Tribunal overturns penalty for duty evasion in freight fraud case, citing Circular No.11/2016-Cus.

The Tribunal allowed the appeal, setting aside the penalty imposed on the appellant Director of a company involved in freight fraud for duty evasion. The Tribunal found the penalty unjustified, citing Circular No.11/2016-Cus., which dictates that settling duty, interest, and penalty within one month should conclude proceedings against all parties. As the importer had complied, the penalty on the appellant was deemed unwarranted, leading to the reversal of the penalty based on legal provisions and circular guidance.

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Issues:
1. Appeal against rejection of appeal by Commissioner of Customs (A) and upholding of Order-in-Original.

Analysis:
The appeal in question was filed against the order passed by the Commissioner of Customs (A) on 30.3.2016, which rejected the appellant's appeal and upheld the Order-in-Original. The case revolved around allegations of freight fraud involving several entities, resulting in duty evasion on imported goods and revenue loss to the department. The appellant, a Director of one of the companies involved, was penalized under Section 114AA of the Customs Act, 1962, for willfully manipulating import documents to evade duty. The importer had admitted the wrongdoing, paid the differential duty, interest, and a penalty equal to 25% of the duty, as required by law.

Upon hearing both parties and examining the records, the appellant's counsel argued that the penalty imposed on the Director was not justified, citing Circular No.11/2016-Cus. dated 15.3.2016 issued by the CBEC. The counsel contended that as per Section 28(6)(i) of the Customs Act, 1962, if the importer settles the duty, interest, and penalty within one month of notice issuance, proceedings against all involved parties should be deemed conclusive. Referring to the Circular, it was emphasized that once duty, interest, and penalty are paid in full, proceedings against the importer and co-noticees should be concluded. The Additional Commissioner had acknowledged the duty payment by the importer but imposed a penalty of &8377; 5,000 on the appellant.

The Tribunal, after considering the arguments and evidence, referred to Circular No.11/2016 dated 15.3.2016, which clarified that payment of duty, interest, and penalty as per the notice would conclude proceedings against the importer and co-noticees. Consequently, the Tribunal found the impugned order unsustainable and allowed the appeal, setting aside the penalty imposed on the appellant. The decision was based on the legal provisions and the circular's explicit guidance, leading to the reversal of the penalty on the appellant.

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