Vikas Singh Vs Principal Commissioner of Customs (CESTAT Delhi)
Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi, has set aside a penalty of Rs. 50 lakhs imposed on Vikas Singh, Managing Director of M/s. MMTC-Pamp India Pvt. Ltd., under Section 112(a)(ii) of the Customs Act, 1962. The Tribunal ruled that a penalty under this section cannot be levied when there is no conscious attempt to evade duty, even in cases of short-paid duty.
The Principal Commissioner of Customs, ACC (Import), New Delhi, had imposed the penalty, asserting that Singh suppressed the fact that differential duty was paid due to a Reserve Bank of India directive, rather than suo moto. The Commissioner concluded that this suppression warranted a penalty under Section 112(a)(ii).
Section 112(a)(ii) of the Customs Act addresses penalties for improper importation of goods. It stipulates that any person who acts or omits to act in a manner that would render goods liable for confiscation under Section 111, or abets such an act, shall be liable to a penalty not exceeding 10% of the duty sought to be evaded or Rs. 5,000/-, whichever is higher, for dutiable goods other than prohibited goods.
The CESTAT, in its order, emphasized that Section 112(a)(ii) pre-supposes a conscious effort on the part of the person alleged to have committed evasion. The Tribunal referred to the Kerala High Court’s ruling in T. Enasu vs. Union Of India, a significant judicial precedent in this context.
In T. Enasu, the Kerala High Court observed that the liability to penalty under Section 112(a)(ii) is contingent upon the “duties sought to be evaded.” The court clarified that “evade” implies a conscious exercise, an artful avoidance, or a deliberate attempt to escape. The judgment highlighted that the concept of “seeking to evade” inherently involves a mental element and a conscious attempt to evade. The court’s ruling in T. Enasu drew support from Supreme Court decisions in Jain Exports Pvt. Ltd. v. Union of India and Akbar Badruddin Jiwani v. Collector, reinforcing the necessity of establishing a conscious attempt to evade duty for penalty imposition.
The CESTAT further referenced its own order in Customs Appeal No. 54789 of 2023, filed by M/s. MMTC-Pamp India Pvt. Ltd. This related appeal provided context regarding the company’s import practices concerning dore bars. The appellant, MMTC-Pamp India Pvt. Ltd., explained that the final quantity of gold/silver in dore bars, determined after melting and assaying, could either be more or less than the quantity initially declared in the Bills of Entry. The confirmed demand for differential duty arose in cases where the gold content in the final supplier invoice was found to be higher than that mentioned in the finalized Bills of Entry, leading to short payment of customs duty.
Crucially, the Tribunal noted that the company had also claimed refunds for excess customs duty paid in instances where the gold content was found to be lower than initially declared. Evidence presented included a refund claim of Rs. 1,13,97,35,837/- on April 22, 2024, for excess duty paid on provisionally assessed Bills of Entry, which was sanctioned by the Assistant Commissioner (Refund) on October 8, 2024. Similar refund orders were also passed on April 7, 2022, and March 31, 2023. The appellant had also claimed a refund of Rs. 1,26,85,29,752/- in other cases.
The CESTAT concluded that no motive could be attributed to the appellant for suppressing the final invoice, given that the company had, in other instances, paid more customs duty than required due to lower gold content. The Tribunal found no evidence to suggest that the appellant had short-paid duty due to any willful misstatement or suppression of facts. Consequently, the extended period of limitation under Section 28(4) of the Customs Act could not be invoked.
Based on these findings, the CESTAT determined that there was no conscious attempt to evade payment of duty. In light of the T. Enasu judgment, the imposition of a penalty on Vikas Singh was deemed unsustainable.
Additionally, the counsel for Vikas Singh pointed out that Singh joined M/s. MMTC-Pamp India Pvt. Ltd. as Managing Director in March 2020, meaning he was not associated with the company when the imports in question took place, as all relevant Bills of Entry were filed before his tenure.
For all the aforementioned reasons, the CESTAT concluded that the penalty under Section 112(a)(ii) of the Customs Act could not have been imposed upon Vikas Singh. The part of the Principal Commissioner’s order dated December 31, 2022, imposing the penalty was set aside, and the appeal was allowed.
FULL TEXT OF THE CESTAT DELHI ORDER
