2024 (3) TMI 1184 - AT - Customs

Tribunal Upholds Appeal, Reduces Penalty to Rs.20,000 for Import Document Compliance, Overruling Rs.1,00,000 Increase.

The Tribunal concluded that the appellant had submitted all necessary documents for finalizing the provisional assessment of the imported goods. It ... Levy of penalty for delay in submission of documents for two Bills of Entry, under regulation 5 of the Customs Provisional Duty Assessment) Regulations, 2011 - HELD THAT:- From the records it is seen that the appellant has imported goods vide 31 Bills of Entry and there was a delay in submission of the documents only in respect of two Bills of Entry, for finalisation of the provisional assessments. Subsequently, they have submitted all the documents, in respect of the remaining two Bills of Entry also, and they have been finalised. As there was a delay in submission of documents in respect of two Bills of Entry, the Department initiated proceedings for imposition of penalty under Regulation 5 of the above said Regulations 2011. The adjudicating authority has imposed a penalty of Rs.20,000/- as the appellant has already submitted the documents in respect of the two Bills of Entry and they also have been finalised. The Appellant cited various decisions in support of their contention that reduced penalty can be imposed for such procedural violations - On perusal of decisions cited by the appellant in support of their contentions that the enhanced penalty is not sustainable in this case. In the case of M/S JAI BALAJI INDUSTRIES LTD. VERSUS COMMR. OF CUSTOMS (PREVENTIVE) , BHUBANESWAR [2021 (1) TMI 767 - CESTAT KOLKATA], this Tribunal has held The order of the Commissioner (Appeals) does not establish any ground for enhancing the penalty to the maximum of Rs. 50,000/- per Bill of Entry yet to be finalised. The present case on hand is squarely covered by the decisions cited above. The appellant has already submitted the documents necessary for finalization of the provisional assessment. Thus, the penalty of Rs.20,000/- imposed by the Assistant Commissioner would be sufficient to meet the ends of justice. It is also found that the Ld. Commissioner (Appeals) has not given adequate reason for enhancing the penalty from Rs.20,000/- to Rs.1,00,000/-. In view of discussions and the decisions cited above, the enhanced penalty is not warranted in this case. Accordingly, the same is set aside. The enhanced penalty set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether enhancement of penalty under Regulation 5 of the Customs (Provisional Duty Assessment) Regulations, 2011 is justified for delayed submission of documents for provisional assessment when documents were subsequently submitted and assessments finalised. 2. Whether imposition of the maximum prescribed penalty is mandatory in cases of procedural delay where there is no revenue implication or mala fide conduct. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification for enhancement of penalty under Regulation 5 for delayed submission of documents Legal framework: Regulation 3(3) of the Customs (Provisional Duty Assessment) Regulations, 2011 requires submission of original/bank-signed documents within one month or within an extended period allowed by the proper officer to finalise provisional assessment. Regulation 5 prescribes penalty for failure to submit such documents in time. Precedent Treatment: Earlier Tribunal decisions addressing delay in furnishing documents (including cited tribunal orders) have examined whether delay caused revenue prejudice or involved deliberate/malafide conduct; where neither existed, reduced or nominal penalties were upheld and enhancement to the maximum penalty was disapproved. Interpretation and reasoning: The Court examined the factual matrix - out of 31 bills, documents were delayed only for two; all documents for those two bills were ultimately submitted and finalisation completed. The delay therefore was procedural and temporary; there was no demonstrated revenue prejudice, deliberate delay, or mala fide intent by the importer. The adjudicating authority originally imposed a nominal penalty (Rs.20,000) given submission and finalisation. The Commissioner (Appeals) enhanced the penalty to the maximum (Rs.1,00,000) without adequate reasoning showing factors (such as revenue loss, deliberate concealment, or repeated defaults) that would justify escalation. Ratio vs. Obiter: Ratio - Enhancement of penalty under Regulation 5 is not justified where delay is limited, documents are subsequently submitted and assessments finalised, and no revenue implication or mala fide conduct is established. Obiter - Emphasis that timely submission is necessary for administrative convenience and prompt duty realisation, but absence of prejudice can mitigate penalty severity. Conclusion: Enhancement of the penalty was set aside and the nominal penalty imposed by the original adjudicating authority was held sufficient to meet the ends of justice. Issue 2: Whether imposition of maximum prescribed penalty is mandatory for procedural delay absent revenue implication Legal framework: Regulation 5 prescribes the penal sanction but does not, by language construed in the judgment, mandate imposition of the maximum penalty in every instance of non-compliance; assessment of penalty requires consideration of facts and circumstances. Precedent Treatment: The Tribunal relied on prior decisions holding that where delay in furnishing documents did not cause revenue implication and there was no deliberate/malafide conduct, imposition of maximum penalty was not warranted and nominal penalties were appropriate. Interpretation and reasoning: The Court applied the principle of proportionality and the adjudicatory duty to record reasons for enhancement. Given that the two delayed bills were subsequently finalised and that the record lacked evidence of revenue prejudice or intentional non-compliance, imposing the maximum penalty would be punitive rather than corrective. The appellate authority failed to provide adequate reasons to depart from the nominal penalty already imposed. Ratio vs. Obiter: Ratio - Maximum penalty under Regulation 5 is discretionary and not mandatory; adjudicatory authorities must consider circumstances (e.g., revenue implication, intent, recurrence) before enhancing penalty. Obiter - Reference to administrative interest in timely finalisation and recovery of duty, which remains a legitimate ground for imposing higher penalties when supported by evidence. Conclusion: The maximum penalty need not be imposed as a rule; where non-submission is procedural, subsequently cured, and devoid of revenue prejudice or malafide intent, a reduced/nominal penalty is appropriate. The appellate enhancement to the maximum was therefore unwarranted. Cross-reference Issues 1 and 2 are interrelated: determination of whether enhancement is justified (Issue 1) depends on the principle that maximum penalty is not mandatory absent aggravating factors (Issue 2). The Court followed established tribunal precedent applying this principle and required adequate reasoned findings to support any enhancement.