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Cus - if SCN alleges that drawback has been wrongly availed, it cannot be said that assessee was having an intention to suppress facts - moreover, there is no demand of Customs duty, so penalty u/s 114A cannot be imposed: CESTAT

By TIOL News Service

MUMBAI, JUNE 03, 2014: THE appellant is manufacturer of De-Oiled Cake and an exporter. To manufacture the said De-oiled Cake, they procure Hexane gas without payment of duty. After exportation of the goods, they claimed duty draw back available on the export goods. The claim was sanctioned. Later-on, it was revealed that the appellants have procured the Hexane gas without payment of duty and also availed draw back claim which was not admissible.

A SCN was issued alleging that the appellant manufacturer has wrongly and irregularly availed duty draw back and, therefore, they as well as the Director are liable to be penalized under Section 114A and 114(iii) of the Customs Act, 1962 respectively.

Penalties were imposed by the original authority and upheld by the Commissioner(A).

So, the appellants are before the CESTAT.

The appellant submitted that they clear De-oiled cake in DTA as well as export the same and they had wrongly availed drawback which was paid by them along with interest before issuance of SCN and, therefore, it cannot be said that they had any intention to take double benefit. Moreover, the SCN itself alleged that they have claimed draw back wrongly. It is further submitted that as there is no demand of duty penalty u/s 114A of the CA, 1962 cannot be imposed. As regards penalty imposed u/s 114(iii) on the Director, it is pleaded that since there is no proposal to confiscate the goods, the said penalty is not sustainable.

The Revenue representative supported the order appealed and submitted that penalty is justified in the case.

The Bench observed -

+ The allegation against the appellants is that they have wrongly availed draw back claim. If an assessee is taken draw back claim wrongly, in that situation, it cannot be said that the assessee was having an intention to suppress the facts. Therefore, the facts of suppression are not proved as the show-cause notice itself alleges that draw back has been taken wrongly.

+ As per the Section 114A of the Customs Act, 1962, penalty can be imposed on account of non-payment, short payment or erroneously refunded duty but in this case duty is not demanded. The only allegation against the appellants is that they have availed draw back claim wrongly.

+ In the show-cause notice there is no proposal for confiscation of the impugned goods, therefore, penalty under Section 114(iii) is not imposable.

In fine, the penalty imposed on the appellant and the Director was set aside and the appeals were allowed.

(See 2014-TIOL-926-CESTAT-MUM)


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