No Penalty due to Inadvertent Omission/System Error: CESTAT grants Relief to HMM India [Read Order]

CESTAT - Penalty - HMM India - Taxscan

In a major relief to Hyundai Merchant Marine India Pvt.Ltd, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has deleted the penalty imposed by the Customs Department and held that no penalty can be levied due to inadvertent omission/system error.

The appellant is a vessel operator and has taken all care to furnish necessary documents in regard to the exports. After receiving the show cause notice proposing penalty pointing out the omissions and errors in the documents received from CHAs, the appellant examined the same and rectified the same. It was argued before the Tribunal that the defect was sorted out by the appellant with the help of officers who pointed out the errors. However, the department ignored these facts and confirmed the penalty mentioned in the notice. The appellants approached the Tribunal for relief.

Before the Tribunal, the department relied on section 41 of the Customs Act, 1962, and submitted that it is the responsibility of the appellant to file the EGM to the proper officer before departure of the conveyance from the Customs station and therefore, the penalty shall be sustained.

After hearing arguments from both sides, Judicial Member Sulekha Beevi observed that only for continued non-compliance beyond 1.4.2019 the penalty is required to be imposed.

“In the present case, on receiving the notice from the department, the appellant has immediately rectified the defect. There is no allegation of continued non-compliance. The facts brought to light established that the error was only due to inadvertent omission/system error etc. A penalty is a form of punishment by recovery of an amount from the offender. It is a form of pecuniary punishment inflicted by law for its violation. If there was no willful intention / wrongful mind for violating the law and such violation occurred was only due to inadvertent omission/system error, imposition of penalty is unwarranted.”

Allowing appeal, the Tribunal added that“If there was continued non-compliance even after the errors being pointed out by the department, the circumstances would have been different and penalty may be imposable. It is also to be stated that after the amendment to Section 41, the section itself provides for a penalty not exceeding Rs.50,000/-. That too only if the proper officer is satisfied that there is no sufficient cause for delay in filing EGM. This being so, the invocation of Section 117 is not legal or proper.”

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