Penalty Under Section 114 A Of The Customs Act Is Invariably Linked To The Quantum Of Duty Evaded: CESTAT

The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the penalty under Section 114 A of the Customs Act is invariably linked to the quantum of duty evaded.

The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the appellant has not violated the provisions intentionally and that there is no mens rea or any motive that can be attributed to the appellant. Neither Section 111 nor Section 112 of the Customs Act prescribed mens rea as a pre-condition for the imposition of a penalty.

The appellant/assessee has imported 2,26,800 kg of hydrogenated vegetable oils (Vanaspati ghee) and filed a bill of entry no. 1203 dated July 11, 2007. On the basis of a test report given by the Central Food Laboratory, a quantity of 45,120 kg was found to be adulterated and unfit for human consumption.

On the request of the importer, a show cause notice was waived, and an order was passed confiscating the quantity of Vanaspati and imposing a penalty under Section 114 A of the Customs Act, 1962.

The appellant contended that if any goods do not conform to the standards, they are required to be re-exported as per the PFA Rules. There is no reason whatsoever to impose any penalty or redemption fine, as there was no men rea on the part of the importer appellant. A penalty was imposed under Section 114A of the Customs Act, 1962, and such a penalty can only be imposed when there is an evasion of duty. As there is no evasion of duty and further, as there is no demand of duty, the penalty under Section 114 A is not at all maintainable.

The department contended that the appellants have violated the conditions of the PFA Act, and therefore the goods have become liable for confiscation. When the goods are held liable for confiscation, no mens rea is required to be established in terms of Section 112 of the Customs Act, 1962.

The tribunal has held that the quantum of the penalty and fine should be commensurate with the offense committed. If the products fail the test, the customs authorities will ensure that the goods are re-exported out of the country by following the usual adjudication procedure or destroyed as required under the relevant rules.

Case Title: M/s Vanick Oils and Fats Pvt. Ltd. Versus Commissioner of Central Excise, Delhi- III, Gurgaon

Case No.: Customs Appeal No. 736 of 2007-DB

Date: 28.04.2023

Counsel For Appellant: Naveen Bindal

Counsel For Respondent: Swati Chopra

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