Penalty u/s 112(a)(ii) of Customs Act cannot be imposed on short paid duty: CESTAT [Read Order]

The New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that penalty under section  112(a)(ii) of Customs Act, 1962 cannot be imposed on short-paid duty without the intention of evasion of duty.

The appellant, Vikas Singh challenged the part of the order dated 31.12.2022 passed by the Principal Commissioner of Customs, ACC (Import), New Delhi  that imposes a penalty of Rs. 50 Lakhs upon him as Managing Director of M/s. MMTC-Pamp India Pvt. Ltd. under section 112(a)(ii) of the Customs Act, 1962.

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Section 112(a)(ii) of the Customs Act deals with penalty for improper importation of goods and provides that any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, shall be liable in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding 10% of the duty sought to be evaded or Rs. 5,000/-, whichever is higher. 

The Principal Commissioner has held that since Vikas Singh suppressed the fact that the differential duty was paid due to the direction of Reserve Bank of India and not suo moto and, therefore, a penalty under section 112(a)(ii) of the Customs Act would be leviable for his acts and omission.

A two-member bench, Justice Dilip Gupta, President and P.V. Subba Rao, Member (Technical)  viewed that section 112(a)(ii) of the Customs Act stipulates imposition of penalty on the customs duty sought to be evaded and, therefore, presupposes a conscious exercise on the part of the person alleged to have committed evasion. 

It was found that “No motive can be attached to the appellant in suppressing the final invoice because the appellant has paid more customs duty than what was actually required to be paid in cases where the gold content is found to be lower than that mentioned in the finalized Bills of Entry. It cannot, therefore, be urged that the appellant had short paid duty on account of any wilful statement or suppression of facts.”

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 It cannot be urged that there was any conscious attempt to evade payment of duty. In view of the judgment of the Kerala High Court in O.T. Enasu, the imposition of penalty upon Vikas Singh cannot be sustained. Counsel appearing for Vikas Singh that Vikas Singh joined M/s. MMTC-Pamp India Pvt. Ltd. as Managing Direct in March 2020. He was, therefore, not associated when the imports took place as all the Bills of Entry were filed before his joining.

The tribunal held that penalty under section 112(a)(ii) of the Customs Act could not have been imposed upon Vikas Singh.  The order dated 31.12.2022 passed by the Principal Commissioner to the extent it imposes penalty upon Vikas Singh under section 112(a)(ii) of the Customs Act, therefore, deserves to be set aside and is set aside.

To Read the full text of the Order CLICK HERE

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