Contradictory penalty findings and failure to decide interest required remand for fresh customs adjudication.

CESTAT Ahmedabad held that an adjudication order is unsustainable where it records contradictory findings on penalty and leaves a proposal for interest undisposed of in the operative part. The order had simultaneously noted that goods were liable to confiscation and that persons were liable to penalty, while also stating that penalty was not imposable because duty had been paid before the show cause notice. It likewise addressed interest under the Customs Act only in reasoning, without a corresponding operative direction. The matter was remanded for fresh adjudication on penalty and interest in accordance with law.

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Issues: (i) Whether the order dropping penalty under Section 112 of the Customs Act, 1962 was sustainable despite findings that the goods were liable to confiscation and that the noticee was liable to penal action. (ii) Whether the omission to pass any operative order on the proposal for interest under Section 28AB of the Customs Act, 1962 rendered the adjudication order erroneous.

Issue (i): Whether the order dropping penalty under Section 112 of the Customs Act, 1962 was sustainable despite findings that the goods were liable to confiscation and that the noticee was liable to penal action.

Analysis: The findings in the adjudication order were internally inconsistent. While one part recorded that penalty was not imposable because duty had been paid before the show cause notice, another part recorded that the goods were liable to confiscation and that the concerned persons were liable to penalty under Section 112. On this basis, the order suffered from contradiction on the issue of penalty.

Conclusion: The penalty finding was not sustainable and required reconsideration by the adjudicating authority.

Issue (ii): Whether the omission to pass any operative order on the proposal for interest under Section 28AB of the Customs Act, 1962 rendered the adjudication order erroneous.

Analysis: The adjudicating authority had recorded a view that interest was not warranted because the duty had been paid before issuance of the show cause notice, but no corresponding operative direction was made on that proposal. An adjudication order must deal with each proposal in the notice, and silence in the operative part on a live issue constituted an error.

Conclusion: The omission on interest vitiated the order and justified fresh adjudication.

Final Conclusion: The appeals were allowed and the matter was sent back for a fresh decision on penalty and interest in accordance with law.

Ratio Decidendi: Where an adjudication order contains contradictory findings on penalty and fails to dispose of a proposal raised in the show cause notice, the proper course is remand for fresh adjudication on those issues.

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