The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has reduced a Rs. 15 lakh penalty imposed on a customs cargo service provider to Rs. 50,000, holding that the adjudicating authority could not exceed the maximum penalty expressly prescribed under Regulation 12(8) of the Handling of Cargo in Customs Areas Regulations, 2009.
The Bench of A.K. Jyotishi (Technical Member) observed that a plain reading of Regulation 12(8) showed that the maximum permissible penalty under the provision was ₹50,000. Consequently, the adjudicating authority had travelled beyond the statutory limit by imposing a penalty of ₹15 lakh.
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The appellant/assessee operates at the International Cargo Terminal of the Indira Gandhi International Airport in New Delhi. The Customs Department had initiated proceedings against it in connection with various alleged acts of omission and commission relating to the handling of cargo in the customs area.
The show-cause notice proposed action against the appellant under multiple provisions. It sought penalties under Sections 112(a) and 114AA of the Customs Act, 1962, cancellation of the appellant’s licence under Regulation 11 of the 2009 Regulations, and the imposition of a penalty under Regulation 12(8).
However, while adjudicating the matter, the Principal Commissioner did not impose penalties under Sections 112(a) or 114AA of the Customs Act. The authority also decided against cancelling the appellant’s licence under Regulation 11. Nevertheless, it imposed a penalty of ₹15 lakh under Regulation 12(8) of the cargo handling regulations.
Before the Tribunal, the appellant clarified that it was not challenging the imposition of the penalty itself. Its objection was confined to the quantum of the penalty, which, according to it, was far beyond the statutory ceiling of ₹50,000.
Counsel for the appellant submitted that when Regulation 12(8) expressly prescribed the maximum amount of penalty, the adjudicating authority had no jurisdiction to impose ₹15 lakh under that provision.
The Customs Department defended the penalty and relied on an earlier CESTAT order dated January 25, 2023, passed in the case of the same appellant. The departmental representative contended that a penalty exceeding the amount mentioned in Regulation 12(8) could be imposed in view of the earlier decision.
The Tribunal identified the limited question before it as whether a penalty exceeding ₹50,000 could be imposed under Regulation 12(8).
Examining the proceedings, the CESTAT noted that although the show-cause notice had proposed penalties under the Customs Act and cancellation of the licence, the adjudicating authority had not taken either of those actions. It further recorded that the Customs Department had not filed an appeal against that portion of the adjudication order.
The only surviving penalty was therefore the one imposed under Regulation 12(8). The Tribunal held that the provision placed a clear cap of ₹50,000 on the amount that could be imposed as a penalty.
It observed that the ₹15 lakh penalty was plainly beyond the limit prescribed by the applicable regulation. The earlier order cited by the Customs Department was also held to be irrelevant in view of the unambiguous statutory language.
The Tribunal reduced the penalty from ₹15 lakh to ₹50,000 and modified the adjudication order to that extent. The appeal was partly allowed.
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