Voluntary payment before show cause notice defeats suppression and penalty under customs law

Differential duty and interest were paid before the show cause notice was issued, and the record did not establish any intent to evade duty or suppression of facts. Because the appellant had voluntarily discharged the liability once the moisture-content discrepancy was pointed out, the basis for further proceedings under the Customs Act was found lacking, and the factual foundation for penalty was not made out. The penalties were therefore set aside, with consequential relief granted in accordance with law.

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Issues: Whether the show cause notice could be sustained after payment of the differential duty and interest before its issuance, and whether the penalties imposed under the Customs Act were justified.

Analysis: The differential duty and interest had already been paid before issuance of the show cause notice. The record did not support any intent to evade duty or suppression of facts, particularly when the appellant had voluntarily discharged the liability once the discrepancy in moisture content was pointed out. In these circumstances, the statutory basis for proceeding further under Section 28(2) of the Customs Act, 1962 was found wanting, and the factual foundation for penalty was not made out.

Conclusion: The penalties were set aside and the appellant was held entitled to consequential relief in accordance with law.

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