Commissioner of Customs vs Tata Power Company Ltd.

N. Kumar, J.—The Revenue has preferred this appeal challenging the order passed by the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as "the Tribunal" for short) reducing the penalty from Rs. 59,77,432 to Rs. 5,00,000 only. The substantial question of law that arises for consideration in this appeal is,

Whether the Tribunal has the jurisdiction to reduce the penalty u/s 114A of the Customs Act?

The facts are not in dispute. The assessee is an importer of furnace oil from M/s. Indian Oil Corporation Limited (hereinafter referred as "IOCL", for short). The Revenue authorities found 18 consignments of furnace oil imported through Mangalore and Karwar ports. The assessee has undervalued 14 consignments by misdeclaring the actual payments made to the IOCL by way of suppressing the facilitation charges, bank charges, demurrages and survey fees incurred on the imported goods. In respect of 12 bills of entry where assessment was final, short-levy was found to be Rs. 59,77,452. Therefore, after issuing notice to the assessee and after hearing him, the Commissioner of Customs passed Order-in-Original No. 1/2007 on February 9, 2007 redetermining the assessable value in respect of total imported goods, confirmed the demand, interest along with penalty and also ordered for confiscation of goods. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal modified the order passed by the Commissioner confirming the duty demand in respect of addition of all the charges, directed the amount already paid to be adjusted and upheld the finding that the goods covered under 12 bills of entry as detailed in part I are liable for confiscation u/s 111(m) of the Customs Act (for short "the Act"). However, as far as the penalty on assessee was concerned, the same was reduced from Rs. 59,77,432 to Rs. 5,00,000 only.

The Revenue has preferred this appeal challenging the order of the Tribunal and its jurisdiction to reduce the penalty. The apex court has held that the imposition of penalty under the Act is not automatic. However, once the conditions which give rise to the imposition of penalty exists then the penalty has to be imposed as prescribed under law. At that stage, no discretion is left to the authorities in the matter of imposing penalty. The law provides that the penalty payable would be not less than equal to the duty payable. Further, the law provides, if the assessee pays the duty with interest within 30 days from the date of the order, then the penalty payable would be 25 percent, of what is imposed. Therefore, the statute provides for the penalty payable and also reduced penalty payable. There is no discretion left either with the authorities or with the Tribunal or with this court to reduce the penalty. However, the Tribunal, which had no jurisdiction, had proceeded to reduce the penalty from Rs. 59,77,432 to Rs. 5,00,000. Whatever is the reason given by the Tribunal, it is not necessary for us to go into the said question because the question is, whether there is any jurisdiction left with the Tribunal to reduce the penalty. The law on the point is now well settled. Once the authorities decide to impose penalty, no discretion is left in the matter of imposing penalty except as provided under law. Even the Tribunal also has not been vested with any power to reduce the penalty, which is imposed by the authority as prescribed under law, and therefore, the order passed by the Tribunal reducing the penalty is one without jurisdiction and, accordingly, it is hereby set aside. The substantial question of law is answered in favour of the Revenue authorities and against the assessee. The appeal is allowed.