2025 (7) TMI 1553 - AT - Customs

Levy of penalty u/s 114 of CA 1962 without confiscation of export goods - Overvaluation of export goods - cut and polished diamonds mixed with small quantity of broken diamonds - goods mis-declared as broken diamonds - HELD THAT - Under Section 114 penalty is imposable on any person who in relation to any goods does or omits to do any act which act or omission would render such goods liable to confiscation under Section 113 or abets the doing or omission of such an act. Thus Section 114 is linked to the liability of the goods to confiscation under Section 113. Therefore the submission of the appellant that without confiscation under Section 113 no penalty can be imposed under Section 114 agreed upon. As there is no confiscation of the goods exported it is found that penalty under Section 114 of the Act is not imposable in this case. It is found that while addressing this very issue arising out of the very same SCN recently this Tribunal in case of another Appellant Shri. Prakash Goti Director of Dharmanandan Diamonds Private Limited 2025 (6) TMI 2047 - CESTAT KOLKATA has set aside the penalty imposed. In that case this Tribunal has held that (a) penalty under Section 114 is incorrectly imposed when the imported goods were never held liable for confiscation under Section 113 of the Customs Act 1962 and (b) there was no involvement of the Appellant in the alleged mis-declaration and overvaluation of imports by other Firms which was the subject matter of investigation. There is no allegation against the appellant that the appellant was engaged in export of diamonds by mis-declaring or overvaluing the said goods. Thus it is found that the Revenue has failed to bring in any evidence on record against the appellant to impose penalty under Section 114 of the Customs Act and therefore no penalty is imposable on the appellant. The penalty of Rs.4, 50, 000/- imposed on the appellant under Section 114 of the Customs Act is set aside - Appeal allowed.

Summary

ISSUES:

Whether a penalty under Section 114 of the Customs Act, 1962 can be imposed without confiscation of the goods under Section 113 of the Customs Act.Whether the appellant's involvement in export of goods by mis-declaration or overvaluation was established to justify imposition of penalty under Section 114.The applicability and interpretation of Section 114 of the Customs Act, 1962 in relation to acts or omissions rendering goods liable for confiscation under Section 113.

RULINGS / HOLDINGS:

The Court held that "Section 114 is linked to the liability of the goods to confiscation under Section 113" and therefore, "without confiscation under Section 113, no penalty can be imposed under Section 114."The penalty under Section 114 was set aside because the goods exported by the appellant were not confiscated, and thus the penalty was "not imposable in this case."The Court found no evidence or allegation that the appellant was involved in mis-declaration or overvaluation of the exported diamonds, and accordingly held that "no penalty is imposable on the appellant."The Court relied on a recent Tribunal decision which held that penalty under Section 114 is "incorrectly imposed, when the imported goods were never held liable for confiscation under Section 113" and where there was "no involvement of the Appellant in the alleged mis-declaration and overvaluation."

RATIONALE:

The Court applied the statutory framework of the Customs Act, 1962, specifically Sections 113 and 114, where Section 114 penalizes acts or omissions that would render goods liable to confiscation under Section 113, or abet such acts.The Court emphasized the statutory language of Section 114, which conditions penalty imposition on the goods being liable to confiscation under Section 113, thus establishing a direct legal linkage between confiscation and penalty.The Court referred to precedent from the same Tribunal that clarified the non-imposability of penalty under Section 114 absent confiscation under Section 113 and where the appellant lacked direct involvement in the wrongful acts.No doctrinal shift or dissenting opinion was noted; the decision reaffirmed the established interpretation that penalty under Section 114 cannot be sustained without confiscation under Section 113.