Penalty U/S 114AA Of Customs Act Applicable Prospectively: CESTAT
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the penalty under section 114AA of the Customs Act, 1962 cannot be imposed retrospectively. The Tribunal, comprising Justice Dilip Gupta (President) and Mr. P.V. Subba Rao (Technical Member), delivered this judgment in the matter of Indusind Media and Communications Limited v. Principal Commissioner of Customs (Import), Air Cargo Complex, Delhi.
The dispute originated when Indusind Media and Communications Limited, the appellant, filed a Bill of Entry dated 26th June 2003 for the import of certain goods. Subsequent investigations led to the issuance of a Show Cause Notice dated 27th June 2014. The notice proposed recovery of differential customs duty, confiscation of the imported goods, imposition of a redemption fine under section 125 of the Customs Act, and penalties under sections 112(a) and 114AA.
The adjudicating authority, by Order-in-Original dated 29th December 2015, upheld the proposals, confirming a differential duty demand of ₹54,19,475. It also imposed a redemption fine of ₹10,00,000, a penalty of ₹15,00,000 under section 112(a), and another penalty of ₹15,00,000 under section 114AA. Aggrieved, the appellant approached the Tribunal.
CESTAT, in its earlier Final Order dated 9th November 2017, partly allowed the appeal and remanded the matter to the Commissioner for the limited purpose of recalculating the duty liability and reassessing the penalties in light of the re-quantified duty. Notably, no directions were given with respect to the redemption fine. The appellant’s challenge to that Final Order before the Supreme Court was dismissed, thereby affirming the Tribunal’s decision.
Following the remand, the Commissioner passed a fresh order dated 13th November 2019, reducing the differential duty demand to ₹33,44,077, but maintaining the redemption fine at ₹10,00,000. The penalty under section 112(a) was reduced from ₹15,00,000 to ₹10,00,000, but the penalty under section 114AA remained unchanged at ₹15,00,000.
Before the Tribunal, the appellant raised several contentions. Firstly, it was argued that the redemption fine remained unchanged despite the significant reduction in differential duty. Secondly, the appellant contended that the reduced penalty under section 112(a) was still on the higher side and warranted further reduction. Thirdly, and most importantly, it was submitted that section 114AA had been introduced into the Customs Act only with effect from 13th July 2006, whereas the Bill of Entry in this case was filed much earlier on 26th June 2003. Therefore, it was argued that the said provision could not be applied retrospectively to an act done before its enactment.
Though the plea regarding section 114AA had not been taken earlier, the Tribunal allowed it on the ground that it was purely a question of law. The Bench, after examining the legislative history and the wording of section 114AA, concluded that the provision did not contain any express indication of retrospective applicability. It was held that: “Unless otherwise indicated, all laws will only apply prospectively. Therefore, Section 114AA would not apply to this case.”
The Tribunal also reproduced the language of section 114AA, which imposes a penalty on a person who knowingly or intentionally makes, signs, or uses any false or incorrect document in the transaction of any business under the Act. However, since all relevant documents, including the Bill of Entry, were filed in June 2003—well before the section came into force—the Tribunal concluded that the penalty under section 114AA was unsustainable in law and had to be set aside.
Regarding the penalty under section 112(a), the Tribunal took a lenient view and further reduced it from ₹10,00,000 to ₹5,00,000, observing that the penalty must be proportionate to the reduced duty. As for the redemption fine, the Tribunal refused to interfere, noting that it had not been modified in the earlier Final Order and had attained finality after the dismissal of the appellant’s appeal by the Supreme Court.
Ultimately, the Tribunal modified the impugned order as follows:
The penalty under section 114AA was set aside, holding that it could not be applied retrospectively;
The penalty under section 112(a) was reduced to ₹5,00,000;
The remainder of the order, including the redemption fine, was upheld.
Accordingly, the appeal was partly allowed to the extent stated above, and the appellant was granted consequential relief.
Appearance
Present for the Appellant: Shri Ranjeet Mahtani, Advocate
Present for the Respondent: Shri Girijesh Kumar, Authorised Representative
Cause Title: Indusind Media And Communications Limited Vs Principal Commissioner, Customs- New Delhi (Acc Import)
Case No: Customs Appeal No. 50229 OF 2020
Coram: Justice Dilip Gupta [President], P. V. Subba Rao [Member ( Technical)]
[Read/Download order]
