By TIOL News Service

CHENNAI, APR 07, 2015: THIS is an appeal by revenue against the order of Tribunal reported in 2009-TIOL-1918-CESTAT-MAD. The Tribunal vide the above order upheld the denial of exemption under Notification No 17/2001 Cus to the goods imported by the assessee, but reduced fine and set aside the penalty imposed. Aggrieved by the same, revenue filed appeal before the High Court with the following questions of law:

1.Whether CESTAT has got power to reduce the fine and waive the penalty in toto when both are mandatory under statute and more so when the Supreme Court has held in the negative against such exercise of power by the Tribunal as held in - 2009-TIOL-63-SC-CX ?

2. Whether the order of CESTAT, waiving the penalty imposed under Section 112 of the Customs Act 1962 for commission of an offence which rendered the goods for confiscation under Section 111 of the Customs Act 1962, is correct when CESTAT has upheld the confiscation of the goods under Section 111 of the Act ibid?

With regard to the first question of law, the High Court held the same does not arise for consideration since the adjudication order does not contemplate imposition of mandatory penalty.

However, with regard to the second question of law, the High Court held:

The contention of the Department appears to be justified for more than one reason. Section 112 of the Customs Act provides for imposition of penalty and a plain reading of Section 112 of the Customs Act makes it clear that once confiscation is ordered, levy of penalty is automatic. In the case of IVRCL Infrastructures and Projects Ltd. V. Commissioner of Customs - 2004-TIOL-233-CESTAT-DEL , penalty has been set aside only on the ground that no adequate evidence was found, which render the goods liable for confiscation. Since there was no proper finding, the penalty was set aside.

It is admitted by the respondent/importer that the goods imported are certain components of the hot mix plant and not a complete plant. Since the respondent has misdeclared the goods as hot mix plant, the Commissioner came to the conclusion to confiscate the goods. Once confiscation is ordered, penalty is automatic.

As the respondent/importer had admitted the position and their evidence is also very clear stating that they had imported only parts of hot mix plant and not entire plant, the above-said decision in the case of IVRCL does not apply to the facts of the present case. Further, the correspondences between the respondent/importer, the supplier and the local representative clearly show that the importer was aware that the goods were only components and not entire plant.

Accordingly, the High Court answered the question of law in favour of the revenue and set aside the order of Tribunal on penalty.

(See 2015-TIOL-845-HC-MAD-CUS)