2025 (7) TMI 1723 - AT - Customs

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)

M/s. Jindal Steel & Power Ltd. Versus Commr., CGST & CX, Bhubaneswar

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 ... Levy of penalty - confiscation orders - redemption fine - scope of SCN - moisture content in the consignment had reduced and actual weight of iron ore fines in terms of DMT has also increased - recovery of differential duty with interest and penalty - HELD THAT:- It is a settled principle of law that an order cannot be passed travelling beyond the scope of SCN inasmuch as the SCN lays down the foundation of any proceedings and if the charges are not brought out properly to the knowledge of the assessee, then he should not face charges by any order passed beyond the propositions made vide the SCN. The SCN has been issued invoking Section 28 of Customs Act, 1962, without invoking Section 28(4) specifically, which is the Section to be invoked when the SCN is issued for the demand pertaining to the extended period. In the present case, the transaction have taken place between April 2010 to November 2011, whereas the SCN was issued on 05.03.2015. Therefore, the SCN should have been issued under Section 28 (4). This error would make it difficult for the Revenue to impose the Penalty proposed in respect of such extended period demand. No case has been made out about the applicability of Section 132 and 135 for the exports done by the appellant. From the facts of the case and even from the SCN and the orders passed, there is nothing coming up about any improper export in this case. Probably coming to know about this, the Adjudicating authority has gone ahead and imposed penalty under Section 114A, for which the appellant was not put to notice. Further Section 114A is applicable when the demand is made by invoking the extended period provisions in terms of Section 28 (4), which has not been invoked in this case - the penalty imposed under Section 114A is legally not sustainable. Confiscation of the exported goods - HELD THAT:- Section 113 has clauses (a) to (l) specifying various situations under which the Confiscation can be warranted. It is found from the SCN, no specific sub-section of 113 has been cited, while proposing to confiscate the consignments. Further it is found that the goods have already been exported in 2010 and 2011 and are no more available for confiscation, as has been held by the Larger Bench in Shiv Kripa Ispat Pvt Ltd. [2009 (1) TMI 124 - CESTAT MUMBAI - LB] - the confiscation order is set aside. The impugned order is set aside - appeal allowed. 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.