Customs Appeal Success: Duty Payment Timing Doesn't Affect Penalty

Commissioner of Customs Versus American Power Conversion (India) (P.) Ltd.

Commissioner of Customs Versus American Power Conversion (India) (P.) Ltd. - 2015 (316) E.L.T. 39 (Kar.) Issues:
1. Imposition of penalty and interest when duty is deposited before the show cause notice.

Analysis:
The judgment in question pertains to a Customs Appeal challenging an order that allowed three appeals, including the respondent's appeal, concerning the levy of penalty and interest. The Central Excise and Service Tax Appellate Tribunal (CESTAT) set aside the penalty and interest imposed by the Adjudicating authority and the Appellate Authority. The main issue before the CESTAT was whether penalty and interest could be imposed if the duty had been paid before the issuance of the show cause notice. The respondent's argument was centered on the fact that they had paid the duty before the notice was issued, thus contending they were not liable for penalty and interest.

The CESTAT based its decision on previous judgments of the High Court and the Supreme Court, which were cited in the impugned order. The learned counsels for both sides referred to the Supreme Court's decision in Union of India v. Rajasthan Spg. Wvg. Mills and a group of civil appeals, where it was held that the payment of duty, whether before or after the show cause notice, does not alter the liability for payment. Consequently, the legal position established in the judgments relied upon by the Tribunal in the impugned order was deemed outdated and set aside.

Ultimately, the High Court allowed the appeal, noting that a nominal penalty of Rs. 50,000 had been imposed. The order passed by the CESTAT in the respondent's appeal was set aside in light of the legal principles established by the Supreme Court and the clarification provided by the counsels regarding the liability for payment of duty, penalty, and interest irrespective of the timing of duty payment concerning the issuance of the show cause notice.