Customs penalty finality under section 28(5) bars higher penalty and redemption fine after timely payment; duty demand stands.

Payment of duty, interest and the prescribed 15% penalty within the time contemplated by section 28(5) of the Customs Act brought the proceedings to finality to that extent, so a higher penalty and redemption fine could not be sustained. Those amounts were set aside. The denial of exemption under Notification No. 50/2017-Cus and the corresponding differential customs duty were upheld because no substantive challenge on merits was pressed, and the record supported ineligibility for the exemption. Relief was therefore confined to deletion of the additional penalty and redemption fine, while the duty demand and exemption denial remained in force.

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Issues: (i) Whether, after payment of duty, interest and 15% penalty under section 28(5) of the Customs Act, 1962, the adjudicating authority could still impose a penalty beyond that amount and demand redemption fine; (ii) whether denial of exemption under Notification No. 50/2017-Cus dated 30.06.2017 and confirmation of the differential customs duty were sustainable.

Issue (i): Whether, after payment of duty, interest and 15% penalty under section 28(5) of the Customs Act, 1962, the adjudicating authority could still impose a penalty beyond that amount and demand redemption fine.

Analysis: The statutory scheme of section 28(5) and section 28(6) treats timely payment of the duty, interest and the prescribed 15% penalty as bringing the proceedings to a conclusive close. On the facts, the appellant had made the requisite payments within the prescribed time, and the adjudicating authority itself recorded acceptance of the benefit under section 28(5). In that situation, imposition of a higher penalty and redemption fine was beyond the legislative intent underlying section 28.

Conclusion: The additional penalty in excess of 15% and the redemption fine were set aside in favour of the assessee.

Issue (ii): Whether denial of exemption under Notification No. 50/2017-Cus dated 30.06.2017 and confirmation of the differential customs duty were sustainable.

Analysis: The appellant did not press any substantive challenge on merits to the classification or exemption dispute. The payment of the differential duty, coupled with the record, supported the finding that the goods were not eligible for the claimed exemption.

Conclusion: Denial of the exemption and confirmation of the differential customs duty were upheld against the assessee.

Final Conclusion: The appeal succeeded only to the extent of relief from the higher penalty and redemption fine, while the duty demand and denial of exemption were maintained.

Ratio Decidendi: Where the importer makes full payment of duty, interest and the prescribed penalty within the time contemplated by section 28(5) of the Customs Act, 1962, the proceedings attain finality to that extent and a higher penalty or redemption fine cannot be sustained.

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