CESTAT Quashes Rs. 20 Lakh Penalty on Importer in Air Conditioner Undervaluation Case

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside a penalty of Rs. 20 lakh imposed on Shri Ajit Singh under Section 112(a) of the Customs Act, holding that there was no evidence to establish his involvement in undervaluation of imported air conditioners. The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) noted that the appellant, Shri Ajit Singh, was only a co-noticee in the proceedings and was not the importer of the goods. The Tribunal observed that his role was limited to sale of goods after their clearance for home consumption. The appeal arose from a common Order-in-Original passed by the Principal Commissioner of Customs (Preventive), New Delhi, in a case involving alleged undervaluation of O’General brand air conditioners imported by M/s M.C. Overseas through ICD Ballabhgarh. The Department had alleged that the importer misdeclared the Maximum Retail Price (MRP) of the imported goods to evade customs duty. The Tribunal also took note of the fact that penalties imposed on the importer M/s M.C. Overseas and another co-noticee, Rohit Sakhuja, had already been set aside by the Tribunal in an earlier order dated 23 December 2019. Since Ajit Singh had been implicated on the same set of allegations and facts, the bench held that the benefit of the earlier decision was equally applicable to him. During the proceedings, the appellant argued that the Department had failed to produce any evidence showing collusion between the importer and the foreign supplier for suppression of value. It was submitted that the declared transaction value had already been accepted by customs authorities at the time of import after examination of invoices, packing lists and related documents. The appellant further contended that the Department had rejected the declared transaction value solely by comparing it with prices adopted by another importer, M/s EGPL, which was legally impermissible. Reliance was placed on the Supreme Court ruling in Eicher Tractors Pvt. Ltd. and other valuation precedents to argue that customs valuation rules must be applied sequentially and supported by cogent evidence. The department maintained that the imported air conditioners were sold in the market at higher MRP than declared at the time of import, indicating deliberate suppression of value to evade countervailing duty. The Department also referred to allegations that seized air conditioners entrusted to the appellant for safe custody were not properly safeguarded, leading to registration of an FIR under Section 406 of the IPC. However, the Tribunal found that the allegation of undervaluation was based only on comparison with prices adopted by another importer and that no independent evidence existed to prove undervaluation by M/s M.C. Overseas or involvement of Ajit Singh. The bench accepted the argument that price differences could not be mechanically compared because imports by M/s EGPL were linked to SAARC Agreement benefits and different commercial arrangements. The Tribunal categorically held that there was no material on record showing that Ajit Singh had participated in undervaluation or customs duty evasion. Consequently, it ruled that no penalty could be imposed upon him under Section 112(a) of the Customs Act. On the separate allegation relating to failure to safely keep seized goods, the Tribunal observed that independent criminal proceedings had already been initiated through an FIR under Section 406 IPC. It held that the penalty under Section 112(a) could only be imposed for violations under the Customs Act, and since the undervaluation allegation itself had failed, the customs penalty was unsustainable. The Tribunal set aside the Rs. 20 lakh penalty and granted consequential relief to the appellant in accordance with law. Case Details Case Title: Shri Ajit Singh Versus Commissioner Of Customs (Airport And General) Citation: JURISHOUR-1256-CES-2026(DEL) Case No.: CUSTOMS APPEAL NO. 50401 OF 2019 Date: 13.05.2026 Counsel For Appellant: Akashdeep Advocate Counsel For Respondent: Srimali Sadashiv, Authorised Representative Click Here To Read Order Read More: CESTAT Quashes Service Tax Demand Against Standard Chartered Finance Over Defective SCN

CESTAT Quashes Rs. 20 Lakh Penalty on Importer in Air Conditioner Undervaluation Case

Membership Required

Latest articles

Services Used for Setting Up Factory Continue to Qualify as ‘Input Services’: CESTAT

Customs Can’t Enhance Import Value Solely on NIDB Data Without Proof of Comparable Imports: CESTAT

Bona Fide Mistakes Shouldn’t Defeat Substantive Tax Rights: Karnataka High Court Allows Correction of GST DRC-03 Filing Error

Procedural Delay Should Not Defeat Scheme Benefits: CESTAT Directs Manual Processing of SVLDRS Discharge Certificate

More like this

Services Used for Setting Up Factory Continue to Qualify as ‘Input Services’: CESTAT

Customs Can’t Enhance Import Value Solely on NIDB Data Without Proof of Comparable Imports: CESTAT

Bona Fide Mistakes Shouldn’t Defeat Substantive Tax Rights: Karnataka High Court Allows Correction of GST DRC-03 Filing Error

About us

Company

Categories