Customs Act | Penalty Can Be Levied Only If Goods Are Liable To Confiscation: CESTAT

Customs Act | Penalty Can Be Levied Only If Goods Are Liable To Confiscated: CESTAT

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that penalty under section 114 of the Customs Act can be levied only if the goods are held liable to confiscation under section 113 of the Customs Act.

The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that  the goods had been exported and, therefore, the goods could not have been confiscated under section 113(d) of the Customs Act. Penalty under section 114 of the Customs Act can be levied only if the goods are held liable to confiscation under section 113 of the Customs Act. As the confiscation cannot be sustained, penalty under section 114 of the Customs Act cannot also be sustained.

Intelligence was received by the department that M/s. Sundram Export Pvt. Ltd. and M/s. Netcompware Pvt. Ltd. had exported CD-ROMs under Duty Entitlement Pass Book Scheme by grossly overvaluing it with an intention to wrongly avail DEPB scrips and thereby evade customs duty. Enquiries were, therefore, initiated by the Directorate of Revenue Intelligence. Statement of various persons, including the appellant, were recorded and ultimately a show cause notice dated 04.12.2000 was issued to 26 persons including the appellant.

The case setup by the department in the show cause notice is that Sundram Export exported 96,800 pieces of CD-ROMs at a highly inflated Freight on Board value of US 19$ per piece. Another exporter, by name of Netcompware, also exported a consignment of 40,000 pieces of CD- ROMs at an overvalued price of US 19$ per piece. The 5 shipping bills covering the above exports were filed under the DEPB Scheme. 

According to the department, the overvalued export was used by the exporter to fraudulently procure DEPB scrips from the Directorate General of Foreign Trade and subsequently these DEPB scrips were sold in the open market and were thereafter used by companies to import goods without payment of duty. 

The department contended that the 40,000 CD-ROMs exported by Netcompware to Hong Kong were subsequently re-imported and cleared by M/s. Arvind International under a Bill of Entry dated 08.09.1998. It is said that the appellant was involved in the export of CD- ROMs and availment of DEPB scrips by Sundram Exports and Netcompware.

The Commissioner then relied upon the various statements made under section 108 of the Customs Act and held that the appellant is liable for penal action under section 114 of the Customs Act, 1962 for abetting the over-invoicing of CD- ROM’s exported by M/s Sundram Exports Pvt. Ltd. and M/s. Netcompware Pvt. Ltd. to avail undue DEPB benefits fraudulently.”

The tribunal held that statements made under section 108 of the Customs Act, there is no other evidence which has been considered by the Commissioner in the impugned order for imposing penalty upon the appellant under sections 114 and 112 of the Customs Act. As these statements cannot be relied upon, the imposition of penalty upon the appellant under sections 114 and 112 of the Customs Act cannot be sustained and is set aside.

Case Details

Case Title: Sh. Deept Swarup Aggarwal Versus Customs Commissioner

Case No.: Customs Appeal No. 335 Of 2006

Date:  06.06.2025

Counsel For  Appellant: Naveen Malhotra and Ritvik Malhotra

Counsel For Respondent: Rajesh Singh

Read More: Taxpayer Declared More Tax Than Due, Still Denied SVLDRS Relief: Bombay High Court Intervenes

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