Penalty under Section 114A unjustified where bona fide self-assessment and voluntary payment defeated allegation of collusion or suppression.

Where penalty under Section 114A of the Customs Act was imposed for alleged non-levy/short-levy of duty, the analysis applies the statutory test for collusion, wilful mis-statement or suppression and for availability of reduced penalty on timely payment. The appellant had made a bona fide self-assessment claiming exemption under the notified exemption and, although the department contested entitlement, voluntarily paid the demanded duty with interest before issuance of show cause notice and did not conceal facts. Absent any finding of deliberate concealment or fraud, the penalty under Section 114A was held unjustified and set aside in favour of the assessee.

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Issues: Whether the Commissioner was justified in imposing penalty under Section 114A of the Customs Act, 1962 for alleged non-levy/short-levy of customs duty.

Analysis: Section 114A imposes penalty where duty or interest has not been levied or short-levied by reason of collusion or any wilful mis-statement or suppression of facts; reduced penalty is available if payment is made within the proviso period. The appellant had self-assessed imports claiming exemption under Notification No. 50/2017-CUS as amended by Notification No. 2/2022-CUS and, though disputing the department's view, voluntarily deposited the demanded duty with interest before the show cause notice was issued and did not conceal facts. Self-assessment, even if incorrect, does not ipso facto constitute collusion, wilful mis-statement or suppression of facts. There is no finding of deliberate concealment or fraudulent suppression; the record shows a bona fide claim of entitlement to exemption and subsequent payment to settle the dispute.

Conclusion: Penalty under Section 114A of the Customs Act, 1962 is not justified and is set aside; decision is in favour of the assessee on the penalty issue.

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