Pranav B Prem

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member), has held that penalties imposed under the Customs Act, 1962 for mis-declaration and undervaluation cannot exceed five times the value of the goods. Dismissing an appeal filed by Shri Nitin Khandelwal, the Tribunal upheld the penalties imposed by the adjudicating authority, noting that the penalty of ₹30 lakh each under Sections 112(a) and 114AA was modest compared to the value of goods involved.

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The case arose when the Special Intelligence and Investigation Branch (SIIB) unearthed large-scale mis-declaration in consignments imported by M/s Wide Impex. Bills of Entry filed in December 2017 and June 2018 were found to contain discrepancies in both description and valuation. Investigators discovered a dual invoicing system: one set of genuine invoices in Chinese RMB reflecting actual prices, and another fabricated set in USD with undervalued amounts presented for customs clearance. During the investigation, Khandelwal, the firm’s manager, admitted that he had procured goods from China by undervaluing invoices, remitting the declared amount through banking channels, while the balance was paid directly to exporters by Indian buyers.

Evidence included Excel sheets retrieved from Khandelwal’s personal email accounts, which contained parallel invoice values. Khandelwal accessed his email in the SIIB office, voluntarily opened the accounts, printed the invoices, and signed them. These records, along with his statement, formed the basis for re-determination of values. Past consignments from 2014 to 2018 were also reviewed, with values reassessed either on the basis of genuine invoices or contemporaneous imports.

Khandelwal challenged the penalties, arguing that his statement had been retracted, that electronic records were inadmissible without certification under Section 65B of the Evidence Act, and that penalty under Section 114AA applied only to exports, not imports. He also claimed that the adjudicating authority acted arbitrarily and denied him proper opportunity of hearing.

The Revenue countered that multiple opportunities for hearing were given, but Khandelwal repeatedly sought adjournments. It was emphasized that Section 114AA is not confined to exports; rather, it applies to any false declaration in the transaction of business under the Customs Act, including imports.

The Tribunal agreed with the Revenue’s submissions. It held that the Excel sheets, being printed and signed by Khandelwal after accessing his own email, were reliable evidence and not subject to the restrictions of Section 65B. It further ruled that his retraction lacked credibility since he had provided details within his exclusive knowledge, including email IDs, business practices, and the identities of associates. The Bench emphasized that Section 114AA expressly covers false declarations in the course of any customs business, including imports, and rejected the argument that it applied only to exports.

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On quantum, the Tribunal observed that the total value of goods liable to confiscation exceeded ₹36 crore, while the penalties imposed were only ₹30 lakh each under Sections 112(a) and 114AA, well below the statutory ceiling of five times the goods’ value. It found the penalties modest and proportionate, and hence declined to interfere. Accordingly, the appeal was dismissed, with the Tribunal affirming that penalties for mis-declaration and undervaluation under the Customs Act cannot exceed five times the value of goods, but that the penalties imposed in this case were entirely justified.

Appearance

Shri Bharat Bhushan and Shri Pratik Kumar, Advocates for the appellant

Shri Nikhil Mohan Goyal and Shri Rakesh Kumar, Authorised Representatives for the department

Cause Title: Nitin Khandelwal V. Principal Commissioner, Customs (Import)-ICD

Case No: Customs Appeal No. 50914 Of 2021

Coram: Justice Dilip Gupta (President), P.V. Subba Rao (Technical Member)