Revenue appeal dismissed as penalty reduction upheld for supari mis-declaration under section 112 discretionary powers

CESTAT New Delhi dismissed Revenue's appeal challenging penalty reduction under section 112 for mis-declaration of unflavoured boiled supari goods. The tribunal clarified that "shall be liable to" in sections 111-114 grants discretionary power to adjudicating authorities rather than mandating automatic penalty imposition. Commissioner (Appeals) properly exercised discretion considering respondent had reasonable cause to classify goods under CTH 2106 9030 based on Advance Ruling Authority precedents. The mis-declaration allegation was deemed not serious given ambiguous CRCL test report and legitimate classification dispute. Penalty reduction was upheld as appropriate.

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Issues Involved:
1. Confiscation and Redemption of Imported Goods
2. Reduction of Penalty u/s 112 of the Customs Act, 1962

Summary:

Confiscation and Redemption of Imported Goods:

The respondent imported areca nuts under two Bills of Entry, describing them as 'unflavoured boiled supari (Betel nuts product)' and classified them under CTI 2106 90 30. The CRCL test report indicated that the goods were actually areca nuts falling under CTI 0802 80 10, which are prohibited for import unless the CIF value exceeds Rs. 251/- per kg. The goods were seized, and a Show Cause Notice (SCN) was issued for mis-declaration and mis-classification, proposing confiscation u/s 111(d), 111(l), and 111(m) and penalty u/s 112(a)(i). The Additional Commissioner confirmed the proposals, absolutely confiscating the goods and imposing a penalty of Rs. 82,77,132/-. The Commissioner (Appeals) upheld the confiscation but allowed redemption on payment of a fine of Rs. 8,00,000/- for re-export and reduced the penalty to Rs. 2,00,000/-. Revenue appealed, contesting the redemption and the reduced penalty. However, since the High Court ordered the export to be allowed, the redemption and export of the goods were permitted, rendering the issue of redemption moot.

Reduction of Penalty u/s 112 of the Customs Act, 1962:

The primary issue before the Tribunal was whether the penalty reduction from Rs. 82,77,132/- to Rs. 2,00,000/- by the Commissioner (Appeals) was appropriate. Revenue argued that the reduction was unwarranted and not proportionate to the gravity of the offense. The Tribunal noted that u/s 112, the penalty can be up to the value of the goods but does not prescribe a minimum penalty. The Tribunal emphasized the discretionary nature of the term "liable to" in sections 111 and 112, allowing the adjudicating authority to decide whether to impose a penalty and its quantum. The Tribunal found that the respondent had a reasonable cause to classify the goods under CTI 2106 9030 based on prior rulings and that the mis-declaration allegation was not severe due to the ambiguous CRCL report. Thus, the Tribunal upheld the order of the Commissioner (Appeals) regarding the penalty reduction, finding no reason to interfere. The appeal was dismissed.

(Order pronounced in open court on 23/04/2024.)

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