Appellant's penalty reduced under Section 28(5) after paying differential duty and interest for misclassified imports

CESTAT New Delhi allowed the appeal regarding penalty reduction under Section 28(5). The appellant had misclassified imported computer-generated drawings and wrongly claimed BCD exemption. Despite finding no bona-fide intention in the misclassification, the tribunal noted appellant voluntarily paid differential BCD and interest upon detection. The reduced penalty payment made on 16.12.2019 was accepted as timely despite weekend holidays on 14th-15th December. Since appellant complied with Section 28(5) requirements by paying 15% reduced penalty, the tribunal set aside the equal penalty amount imposed by lower authorities and confirmed appellant's liability was limited to the already-paid reduced penalty rate.

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Issues Involved:
Classification of imported goods under Customs Tariff Item (CTI) 4906 00 00 vs. CTI 4911 99 20, imposition of penalty under Section 114A of the Customs Act, 1962, and compliance with the statutory provisions regarding payment of reduced penalty under Section 28(5) of the Customs Act.

Summary of the judgment:

1. The appellant imported goods and claimed classification under CTI 4906 00 00 with exemption from Basic Customs Duty (BCD). Directorate of Revenue Intelligence (DRI) found the goods classifiable under CTI 4911 99 20. Appellant admitted the error, paid the differential BCD, and deposited 15% penalty under Section 28(5) of the Customs Act.

2. Appellant argued that penalty under Section 114A cannot be imposed as there was no collusion, and the reduced penalty was paid within 30 days of receiving the show cause notice (SCN). Revenue contended that penalty was justified as per Section 114A and the reduced penalty was paid late.

3. The Tribunal found that the appellant accepted the correct classification by DRI, voluntarily paid the differential BCD and interest, and complied with the reduced penalty payment. The impugned order imposing equal penalty was deemed unjustified.

4. Referring to the General Clauses Act, the Tribunal held that the reduced penalty payment made within a reasonable time frame, considering holidays, should be deemed compliant with statutory provisions. Citing a Gujarat High Court case, the Tribunal extended the deadline for payment to the next working day.

5. Consequently, the Tribunal set aside the impugned order confirming equal penalty, allowing the appeal in favor of the appellant. The appellant was held liable to pay the reduced penalty of 15%, already paid by them.

(Order pronounced in open court on 30.04.2024)

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