Penalty u/s 112 leviable when Goods are Misdeclared: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that penalty under section 112 of the Customs Act, 1962 is leviable when goods are misdeclared.

 Jindal Fibre, the appellant is an SEZ Unit at KASEZ filed following Home Consumption Bills of Entry for clearance of goods in DTA declaring as "Mix mutilated rags" & "Old and Used mutilated rags" falling under CTH 6310 (BCD 5%).

On examination, it was found that 64.280 MTs of old and used clothes were classifiable under CTH 6309 (BCD 10%) have been misdeclared and are liable for confiscation under the provisions of section 111(d) & (m) of the Act and importer is liable for penalty under section 112(a) of the Act. The officers placed the goods and five trucks carrying the goods under seizure.

Mr Rakesh Singh, Government approved valuer determined the fair value of goods as Rs. 50,90,000/- and based on which differential duty was determined as Rs.7,06,028/- 

The appellants accepted their negligence and took full responsibility to pay fine/penalty and differential duty and waived SCN and personal hearing in the matter. The appellant submitted that the incident occurred on account of negligence by junior staff. 

The appellant deposited the entire amount of liability as adjudged. An Order in original was issued in which it was held that the appellant had wilfully misdeclared old and used clothes in the guise of the cotton wiper with an intention to evade the customs duty. In that view, it was ordered to Confiscate 64.280 Mts of old and used clothes under the provisions of section 111 (d) & (m) of the Customs Act and imposed the penalty of Rs. 4,00,000/- under section 112(a) of the Customs Act.

It was submitted that the appellant is not contesting, the duty and redemption fine on goods. The contest is only to the penalty of Rs. 4,00,000/- under section 112(a) and a redemption fine of Rs. 175,000 on conveyance. Due to a lack of supervision, the staff inadvertently cleared a certain quantity of unmutilated clothes in five trucks.

It was stated that the adjudicating authority has given no reasons for holding that misdeclaration was wilful and further refrained from imposing penalty under section 114A and learned Commissioner (appeals) has not disputed the said stand of the appellant but went on to hold that for liability of redemption fine and penalty no mens rea is required.

A single-member bench comprising Mr Somesh Arora, Member (Judicial) held that the Commissioner (Appeals) has rightly, relying upon the decision of the Apex Court in 1993 (67) held that the goods are misdeclared, Section 112 gets attracted. This is especially so when violations are accepted by the concerned party. “Accordingly, the penalty under Section112 (a) is sustainable, however, the same is reduced to Rs. 1,00,000/- (one lakh only), as the Apex Court has also held that only the quantum of penalty remains justiciable. Accordingly, the penalty under Section 112(a) is sustained but stands reduced to Rs. 1,00,000/-, similarly, the redemption fine of Rs. 35,000/- each on five truck clearing, carrying goods when intercepted is also reduced to Rs. 10,000/- each from Rs. 35,000/-, as the truck was not offending goods, per se.”, the CESTAT held.

To Read the full text of the Order CLICK HERE

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