The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside penalties of Rs. 40 lakh imposed on an importer of kerosene generator sets, holding that customs cannot impose penalty for its own failure to verify import documents at clearance stage.

The bench of R.Muralidhar (Judicial Member) and Rajeev Tandon (Technical Member) has observed that no evidence existed to establish concealment, suppression, or use of false documents by the importer.

The appeal was filed by General Agencies (Kolkata) Pvt. Ltd. against an order of the Commissioner (Appeals), Kolkata, which had upheld penalties imposed under Sections 112(a)(i) and 114AA of the Customs Act, 1962. The Tribunal delivered its decision on 19 June 2026.

The appellant had imported kerosene generator sets during 2020 and 2021 by classifying the goods under Customs Tariff Heading (CTH) 85023990. At the time of import, the company submitted all relevant documents, including emission certificates issued by Envirotech East Pvt. Ltd., a laboratory recognized by the Ministry of Environment. Based on verification of the Bills of Entry and accompanying documents, Customs authorities permitted clearance of the goods for home consumption.

More than one year after the second import and over two years after the first import, Customs authorities issued a Show Cause Notice alleging that the goods ought to have been classified under CTH 85022090 and that the environmental certification submitted by the importer did not satisfy the requirements prescribed under environmental notifications.

The adjudicating authority thereafter imposed a penalty of ₹15 lakh under Section 112(a)(i) and a further penalty of ₹25 lakh under Section 114AA of the Customs Act. These penalties were subsequently affirmed by the Commissioner (Appeals), leading to the present appeal before CESTAT.

The importer argued that the emission certificates relied upon during import were issued by Envirotech East Pvt. Ltd., an agency specifically empanelled and authorized by the Ministry of Environment to conduct tests and issue environmental certificates. The appellant pointed out that the certificates were openly submitted along with the Bills of Entry and other technical documents, including quality reports and specifications provided by the manufacturer.
According to the appellant, the dispute essentially revolved around the allegation that a “Type Approval Certificate” was not furnished in the prescribed format. However, the importer contended that submission of a certificate issued by a duly authorized agency could not be treated as furnishing false or incorrect documents.

The appellant further highlighted that the total value of the imported consignments was approximately ₹39 lakh and the customs duty involved was around ₹11 lakh, making the penalties imposed grossly disproportionate.

After examining the relevant notifications, certificates, Bills of Entry, and technical specifications, the Tribunal noted that Envirotech East Pvt. Ltd. was indeed an authorized agency notified by the Government to conduct testing and issue certificates relating to environmental standards. The Tribunal also found that the emission certificate had been filed at the time of import itself and was available to Customs officers during assessment.
The Bench observed that the sole allegation in the Show Cause Notice was that the certificate was not issued in the form of a “Type Approval Certificate.” However, Customs authorities had accepted the certificate without objection at the time of clearance despite having full knowledge of the applicable notification requirements.

Importantly, the Tribunal remarked that if Customs believed the certificate was insufficient, the issue ought to have been examined before allowing clearance of the goods. Issuing a notice years later could not cure the department’s own failure to scrutinize the documents at the relevant stage.

The Tribunal also noted that while the Revenue argued that the certificate did not specifically mention noise-level testing, the manufacturer’s technical specifications showed that the generator sets had a noise level of 71 dBA, well below the maximum permissible limit of 86 dBA prescribed under the notification.

A crucial aspect of the ruling was the Tribunal’s finding that there was no evidence of suppression, concealment, or intentional misrepresentation by the importer. All relevant documents had been furnished to Customs authorities at the time of import and were available for scrutiny.

Referring to Sections 112(a) and 114AA of the Customs Act, the Bench emphasized that penalties under these provisions require conduct involving improper importation, false declarations, or knowingly using incorrect documents. The facts of the case did not support such allegations.

The Tribunal held that the importer acted under a bona fide belief that the certificate issued by an authorized government-recognized agency satisfied the legal requirements. Any failure to detect the alleged deficiency in the certificate at the time of assessment was attributable to the Revenue and not to any deliberate act by the importer.

Allowing the appeal, CESTAT held that no case had been made out for imposing penalties under Sections 112(a) and 114AA of the Customs Act. Consequently, both penalties totaling ₹40 lakh were set aside and the importer was granted consequential relief in accordance with law.

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