Relief to Citibank: CESTAT quashes Penalty imposed u/s 112 Customs Act on purchase of ATMs made within India [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) at Mumbai has recently held that the penalty under Section 112 of the Customs Act, 1962 is not valid for purchase of ATMs and Controllers for ATMs for mis-declaration of description and value of goods.

Citibank is engaged in carrying on activities of banking services at its various branches located in India and it had purchased 12 numbers of ATMs and 6 ATMS Controllers in July, 1998 from M/s. Philips India.

A show-cause notice was issued in 1992 by the then Collector of Customs, Air Cargo Complex, Sahar, Mumbai on the allegation that those ATMs and ATMs Controllers were supplied by M/s Philips India to the Appellant after the same being imported by the company/firm, the appellant by mis-declaration of description and value of goods in violation of Import Policy and without Import Licence.

A penalty of One Crore Fifty Lakh Rupees was imposed on the Appellant Citibank. A Penalty of Fourty Lakh Rupees each for two consignments were also imposed on Appellant Mr. Mafatlal R. Mehta. The appellant filed the present appeal to question the delay in lack of merit of the penalty order.

On behalf of the petitioner, J C Patel, Raveena Kinkhabwala and Sujay Kantawala contended that delay of over 15 years in passing the Order-in-Original vitiates the proceedings and there was no evidence available to establish that Appellant had any knowledge about ATMs and ATMs Controllers being supplied by M/s. Philips India. The medical unfitness of the appellant was also made known to the appellate authority.

Ashwini Kumar, on behalf of the revenue, while supporting the reasoning and rationality of the order passed by the Commissioner (Appeals), submitted that investigation by DRI had unearthed such evil design of the Appellants in importing ATM machines without import license and with mis-declaration for the purpose of evading the Customs duty and that show-cause notice was issued to the Citibank-Appellant, but it was returned by the postal authority as refused by the recipient.

Taking cognizance of the violation of natural justice principles in this matter, the  Bench of Judicial Member Suvendu Kumar Pati and Technical Member Sanjiv Srivastava observed that, the fact in question being a transaction concerning purchase of an item within India, which is unrelated to its importation and to the importer as the said transaction is confined between the Appellant Citibank and M/s. Philips India, confirmation of penalty under Section 112 of the Customs Act against the Appellant is unsustainable both in law and facts. The order that imposed the penalty was consequently set aside.

To Read the full text of the Order CLICK HERE

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