Penalty Not Sustainable when Customs Ignores Assessee’s Valuation: CESTAT Quashes Penalties of Rs 1.57 Crore [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Bench at Kolkata, has set aside the penalties imposed upon appellant, a Government approved valuer, under Sections 112(a)(iii) and 114AA of the Customs Act, 1962. The total quantum of penalties confirmed by the Commissioner (Appeals) amounted to Rs. 60,00,000/- under Section 112(a)(iii) and Rs. 1,20,00,000/- under Section 114AA across the two appeals.

The case originated from intelligence developed by the Directorate of Revenue Intelligence (DRI) concerning "Trade Based Money Laundering." The investigation targeted importers who were allegedly over-invoicing goods declared as "rough precious stones" to illegally remit money out of India.

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The DRI concluded that the appellant, Shri Amit Bhutoria, who is a Government approved valuer, had connived with importers to facilitate the clearance of mis-declared goods. He was specifically accused of certifying highly over-invoiced values and giving incorrect certificates regarding the nature of the goods as "precious rough-semi precious stones," when the items were allegedly inferior quality stones with much lower values.

Before the Tribunal, the appellant contended that the penalties were unwarranted. He argued that the goods he had examined were subsequently cleared and given 'out of charge' by Customs after completion of formalities.

The appellant also highlighted a severe lack of corroboration, noting that the samples drawn from the consignments he examined were never sent for re-valuation by the Government-appointed valuer, or for examination by the Geological Survey of India (GSI).

The CESTAT Bench, comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member), found merit in the appellant's submissions. Regarding the penalty under Section 114AA (false declaration), the Tribunal observed that since the Customs authorities had assessed and cleared the goods based on their own valuation and not the appellant's certificate, his valuation was not used for determining duty liability. For the penalty under Section 112(a)(iii) (abetment), the Tribunal ruled that there was no evidence on record to prove the appellant derived or intended to derive any benefit.

The CESTAT found that the allegation of connivance was baseless and unsupported by evidence, and critically, the Department failed to establish that the goods examined by the appellant and the goods subject to the investigation were the same.

As a result, the Tribunal set aside the penalties imposed under both Sections 112(a)(iii) and 114AA, and allowed the appeals in full.

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