Customs penalty survives prior repayment where excess drawback was obtained by misrepresentation and statutory penalty power remained available.

Penalty under Section 114(iii) of the Customs Act was not displaced merely because the excess drawback had been repaid before issue of the show cause notice. The Tribunal distinguished earlier authorities on facts and noted that the drawback had been obtained by misrepresentation of facts. It held that voluntary repayment of the unauthorised amount did not erase the statutory foundation for penalty where the provision expressly authorised such imposition. The challenge to the penalty therefore failed, and the penalty was sustained.

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Issues: Whether penalty under Section 114(iii) of the Customs Act, 1962 was liable to be set aside merely because the excess drawback amount had been repaid before the show cause notice.

Analysis: The appellants did not dispute recovery of the excess drawback amount and relied on earlier decisions to contend that no penalty should follow once the amount had been paid back. The Tribunal distinguished those decisions on facts and noted that, in the present case, the drawback had been availed by misrepresentation of facts. It held that prior repayment of the unauthorised amount, by itself, did not eliminate the statutory basis for penalty where the provision expressly authorised its imposition.

Conclusion: The penalty was rightly imposed and the challenge to it failed.

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