Mandatory penalty under Section 114A applies where duty is determined due to willful suppression; penalty equals duty plus interest.

The note addresses imposition of penalty where differential customs duty is determined following willful misstatement, suppression of facts and diversion of duty free imports. It concludes that when duty is determined under adjudication for such willful conduct the statutory provision mandates imposition of a penalty equal to the differential duty plus interest; prior penalties under general penalty provisions were superseded. The analysis emphasises factual indicia of organised fraud (fabricated addresses/documents, diversion, absence of bona fide manufacturing) as satisfying the statutory ingredient of wilful suppression and justifying mandatory penalty equal to duty plus interest.

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Issues: Whether the Adjudicating Authority was justified in not imposing penalty under Section 114A of the Customs Act, 1962 where duty was determined under Section 28(8) by reason of willful misstatement or suppression of facts and diversion of duty-free goods imported under Advance Authorisation.

Analysis: The appeals concern import of mulberry raw silk under Notification No. 93/2004-Cus where investigations and adjudication found fabricated addresses and documents, diversion of imports to the domestic market, absence of bona fide manufacturing facilities and other indicia of organized fraud. The adjudicating authority had confirmed differential duty under Section 28(8) but declined to impose penalty under Section 114A, instead imposing penalty under Section 112(a). Section 114A prescribes a penalty equal to the duty or interest determined under Section 28(8) where non-levy or short-levy arises by reason of collusion or wilful misstatement or suppression of facts; the language is mandatory. The Tribunal examined analogous precedents and a closely similar earlier Tribunal decision where Section 114A was held to be mandatorily attracted once duty is determined under Section 28(8) by reason of wilful suppression. In the present appeals the essential ingredients of Section 114A-wilful misstatement/suppression and duty determined under Section 28(8)-are established on record and there was no effective rebuttal by the importers.

Conclusion: The Adjudicating Authority was not justified in refraining from imposing penalty under Section 114A; penalty under Section 114A is imposable and the impugned orders are modified to impose penalty equal to the differential duty plus interest under Section 114A, and the penalties under Section 112 are dropped. The conclusion is in favour of the Revenue.

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