Court affirms reduced penalty for garment manufacturer under Customs Act

The High Court upheld the Customs Excise and Service Tax Appellate Tribunal's decision to reduce the penalty under section 114A of the Customs Act for an assessee engaged in manufacturing ready-made garments. The Court found that the Tribunal correctly extended the option for reduced penalty to the assessee, as per the provisions of the Act, and dismissed the appeal, stating that no question of law arose.

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Issues:
1. Whether reduced penalty under proviso to section 114A of the Customs Act can be extended to a unit/person who has not paid the interest payable on delayed payment of evaded duty and penaltyRs.
2. Whether the Tribunal erred in relying on a previous case without comparing the facts of both casesRs.
3. Whether the impugned order made by the Tribunal is in accordance with the lawRs.

Analysis:
1. The case involved an assessee engaged in manufacturing ready-made garments from duty-free raw materials. Upon discovery of a shortage of imported fabrics due to clandestine removal without paying customs duty, a show-cause notice was issued demanding duty, interest, and penalty under the Customs Act, 1962.

2. After adjudication, the evaded duty, interest, and penalty were directed to be paid. The Commissioner (Appeals) and the Customs Excise and Service Tax Appellate Tribunal (CESTAT) upheld the order, with CESTAT reducing the penalty under section 114A of the Act. The appellant challenged this reduction before the High Court.

3. The High Court examined the provision of section 114A of the Customs Act, which is similar to section 11AC of the Central Excise Act, allowing for a reduced penalty if 25% of the duty is paid within 30 days. The Court noted that the Tribunal extended this option to the assessee, citing a previous case, and found no error in doing so.

4. The Court also referenced a Division Bench case where it was held that the benefit of reduced penalty is available if the duty, interest, and penalty are paid within 30 days. As section 114A permits an option to the assessee, the Court applied the same reasoning and upheld the Tribunal's decision to reduce the penalty.

5. Ultimately, the Court found no error or infirmity in the Tribunal's order and dismissed the appeal, stating that no question of law arose. The appeal was dismissed with no costs awarded.

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