The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has provided significant relief to Hindustan Inox Limited by quashing the penalties imposed under Section 114AA of the Customs Act, 1962. This section deals with penalties for making, signing, or using false or incorrect statements or documents in the course of business under the Customs Act.
The case revolved around the import of stainless steel coils and plates from China, which were subject to Countervailing Duty (CVD). The company initially availed duty exemption under certain notifications, believing that the CVD was not payable for imports made under an Advance Authorization. However, subsequent investigations and interpretations by the customs authorities suggested otherwise, leading to the imposition of duties and penalties.
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The Tribunal observed that the company had acted based on a bona fide belief supported by existing notifications and legal interpretations at the time of import. Since there was no deliberate or intentional misdeclaration, the imposition of penalties under Section 114AA was deemed unsustainable. The Tribunal also found that the penalties imposed under Section 114AA were without sufficient evidence.
The CESTAT bench noted that there was no misdeclaration or fraudulent intent by Hindustan Inox or its directors.
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It was noted that, “It is only on account of subsequent investigation by DRI, that the appellants have paid the CVD duty on 23.10.2018. From the above factual details, it is clearly proved that there is no trace of any element of violation of Section 111(d) ibid and hence the imposition of penalty under Section 112(a) ibid is without any evidence or grounds and hence to this extent the impugned order is not legally sustainable.”
It was also observed that, “ It is not the case that in the factual matrix of the present case, that the impugned imported goods were imported by the appellants involving any prohibition imposed under Customs Act, 1962 or any other Act. In fact, the appellants importer have given the specific Advance Licences on which they had claimed exemption from the levy of CVD, and the departmental authorities at the Customs port of importation had also permitted such impugned imported goods to be cleared without payment of such CVD approving of such act by the appellants.”
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The tribunal bench of S.K. Mohanty, Member (Judicial) and M.M. Parthiban, Member (Technical) noted that the penalties under Section 114AA require clear evidence of intent to defraud or knowingly making false statements, which was not present in this case.
Therefore, the Customs, Excise and Service Tax Appellate Authority set aside the penalties, in relief to Hindustan Inox and its directors.
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