Penalty and confiscation orders quashed for improper invocation of Section 28(4) and lack of valid grounds under Sections 132, 135, 114A, and 113 (4)

The CESTAT Kolkata held that the penalty and confiscation orders were unsustainable as the SCN did not properly invoke Section 28(4) for extended period demands relating to transactions from 2010-2011, making penalty imposition invalid. No grounds were made out under Sections 132 and 135 for improper export, and penalty under Section 114A was improperly imposed without notice. Confiscation was also set aside since no specific clause under Section 113 was cited and the goods had already been exported and were unavailable for confiscation. The impugned order was therefore set aside and the appeal allowed.

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ISSUES:

Whether penalty under Section 114A of the Customs Act can be imposed when the appellant has paid the differential duty along with interest upon issuance of Show Cause Notice.Whether penalty and confiscation orders can be sustained when the Show Cause Notice proposes penalty under Section 114 but penalty is imposed under Section 114A.Whether an order can be passed imposing penalty or confiscation beyond the scope of the Show Cause Notice.Whether confiscation of exported goods and imposition of redemption fine is sustainable when the goods are no longer available for confiscation.Whether the extended period provisions under Section 28(4) of the Customs Act were properly invoked in the Show Cause Notice.Whether penalty under Sections 132 and 135 of the Customs Act is applicable in the absence of any allegation of improper export or fraudulent evasion.

RULINGS / HOLDINGS:

The penalty imposed under Section 114A is "legally not sustainable" where the appellant paid the differential duty along with interest immediately upon issuance of the Show Cause Notice, as Section 114A cannot be invoked in such circumstances.The penalty and confiscation orders are unsustainable as the Show Cause Notice proposed penalty under Section 114 but the adjudicating authority imposed penalty under Section 114A without giving notice to the appellant, thus exceeding the scope of the SCN.An order cannot be passed "travelling beyond the scope of SCN" and any infirmity in the SCN cannot be cured by adjudication or appellate authorities; hence, penalty and confiscation imposed beyond the SCN's propositions are liable to be set aside.Confiscation of goods and imposition of redemption fine under Section 113 and Section 125 of the Customs Act are not sustainable where the goods have already been exported and are no longer available for confiscation, consistent with binding precedents.The Show Cause Notice failed to invoke Section 28(4) specifically for extended period demand relating to transactions between 2010 and 2011, which is a procedural error affecting the validity of penalty imposition under extended period provisions.No case was made out for applicability of Sections 132 and 135 as there was no evidence of improper export, fraudulent evasion, or misdeclaration; thus, penalties under these provisions are not justified.

RATIONALE:

The Court applied the statutory framework of the Customs Act, particularly Sections 28, 28(4), 113, 114, 114A, 125, 132, and 135, to assess the validity of penalty and confiscation orders.It emphasized the settled legal principle that the Show Cause Notice "lays down the foundation of any proceedings" and that the charges must be clearly brought to the notice of the person affected; orders beyond the SCN's scope violate natural justice.The Court relied on precedents including the Hon'ble Supreme Court's rulings that penalty under Section 114A cannot be imposed if duty and interest are paid promptly upon notice, and that redemption fines cannot be imposed where goods are not available for confiscation.The Court noted the absence of invocation of Section 28(4) for extended period demand, which is mandatory for such cases, thereby invalidating the penalty imposed under that extended period.The Court distinguished between penalties under Section 114 (for improper export) and Section 114A (for short levy due to collusion or wilful misstatement), finding no evidence of improper export or wilful misstatement in this case.The Court followed binding precedents from the Larger Bench and High Courts, affirmed by the Supreme Court, that redemption fines are not leviable in cases where goods have been cleared without bond/undertaking and are no longer available for confiscation.

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