The Commissioner of Customs vs Powerica Ltd.

N. Kumar, J.—The revenue has preferred this appeal challenging the order passed by the Tribunal, which has held that when the duty is paid before the issue of show cause notice imposition of penalty and Interest is not justified.

From the order in original, it in clear, on the ground of misdescription of the goods imported after the came was noticed when the authorities initiated (sic) proceedings by issue of show cause notice, the Assessee requested for waiver of notice and promptly paid the duty and interest payable thereon. Thereafter, the adjudicating authority adjudicated the dispute and held the case of misdescription is made out. But taking a lenient view of the matter, as the Assessee had admitted liability to pay duty and interest, imposed a penalty of Rs. 1 lakh. The same was challenged, by the Assessee before the Appellate Commissioner to dismiss the appeal. The Tribunal in appeal held referring to several judgments of the Supreme Court, that once duty is paid before issue of show (sic) notice, interest and penalty cannot be levied and thus set aside the order imposing penalty, Aggrieved by the said order, the revenue is in appeal.

As is clear from, the facts set out above the observation made by the Tribunal is not proper. The Assessee has paid the duty and interest. However, a penalty of Rs. 1 lakh was imposed by the adjudicating authority taking a very lenient view of the matter. The dispute relates to the year 2004-05. By Act 14 of 2001, Sub-Section (2B) has been inserted to Section 28 of the (sic) Act. 1962 which reads as under:

(2B) Where any duty has not been levied or has been short-levied or erroneously refunded or any interest payable has not been paid, part paid, or erroneously refunded, the person, chargeable with the duty at the interest may pay the amount of duty or interest before service of notice on him under Sub-section (1) in respect of the duty or the interest, as the case may be and inform the proper officer of such payment in writing, who, on receipt of such information shall not serve any notice under Sub-section (2) in respect of the duty or the interest so paid:

Provided that the proper officer may determine the amount of short-payment of duty or interest, if any which in his opinion has not been paid lm such person and then, the proper officer shall proceed to recover such amount in the manner -specified in this section and the period of ''one year'' or ''six months'' as the case may he, referred to in Sub-section (1) shall be counted from the date of receipt of such information of payment.

In view of the aforesaid provision, when the Assessee pays; the duty arid penalty and inform the proper Officer of such payment in writing, who on receipt of such information shall not serve any notice under Sub-section (1) in respect to the duty or the interest so paid, If in law there is a prohibition for initiation of the proceeding to recover, the duty and penalty after it is paid before the issue of show cause notice, certainly in such a proceedings which is not maintainable, question, of imposing penalty would not arise. In other words, if duty and penalty is paid even before the issue of show cause notice and the said fact is informed to the proper Officer, he shall not initiate any proceedings to recover the duty and interest, much leas for imposition of penalty. Therefore, the order imposing penalty is illegal. The Tribunal has set aside the same for different reasons. As the ultimate order is proper and we have set aside the came, we do not see any merit in this appeal, Accordingly, it is dismissed.

Thus, the substantial question of law is answered in favour of the Assessee and against the revenue.