2026 (1) TMI 536 - AT - Customs

Omitted customs duty on two import invoices later self-paid with interest before SCN, so confiscation and penalties set aside.

The dominant issue was whether differential customs duty, confiscation under s.111(l), and penalties could be sustained where duty on two import invoices ... Demand proceedings - Voluntarily deposited differential duty prior to the issuance of the Show Cause Notice - non-inclusion of second and third invoices for payment of Customs duty at the time of import - confiscation u/s 111(l) - allegations of suppression or misstatement or collusion - HELD THAT:-Adjudicating Authority has observed that the importer. They had voluntarily come forward and paid the differential duty together with interest immediately after they were confronted with the irregularity and much before issue of the Show Cause Notice. - No any mala fide intention for the appellant regarding non-payment of differential duty at the time of import. We find that if the appellant had any malafide intention, he himself would not have disclosed the fact that duty had not paid on the other 2 invoices. From the above facts, it is clear that the appellants had deposited the differential duty even before the issuance of the Show Cause Notice. The information regarding non-payment of duty on two invoices was provided by the appellants himself and if there had been any malafide intention, he would not have disclosed this information. Thus, the demand, confiscation and penalties is not sustainable against main appellants then penalties on the appellants General Manager is also not sustainable. Therefore appeals deserve to be allowed and the impugned order is liable to be set aside. Appeals allowed with consequential relief, if any, as per law. Issues: (i) Whether demand of differential duty, interest, confiscation and penalties is sustainable where the importer voluntarily disclosed omission and paid differential duty and interest prior to issuance of the Show Cause Notice; (ii) Whether penalties imposed on responsible individuals are sustainable in the same circumstances.Issue (i): Whether demand of differential duty, interest, confiscation and penalties is sustainable where the importer voluntarily disclosed omission and paid differential duty and interest prior to issuance of the Show Cause Notice.Analysis: The Tribunal examined documentary chronology showing the omission was disclosed by the importer and differential duty and interest were deposited before the Show Cause Notice. The Tribunal applied the statutory framework in Section 28 and specifically the bar in Section 28(2) which restricts issuance of a notice where duty and interest have been paid as contemplated. The Tribunal also considered the principles concerning confiscation under Sections 111 and 125, requiring culpability such as mala fide intention or willful suppression to sustain confiscation and related fines. Relevant authorities and valuation findings confirming declared transaction value were taken into account to assess whether misdeclaration or collusion was established. The analysis focused on whether the facts amounted to bona fide error corrected by voluntary payment prior to initiation of adjudicatory proceedings.Conclusion: The demand, confiscation and penalties were not sustainable on the facts where voluntary disclosure and deposit of differential duty and interest occurred prior to issuance of the Show Cause Notice and no mala fide intention was shown.Issue (ii): Whether penalties imposed on responsible individuals are sustainable where the principal importer made voluntary disclosure and paid differential duty and interest before issuance of the Show Cause Notice.Analysis: The Tribunal confined its analysis to whether individual culpability was sufficiently established given the importer’s undisputed voluntary disclosure and corrective payment prior to initiation of proceedings. The Tribunal assessed whether the record supported a finding of willful misdeclaration or collusion by the individuals on whom penalties were imposed, applying the same standards for penalty imposition under Section 112(a) in the context of voluntary remediation.Conclusion: Penalties on the responsible individuals were not sustainable in the circumstances where the primary facts indicated no mala fide intention and corrective steps were taken before issuance of the Show Cause Notice.Final Conclusion: On the established facts the statutory bar on proceeding where differential duty and interest have been paid prior to issuance of a notice and the absence of proven mala fide conduct precluded sustaining the demand, confiscation and penalties; the decision therefore requires setting aside the impugned orders with consequential relief as per law.Ratio Decidendi: Where an importer voluntarily discloses an omission and deposits the differential duty and interest before the issuance of a Show Cause Notice, the statutory bar in Section 28(2) operates to preclude initiation or sustainment of demand and associated punitive measures absent clear proof of mala fide conduct or willful suppression.