2025 (11) TMI 1568 - AT - Customs

Extended period under Section 28 fails where Section 114A penalty unsustainable; anti-dumping duty and interest demand quashed

CESTAT allowed the appeal and set aside the demand of anti-dumping duty, interest, and penalty raised by invoking the extended period under Section 28 of ... Levy of ADD on import of Injection Moulding Machine with interest and penalty - demand confirmed against the Appellant by invoking extended period of limitation as per Section 28 of the Customs Act - HELD THAT:- It is a settled law that provisions for invoking extended period of limitation as per Section 28 of Customs Act and for imposition of penalty under Section 114A are identical and hold hand in hand. The Hon’ble Supreme Court while dealing with the provisions of Section 11A and Section 11AC of the Central Excise Act, 1944 in the case of Union of India V/s Rajasthan Spinning & Weaving Mills [2009 (5) TMI 15 - SUPREME COURT] has observed that 'it is clear that penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section.' Thus, once the impugned order holds that provisions of Section 114A could not have been invoked for imposition of penalty upon the Appellant, this would amount to admission of the fact that ingredients to invoke the extended period of limitation under Section 28 are amiss. That being so extended period of limitation as per Section 28 could not have been invoked for making this demand. There are no merits in the impugned order to this extent whereby Commissioner (Appeals) has taken a contrary view to his own findings recorded in the same order - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether, in the facts of import under self-assessment followed by first check re-assessment by Customs, there was any collusion, wilful mis-statement or suppression of facts by the importer so as to justify imposition of penalty under Section 114A of the Customs Act, 1962. 1.2 Whether, once the ingredients for penalty under Section 114A were found absent, the extended period of limitation under Section 28(4) of the Customs Act, 1962 could nevertheless be invoked for demand of anti-dumping duty. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Requirement of collusion / wilful mis-statement / suppression for penalty under Section 114A in the context of self-assessment and first check re-assessment Legal framework 2.1 The Tribunal noted that Section 114A of the Customs Act, 1962 provides for penalty equal to the duty or interest determined under Section 28(8), where non-levy or short-levy, etc., is 'by reason of collusion or any willful mis-statement or suppression of facts'. 2.2 The Tribunal also referred to the scheme of self-assessment under Section 17(1) of the Customs Act, 1962 and the first check re-assessment procedure by the proper officer. 2.3 For interpretative guidance, the Tribunal relied on the Supreme Court's exposition of Section 11A and Section 11AC of the Central Excise Act, 1944 in the decision wherein it was held that penalty under Section 11AC is attracted only where non-payment or short-payment of duty is the result of deliberate deception - 'fraud, collusion or any wilful mis-statement or suppression of facts' - and that the same expressions govern both extended limitation and penalty. Interpretation and reasoning 2.4 The original authority had held that under the trust-based self-assessment system it was the importer's responsibility to correctly assess all duties including anti-dumping duty, and that failure to do so, coupled with continued contesting of liability even after issue of show cause notice, amounted to suppression and mis-declaration with intention to evade duty, justifying invocation of extended period under Section 28(4) and penalty under Section 114A. 2.5 The Commissioner (Appeals), while examining the same facts, recorded that the Bill of Entry had been re-assessed after first check examination; at that stage the importer presents all original documents and the assessing officer, with approval of the higher authority, completes the assessment in the system, and duty challans are generated accordingly. 2.6 The Commissioner (Appeals) reasoned that in a first check re-assessment scenario, any mis-statement or suppression relevant to duty liability, including non-payment of anti-dumping duty, would normally be detected either by the automated system or by the assessing officer; in the instant case, although anti-dumping duty was in fact payable, it was neither declared by the importer nor charged at re-assessment by Customs. 2.7 It was specifically noted that there was no allegation of mis-statement or suppression regarding classification, valuation, description, country of origin, or any other substantive aspect of the goods in the Bill of Entry. The omission related only to non-levy of anti-dumping duty. 2.8 Relying on the ratio of a Tribunal decision that where the importer/CHA has made a declaration and requested first check, it is for Customs to correctly classify/assess the goods and penalty is not attracted merely for alleged mis-declaration in such circumstances, the Commissioner (Appeals) held that there was no act of collusion, wilful mis-statement or suppression of facts by the importer in relation to non-payment of anti-dumping duty. 2.9 The Commissioner (Appeals) also observed that, since the goods were re-assessed after first check, the Customs assessing authority could not disclaim responsibility for levy and collection of applicable anti-dumping duty under the notification. Conclusions 2.10 On this reasoning, the Commissioner (Appeals) concluded that the statutory conditions for invoking Section 114A were not met and accordingly set aside the penalty imposed under Section 114A. 2.11 The Tribunal proceeded on the basis of this finding, treating it as a categorical conclusion that there was no collusion, wilful mis-statement or suppression of facts by the importer. Issue 2 - Sustainability of extended period under Section 28(4) when ingredients for Section 114A penalty are absent Legal framework 2.12 The Tribunal recorded that the demand of anti-dumping duty was confirmed by invoking the extended period of limitation under Section 28(4) of the Customs Act, 1962. 2.13 By referring to the Supreme Court's reasoning on Section 11A (extended period) and Section 11AC (penalty) of the Central Excise Act, 1944, the Tribunal noted that both provisions use the same expressions: 'by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any ... provisions ... with intent to evade payment of duty'. The conditions that justify extension of the limitation period are the same as those that attract mandatory penalty. Interpretation and reasoning 2.14 The Tribunal emphasized that, as settled by the Supreme Court, if the notice alleges, and the adjudication order validly finds, that non-payment is due to such conscious and deliberate wrongdoing, then both extended limitation and penalty apply; conversely, in the absence of such allegation or finding, (i) the limitation period remains confined to the normal period, and (ii) the penalty provision is inapplicable. 2.15 Applying this parity of conditions to the Customs provisions, the Tribunal held that the pre-requisites for invocation of extended period under Section 28(4) and for imposition of penalty under Section 114A are 'identical and hold hand in hand'. 2.16 The Tribunal noted that the Commissioner (Appeals), in the same impugned order, had (a) categorically held that there was no collusion, wilful mis-statement or suppression of facts and therefore penalty under Section 114A was not invocable, yet (b) still upheld the demand of anti-dumping duty by invoking the extended period under Section 28(4). This was considered internally inconsistent. 2.17 Once the Commissioner (Appeals) concluded that Section 114A was inapplicable due to absence of its statutory ingredients, that amounted, in the Tribunal's view, to an admission that the factual basis for invoking the extended period (fraud, collusion, wilful mis-statement, suppression, or like conduct with intent to evade duty) was also absent. Conclusions 2.18 The Tribunal held that, in light of the finding that Section 114A could not be invoked, the necessary ingredients for the extended period under Section 28(4) were 'amiss', and therefore the extended period could not be validly invoked for the duty demand. 2.19 The Tribunal found no merit in that part of the impugned order where the Commissioner (Appeals) had taken a view contrary to his own findings, by simultaneously disallowing Section 114A penalty yet sustaining the extended period demand. 2.20 Consequently, the appeal was allowed, and the demand of anti-dumping duty based on the extended period of limitation did not survive.