Disclosure without Deliberate Evasion Not Enough: CESTAT Quashes Rs. 2 Crore Penalty on Former Managing Director [Read Order] Mere Non-Disclosure without Deliberate Evasion Not Enough: CESTAT Quashes Rs. 2 Crore Penalty on Former Managing Director [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/05/penalty-CESTAT-TAXSCAN.jpeg)
The Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that mere non-disclosure without a deliberate attempt to evade duty is insufficient to attract a penalty under Section 112(a)(ii) of the Customs Act and quashed a Rs. 2 crore penalty imposed on Rajesh Khosla, the former Managing Director of MMTC-PAMP India Pvt. Ltd.
Rajesh Khosla had challenged an order dated December 31, 2022, passed by the Principal Commissioner of Customs (Import), New Delhi, which imposed the penalty on the ground that he had failed to inform customs authorities that the final valuation of imported gold dore bars was based on assay-confirmed quantities determined post-import, and not on the provisional invoices used at the time of import clearance.
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The department alleged that this non-disclosure contributed to the undervaluation of imported goods and that Khosla, as Managing Director, was aware of the process and thus liable for abetting duty evasion under Section 112(a)(ii) of the Customs Act.
The appellant’s counsel argued that there was no conscious attempt to evade customs duty and that the valuation mechanism used was transparent, with post-import assay reports guiding the issuance of final invoices. They further argued that in several instances, MMTC-PAMP had overpaid duty and successfully claimed refunds, which shows the absence of intent to suppress facts or evade duty.
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The revenue argued that the petitioner (Rajesh Khosla), being the Managing Director of the company, was responsible for the non-disclosure of the actual valuation methodology and thus liable for the resulting duty shortfall.
The two-member bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that there was no basis to conclude that Rajesh Khosla had consciously attempted to evade customs duty. The tribunal observed that the gold content sometimes turned out to be lower than declared, leading to overpayment and refund claims, an inconsistency that contradicted the notion of intentional evasion.
The tribunal observed that penal provisions must be interpreted strictly and cannot be invoked in the absence of deliberate misconduct. It held that the requirement of a mental element, such as intent, knowledge, or willful omission, was not met in this case. The penalty of Rs. 2 crore imposed on Rajesh Khosla under Section 112(a)(ii) of the Customs Act was set aside. The appeal was allowed.
To Read the full text of the Order CLICK HERE
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