S.B. Agarwal Vs Commissioner of Customs (CESTAT Delhi)
Conclusion: The alleged misdeclaration in the year of manufacture of the machinery to be imported by the appellant to the Directorate General of Foreign Trade ( DGFT ) did not fall within the purview of Section 114AA of the Customs Act, 1962.
Held: S.B. Agarwal, proprietor1 of M/s. Nimbark Textile Mills filed this appeal to assail the personal penalty of Rs.71,66,520/- imposed on him under section 114AA of the Customs Act, 19622 passed by Commissioner of Customs, Jodhpur. There was allegations of misdeclaration of the year of manufacture of machinery in applications for licenses under the Export Promotion Capital Goods (EPCG) scheme, governed by the Foreign Trade (Development & Regulation) Act, 1992, and the associated Foreign Trade Policy (2009–2014). The EPCG scheme allowed for duty-free or concessional duty imports of capital goods, provided that the importer met specific export obligations. Commissioner of Customs observed that misdeclaration in applications to DGFT invalidated the licenses obtained under the EPCG scheme. Consequently, duties were demanded along with interest, redemption fines were imposed, and personal penalties under Section 114AA were levied against the individuals, including S.B. Agarwal. On appeal, the Tribunal had initially remanded the matter to the Commissioner, awaiting clarity on the jurisdictional issue raised in related Supreme Court proceedings. After jurisdiction was clarified by the apex court, the matter was heard and decided afresh. It was held that the case of the department was not that the nature of goods or year of manufacture was mis-declared in the Bill of Entry or under any declaration made under the Customs Act. The allegation was that in the application made to the DGFT for EPCG scheme [under the Foreign Trade (Development & Regulation) Act, 1992 read with the Foreign Trade Policy 2009- 2014], the manufacturers had mis-declared the year of manufacture of the machinery to be imported. Insofar as M/s. Nimbark Textile Mills of which the appellant was the proprietor was concerned, this matter was before Commissioner to decide in the remand proceedings. Even if the case was decided against M/s. Nimbark Textile Mills, the appellant herein could still not be penalised under Section 114AA of the Customs Act because this section rendered one liable to penalty only in case of mis-declaration with knowledge or intent in any proceeding under the Customs Act which was not even the allegation. Any mis-declaration before DGFT to obtain a licence was not a declaration in a proceeding under the Customs Act but a proceeding under Foreign Trade Policy framed under the Foreign Trade (Development & Regulation) Act, 1992. A plain reading of section 114AA of the Customs Act made it evident that appellant did not fall under its scope. Nothing in the impugned order showed that appellant fell under this section. The alleged mis-declaration by the appellant before DGFT was not in any proceeding under the Customs Act and therefore, was not covered by section 114AA of the Customs Act.
