Penalty not imposable when demand hit by limitation.

PJ/Case Law /2016-17/3238

Case:- HAREN CHOKSEY VERSUS COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI

Citation:- 2016 (337) E.L.T. 148 (Tri. - Mumbai)

Brief Facts:-This appeal is directed against Order-in-Appeal Nos. 735-736/ MCH/ADC/GR.VB/2012, dated 10-9-2012 passed by the Commissioner of Customs (Appeals), Mumbai Zone-I. The issue involved in this case is whether penalty imposed on the appellant under the provisions of Section 112(a) of the Customs Act, 1962 is correct or otherwise.

Appellant’s Contention:-Learned counsel argues that the preliminary point that needs to be addressed in this case is whether penalty is imposable on an act for which demand of duty will not survive. He submits that the show cause notice is issued on 23-8-2010 for undervaluation in respect of a car imported by bill of entry dated 29-4-2003 and finally assessed by the authorities. He would draw attention to the provisions of Section 28 of the Customs Act, 1962 and submit that demand of duty is beyond the period of five years as mentioned in Section 28.

Respondent’s Contention:-Learned Departmental Representative would submit that the appellant herein had abetted misdeclaration of the vehicle inasmuch as the manufacturing date was improperly mentioned to avail ineligible benefit. He would submit that the act of commission and misstatement with intention to evade duty is confirmed. It is also his submission that this point was not taken up before the lower authorities.

Reasoning Of Judgment:- On considering the submissions made by both the sides and on perusal of the records, Tribunal find that the demand of differential duty, in the case in hand is under Section 28 of the Customs Act, 1962 read with Section 125 of the Customs Act, 1962 and penalty is imposed on that ground. Tribunal find strong force in the contention raised by the learned counsel that the penalties imposed on the appellant herein being under the Customs Act, 1962, he can raise the question of law as to the demand of duty itself being incorrect, no penalty can be imposed.

It is seen from the records that the bill of entry was finally assessed on 29-4-2003, for car which was imported and the Customs duty was paid on the same day. Though there is an allegation of suppression of facts and mis-statement with intention to evade payment of duty, the show cause notice was issued on 23-8-2010, which is beyond the period of five years as mentioned in Section 28(4) of the Customs Act, 1962. The provisions of Section 28(4) mandates that the demand of duty can be raised beyond the normal period, but within five years of the relevant date. The relevant date in the case in hand is 29-4-2003 when the customs duty as assessed was paid.
In view of the above, Tribunal find that the penalty imposed on the appellant under Section 112(a) of the Customs Act, 1962 cannot be sustained for the simple reason that demand of duty and the confiscation of the vehicle is not sustainable under the provisions of the Customs Act, 1962.
In view of the foregoing the appeal is allowed and the penalty imposed is set aside.

Decision:-Appeal allowed.

Comment:- The essence of the case is that the provisions of Section 28(4) mandates that the demand of duty can be raised beyond the normal period, but within five years of the relevant date and so the demand of duty beyond 5 years is not sustainable in law. Consequently, when the demand of duty and the confiscation of the vehicle itself is not sustainable under the provisions of the Customs Act, 1962, penalty cannot be imposed.

Prepared By: - Rakshay Tater

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PJ/Case Law /2016-17/3238

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