Fines and penalties under Customs can be disproportionate and may need to be contested. However, to contest these, more is required to be done than merely citing case laws. Let us understand some penal provisions under Customs as follows:
- SECTION 111: Confiscation of improperly imported goods, etc.
- SECTION 112: Penalty for improper importation of goods, etc.
Any person,
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or…
SECTION 114A: Penalty for short-levy or non-levy of duty in certain cases
Where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful misstatement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under subsection (8) of section 28, shall also be liable to pay a penalty equal to the duty or interest so determined: …
SECTION 114AA: Penalty for use of false and incorrect material
If a person knowingly or intentionally makes, signs, or uses, or causes to be made, signed, or used, any declaration, statement, or document that is false or incorrect in any material particular in the transaction of any business for the purposes of this Act, they shall be liable to a penalty not exceeding five times the value of goods.
SECTION 117: Penalties for contravention, etc., not expressly mentioned
Any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to a penalty not exceeding four lakh rupees.
In the case of M/s ANGEL STARCH & FOODS PVT LTD vs COMMISSIONER OF CUSTOMS, CHENNAI [2025-VIL-1751-CESTAT-CHE-CU], the claim for assessment under the EPCG Scheme was rejected due to capital goods being second hand, and the goods were assessed to duty before their clearance. Duty was also paid as assessed. Thus, there was no demand in terms of Section 28 of the Customs Act.
Under such circumstances, imposition of a penalty under section 114A of the Customs Act was also not legally sustainable. Reliance was placed on the decision in Armaity S Patel vs. CC (Imports) Mumbai, 2014 (310) ELT 313 (Tribunal - Mumbai) - 2014-VIL-2354-CESTAT-MUM-CU. The quantum of redemption fine, the demurrage and detention charges incurred, etc., should also be taken into consideration while arriving at the quantum of redemption fine as held in the decision in Jain Exports Private Limited vs. Union of India-1990 (47) ELT 213 (SC)-1990-VIL-38-SC-CU and CC Amritsar vs. Santan Sales & Services, 2010 (252) ELT (382) Tribunal (New Delhi)-2009-VIL-651-CESTAT-DEL-CU.
A mere ipse dixit that the importer is found to have misdeclared the value of the goods cannot lead to disproportionate fines. The extenuating circumstances leading to the import of the disputed goods for purposes of determining the quantum of redemption fine. While determining the question of the quantum of redemption fine, it is essential to consider the facts and circumstances relevant to the bona fide conduct of the importer in importing the goods, as held by the Apex Court in Jain Exports Private Limited vs. Union of India-1990 (47) ELT 213 (SC)-1990-VIL-38-SC-CU.
Again, in the case of Commissioner of Customs vs. Roshan Overseas (CESTAT Chennai), the assessee-importer (M/s. Roshan Overseas) had filed a bill of entry for 645 bales of fabric. The Commissioner of Customs confiscated a consignment of 645 bales (107,806 sq. meters) of various fabrics imported by M/s. Roshan Overseas under Bill of Entry No. 65. The Adjudicating Authority had imposed a combined penalty under Sections 112, 114A, and 114AA without proper application of statutory provisions and was directed to reconsider the penalty in accordance with law.
The residual provision of Section 117 can't be invoked upon realizing that penalties can't be imposed under Sections 111 and 112 of the Customs Act, as was held by the Bombay High Court. In one of the cases, respondents import goods (edible oil) discharged through high-pressure pipelines from the vessel directly into tanks in the gated complex in the port area. After obtaining the necessary permissions from the authorities, some of the material may have been stored in non-bonded tanks but within the same gated complex.
The department submitted that the appellant stored material more than the value permitted to be stored. CESTAT erred in relying upon the decision of Bombay High Court in Commissioner of Customs (Import) Mumbai vs. Finesse Creation Inc., when, in fact, the Gujarat and Madras High Courts have taken a contrary view. It was heldthe Bombay that there is no question of law, but a matter of fact, and the same has been dealt with by CESTAT.
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