Tax evasion inference from incorrect goods description upheld, but maximum penalty reduced as disproportionate.

A clerical error in the invoice and Form-31 did not negate the finding of intention to evade tax where the disclosed import of P.P. fabric differed in composition and 25 bags of unlaminated fabric were not disclosed as required. The concealment finding was sustained, but the maximum penalty was treated as disproportionate because the total quantity matched the intercepted consignment and the lapse did not justify levy at the highest rate. The penalty was therefore reduced, while liability on the core allegation of evasion was maintained.

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Issues: (i) Whether intention to evade tax could be inferred from a clerical error in filling the invoice and Form-31 in relation to the import of P.P. fabric. (ii) Whether the penalty imposed at the maximum rate was excessive and arbitrary in the facts of the case.

Issue (i): Whether intention to evade tax could be inferred from a clerical error in filling the invoice and Form-31 in relation to the import of P.P. fabric.

Analysis: The disclosed import was of 67 bags of P.P. fabric. The factual discrepancy was not that an extra consignment was found, but that the composition of the disclosed quantity differed between laminated and unlaminated fabric. On that basis, the asserted clerical mistake did not displace the finding that 25 bags of unlaminated fabric were not disclosed in the manner required for the entry documents.

Conclusion: The finding of intention to evade tax was upheld, against the assessee and in favour of the revenue.

Issue (ii): Whether the penalty imposed at the maximum rate was excessive and arbitrary in the facts of the case.

Analysis: Although the discrepancy justified penalty, the total quantity remained the same and the facts did not warrant levy at the maximum rate of 40% of the value of goods. The penalty was therefore treated as disproportionate to the nature of the lapse, and the amount was confined to a lower sum.

Conclusion: The maximum penalty was held to be excessive, in favour of the assessee and against the revenue.

Final Conclusion: The revision was allowed only to the extent of reducing the penalty, while sustaining the finding of liability on the core allegation of evasion.

Ratio Decidendi: Where the disclosed total quantity of goods matches the intercepted consignment, but the description or bifurcation of the goods is /incorrect, the finding of concealment may stand, yet the penalty must still be calibrated to the actual nature of the default and cannot be imposed mechanically at the maximum rate.

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