The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the penalties for mis-declaration and undervaluation cannot exceed 5 times the value of goods.
The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that the value of the goods confiscated under section 111 was Rs. 58,12,694/- (B/E No. 4355861 dated 11.12.2017) + Rs. 42,24,056/- (B/E No. 6648028 dated 2.6.2018). The value of the goods in the past Bills of Entry held to be liable to confiscation (though not confiscated because they were not available) was Rs. 35,01,33,953/-. These add upto Rs. 36,01,70,703/- [Rs.1,00,36,750 (goods confiscated)+ Rs. 35,01,33,953/- (goods held liable to confiscation but not actually confiscated]. Considering these values, the consequential penalty of Rs. 30,00,000/- imposed on the appellant under section 112(a) is quite modest and does not require any interference.
The dispute arose after the Special Intelligence and Investigation Branch (SIIB) unearthed discrepancies in consignments cleared through Bills of Entry dated December 11, 2017, and June 2, 2018. Goods were found undervalued, mis-declared, and in some cases not declared at all.
Investigations revealed a dual invoicing system: one genuine invoice in Chinese RMB reflecting actual prices, and another fabricated invoice in USD with significantly reduced values presented to Customs for clearance. The differential payments were allegedly settled directly between Indian buyers and foreign suppliers.
Key evidence, including Excel sheets with true invoice values, was retrieved from the email accounts of the firm’s manager during questioning. These records formed the basis for re-determination of values and confirmation of differential duty.
The appellant argued that the order was arbitrary, that his statement had been retracted, that electronic evidence was inadmissible without certification under Section 65B of the Evidence Act, and that penalties under Section 114AA were confined to exports.
A plain reading of the section 114AA shows that it provides for making, signing or using or causing to be made, signed or used any declaration or statement which is incorrect in the transaction of any business for the purposes of the Customs Act. Imports and filing of Bill of Entry are transactions of business under the Customs Act. Section 114AA would squarely apply to those transactions.
The CESTAT held that the penalty under section 114AA cannot exceed five times the value of the goods in which there was mis- declaration. The total value of these goods is Rs. 36,01,70,703. Therefore, the penalty of Rs. 30,00,000 imposed on the appellant under section 114AA is quite modest and calls for no interference.
Case Details
Case Title: Nitin Khandelwal Versus Principal Commissioner, Customs (Import)-ICD
Case No.: CUSTOMS APPEAL NO. 50914 OF 2021
Date: 23/09/2025
Counsel For Appellant: Bharat Bhushan
Counsel For Respondent: Nikhil Mohan Goyal
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