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2025 (6) TMI 272 - AT - CustomsEntitlement to the concessional rate of duty under Notification No.12/2012-Cus dated 17.03.2012 for imported rubber tracks used as replacement parts rather than in the manufacture of track type combined harvesters - levy of penalty - HELD THAT - The he appellant admittedly imported rubber tracks and claimed exemption under Sl.No.399 of Notification No.12/2012-Cus. dated 17.03.2012 even though the same are not used in the manufacture of harvesters transplanters etc. but used as replacement of parts. The appellant admitting their mistake discharged the entire amount of differential duty with interest before issuance of show-cause notice. It is the contention of the appellant that under a bona fide belief and interpretation of the said Notification they have claimed the benefit on the imported goods; hence imposition of penalty under Section 112(ii) and Section 114AA are unwarranted when the penalty had already been imposed under Section 114A of the Customs Act 1962 which they have discharged. In the interest of justice therefore the penalties imposed under Section 114A is upheld. The penalties imposed under Section 112(ii) and Section 114AA are liable to be set aside and accordingly set aside. Since there is no evidence on record regarding involvement of the Manager the penalty imposed on him under Section 112(ii) deserves to be set aside and accordingly set aside. There are merit in the contention of the learned advocate for the appellants that the fine imposed in the present case is excessive. Consequently taking note of the facts and circumstances of the case it would be appropriate to reduce the fine to Rs.5.00 lakhs in the interest of justice. Accordingly the redemption fine is reduced to Rs.5.00 lakhs. The impugned order is modified to the extent of setting aside the penalties imposed under Section 112(ii) and Section 114AA of the Customs Act 1962 on the appellant company. Penalty imposed on the individual is set aside. Redemption fine is reduced to Rs.5.00 lakhs - Appeal allowed in part.
1. ISSUES PRESENTED and CONSIDERED
- Whether the appellant was entitled to the concessional rate of duty under Notification No.12/2012-Cus dated 17.03.2012 for imported rubber tracks used as replacement parts rather than in the manufacture of 'track type combined harvesters'. - Whether the imposition of penalties under Sections 112(ii) and 114AA of the Customs Act, 1962 was justified in addition to the penalty under Section 114A, given that the appellant had paid the differential duty with interest before issuance of the show-cause notice. - Whether the confiscation of the imported goods and the quantum of fine imposed were appropriate in the circumstances. - Whether the penalty imposed on the company's Manager under Section 112(ii) was justified in absence of evidence indicating personal involvement in the alleged violation. 2. ISSUE-WISE DETAILED ANALYSIS Entitlement to Concessional Rate of Duty under Notification No.12/2012-Cus The appellant imported rubber tracks during 2012-13, claiming exemption under Sl.No.399 of Notification No.12/2012-Cus dated 17.03.2012, on the basis that these were used in the manufacture of 'track type combined harvesters'. However, the Department's investigation revealed that these imported goods were not used in manufacture but were supplied as replacement parts under repair and maintenance agreements. The legal framework governing such exemptions requires that the imported goods be used in manufacture to qualify for concessional duty. The appellant admitted the misapplication of the notification and discharged the differential duty amounting to Rs.10,32,497/- along with interest of Rs.81,610/- prior to issuance of the show-cause notice, indicating recognition of the error. The Court noted that the appellant's claim was based on a bona fide interpretation of the notification, albeit incorrect. Imposition of Penalties under Sections 112(ii), 114AA, and 114A of the Customs Act, 1962 The adjudicating authority imposed penalties under Section 114A equivalent to the differential duty, as well as additional penalties under Section 112(ii) (Rs.2 lakhs) and Section 114AA (Rs.10 lakhs) on the appellant company. A penalty of Rs.2 lakhs under Section 112(ii) was also imposed on the Manager personally. The appellant contended that once the penalty under Section 114A was imposed and paid, the additional penalties under Sections 112(ii) and 114AA were excessive and unjustified, especially given the bona fide nature of the claim and the prompt payment of differential duty and interest. The appellant also argued that the penalty on the Manager was unwarranted due to lack of evidence of personal involvement. The Court examined the statutory provisions: Section 114A prescribes penalty equivalent to the duty evaded, while Sections 112(ii) and 114AA provide for penalties in cases of wrongful claim and suppression of facts. The Court found merit in the appellant's argument that imposing multiple penalties for the same act, particularly after the differential duty and penalty under Section 114A had been paid, was harsh and disproportionate. Accordingly, the Court upheld the penalty under Section 114A but set aside the penalties under Sections 112(ii) and 114AA against the company. The penalty on the Manager was also set aside due to absence of evidence of personal culpability. Confiscation of Goods and Quantum of Fine The adjudicating authority ordered confiscation of the imported goods with an option to redeem on payment of a fine of Rs.6 lakhs. The appellant challenged the confiscation and the quantum of fine as excessive and unwarranted. The Court noted the facts and circumstances, including the bona fide nature of the claim and the appellant's prompt compliance by paying the differential duty and interest. It found the fine imposed to be excessive in the interest of justice and reduced the redemption fine to Rs.5 lakhs. The confiscation order was modified accordingly to allow redemption on payment of the reduced fine. 3. SIGNIFICANT HOLDINGS "I find substance in the argument of the learned advocate for the appellants. In the interest of justice, therefore, the penalties imposed under Section 114A is upheld. The penalties imposed under Section 112(ii) and Section 114AA are liable to be set aside and accordingly set aside." "Since there is no evidence on record regarding involvement of the Manager Mr. Saurab Gupta, the penalty imposed on him under Section 112(ii) deserves to be set aside and accordingly set aside." "Consequently, taking note of the facts and circumstances of the case, it would be appropriate to reduce the fine to Rs.5.00 lakhs in the interest of justice. Accordingly, the redemption fine is reduced to Rs.5.00 lakhs." The Court established the principle that where a bona fide claim for exemption is made and the differential duty along with interest and penalty under Section 114A is discharged before show-cause notice, imposing multiple penalties for the same act under Sections 112(ii) and 114AA is excessive and unjustified. The final determinations were:
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