2014 (12) TMI 729 - HC - Customs

Supreme Court limits Tribunal's penalty reduction power under Customs Act

COMMISSIONER OF CUSTOMS, MANGALORE Versus TATA POWER COMPANY LTD.

The Supreme Court held that the Customs, Excise & Service Tax Appellate Tribunal lacked jurisdiction to significantly reduce a penalty under Section ... Reduction in penalty u/s 114 - Jurisdiction of Tribunal to reduce penalty - Held that:- Imposition of penalty under the Act is not automatic. However, once the conditions which give rise to imposition of penalty exists then the penalty has to be imposed as prescribed under law. At that stage, no discretion is left to the Authorities in the matter of imposing penalty. The law provides that the penalty payable would be not less than equal to the duty payable. Further, the law provides, if the assessee pays the duty with interest within 30 days from the date of the order, then the penalty payable would be 25% of what is imposed. Therefore, the statute provides for the penalty payable and also reduced penalty payable. There is no discretion left either with the authorities or with the Tribunal or with this Court to reduce the penalty. However, the Tribunal, which had no jurisdiction, had proceeded to reduce the penalty from ₹ 59,77,432/- to ₹ 5,00,000/-. Whatever is the reason given by the Tribunal, it is not necessary for us to go into the said question because the question is, whether there is any jurisdiction left with the Tribunal to reduce the penalty. The law on the point is now well settled. Once the authorities decide to impose penalty, no discretion is left in the matter of imposing of penalty except as provided under law. Even the Tribunal also has not been vested with any power to reduce the penalty, which is imposed by the authority as prescribed under law, and therefore, the order passed by the Tribunal reducing the penalty is one without jurisdiction and, accordingly, it is hereby set aside - Decided in favour of Revenue. Issues:Jurisdiction of the Tribunal to reduce penalty under Section 114A of the Customs Act.Analysis:The judgment involves a challenge by the Revenue against the Customs, Excise & Service Tax Appellate Tribunal's order reducing a penalty from Rs. 59,77,432/- to Rs. 5,00,000/- only. The key issue at hand is whether the Tribunal has the jurisdiction to reduce the penalty under Section 114A of the Customs Act. The facts are undisputed, involving an importer of furnace oil undervaluing consignments by misdeclaring actual payments made to the supplier. The Commissioner of Customs re-determined the assessable value, confirmed the demand, interest, and penalty, leading to the confiscation of goods. The Tribunal modified the order, reducing the penalty significantly, which the Revenue challenged.The Apex Court precedent establishes that penalty imposition under the Act is not automatic but must be imposed as prescribed by law once the conditions for penalty imposition exist. The law mandates that the penalty payable should not be less than the duty payable, with a provision for a reduced penalty if duty with interest is paid within 30 days. The judgment clarifies that neither the authorities nor the Tribunal have discretion to reduce the penalty beyond what is prescribed by law. In this case, the Tribunal's reduction of the penalty from Rs. 59,77,432/- to Rs. 5,00,000/- was deemed to be without jurisdiction. The ruling emphasizes that once the authorities decide to impose a penalty, no discretion is left in the matter, and the Tribunal is not empowered to reduce the penalty beyond what is mandated by law. Consequently, the Tribunal's order reducing the penalty was set aside, and the substantial question of law was resolved in favor of the Revenue Authorities. The appeal by the Revenue was allowed based on these legal principles.