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Sree Ayyanar Spinning & Weaving Mills Ltd. Vs. The Commissioner of Customs - (Customs, Excise and Service Tax Appellate Tribunal) (25 Jul 2019)

Unless it is proved that, person to be penalized has intentionally implicated himself in use of false and incorrect materials, there can be no justification for penalty



The only issue involved in the present appeal by the Assessee is the levy of penalty under Section 114AA of the Customs Act, 1962. The Appellant preferred appeal against the levy of penalty under Section 114AA of Act, before the First Appellate Authority and the First Appellate Authority vide impugned Order-in-Appeal upheld the levy of penalty thereby rejecting the claim of the Appellant.

The main contention is that, the Appellant had no role in so far as quality of the imported cotton was concerned. He further contended that, the imposition of penalty was not automatic since there was no finding by the authorities below as to the satisfaction of the conditions prescribed under Section 114AA of Act, by the Assessee.

The essence of Section 114AA of Act, is that the "person knowingly and intentionally makes, signs or uses" is as good as suppression or playing fraud and hence, the burden of proof is heavily cast on the Revenue to establish the mala fides. The allegation of Fake PSC ipso facto does not lead to the liability under this Section. The words "knowingly" and "intentionally" touches upon the culpability of the mindset ab initio and consequently, it is for the Revenue to discharge its burden of establishing that, the imported consignment was forbidden or that the Appellant was well aware of the fact that the cotton it ordered was forbidden or was not fit for home consumption. It is a matter of record that, only after the preliminary tests, when the consignment reached India, did everyone realize that it was unfit for home consumption.

The impugned penalty is for an express default and when the report itself has a clean slate, there cannot be any penalty, at least with respect to that report. This is also for the reason that, the Commissioner (Appeals) has, in her first order, set aside the entire issue for passing fresh adjudication order in the light of the second report. The natural corollary is that, the first report becomes non-est. Hence, there is no basis for imposition nor has the Revenue brought out any raison d'etre for imposition of the impugned penalty on record since the very basis i.e., the alleged fake report is itself not there on board anymore.

The Adjudicating Authority has been injudicious and peremptory in imposition of the impugned penalty under Section 114AA of Act, since, unless it is proved that the person to be penalized has knowingly or intentionally implicated himself in use of false and incorrect materials, there can be no justification for penalty under this Section. This requirement of factual finding itself is not there and nor has it been answered satisfactorily either in the Show Cause Notice or in the orders of the lower authorities. The impugned order is set aside, the appeal is allowed and the penalty is ordered to be deleted.


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