Order Date: 21 July 2022

Facts:

• The appellant, M/s.  Chaithanya Projects Private Limited has filed a Bill-of-Entry for clearance of goods declared as “Engineered Wood Flooring” after classifying the same under CTH 44079990.
• The Revenue alleged to have found during Audit that the imported goods were required to be classified under the sub-heading 441232, i.e., under CTH 44123290.
• The Show Cause Notice issued after considering the reply of the appellant, the Adjudicating Authority passed Order-in-Original wherein the additional duty demand was confirmed, but however, since the appellant had paid the balance tax along with interest, the same was appropriated in the Order-in-Original and that the Adjudicating Authority also imposed a penalty of Rs.1,00,000/- under Section 114A of the Customs Act, 1962 on the appellant.
•  Being aggrieved the appellant has filled the present appeal before this forum.

Issue:

• Whether the penalty imposed on the appellant, as sustained in the First Appeal, is correct or not?

Order:

• The Tribunal observed that the initial dispute was with regard to classification which, as canvassed by the appellant, was debatable, but however, having not disputed, they chose to accept the classification adopted by the Adjudicating Authority and also paid the differential duty along with applicable interest even before the completion of adjudication. It is precisely for this reason that in the Order-in-original dated 27.03.2015 there is an order appropriating these amounts towards the differential duty and interest. Hence, declaring a wrong classification per se would not amount to collusion or any wilful mis-statement or suppression of facts and other than mere allegation, the Revenue has not placed on record any supporting document/s nor has it established the existence of collusion, etc.
• It is the settled position of law that mere acceptance and payment of differential duty would not ipso facto attract any penalty under the statute. Hence, the fact of payment of differential duty along with interest by the appellant and the order of appropriation reflected in the Order-in-Original is a sufficient ground to disbelieve the “mala fides” on the part of the appellant.
• The lower authorities have given much importance to the first proviso to Section 114A ibid.: the first proviso is applicable only if an assessee chooses to avail the benefit of reduced penalty of twenty five per cent, if the duty or interest determined is paid within thirty days from the date of communication of the order, which is not the case of the appellant here, in the case on hand. The first test of collusion, etc., has to be established and only then could the penalty be imposed. Having not satisfactorily established collusion or any wilful mis-statement or suppression of facts, the penalty under Section 114A of the Customs Act, 1962 appears to have been imposed mechanically by the Adjudicating Authority, which is not in accordance with the statute.

• Accordingly, the impugned order is set aside and the appeal is allowed.