ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 26.02.2026
CESTAT Delhi Set aside the penalty imposed under Section 114A of the Customs Act, 1962
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idΒ intelconsul@gmail.com or on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, recently delivered a significant judgment in the case of M/s Allengers Medical Systems Ltd. vs. Commissioner of Customs (Customs Appeal No. β 51218 of 2025). β This case revolved around the imposition of penalty under Section 114A of the Customs Act, 1962, and the eligibility of exemption under Notification No. β 50/2017-CUS, as amended by Notification No. β 2/2022-CUS.
Background of the Case
M/s Allengers Medical Systems Ltd., a company based in Mohali, Punjab, imported Carbon Fiber Table Tops and Carbon Fiber Tables under various Bills of Entry between August 18, 2022, and March 9, 2023. β The company self-assessed the customs duty, claiming exemption under Notification No. β 50/2017-CUS, as amended by Notification No. β 2/2022-CUS (Sl. β No. 564). β However, the Customs Department contended that the amendment excluded carbon fiber tables from the exemption, leading to a demand for differential customs duty of Rs. β 57,18,554/- along with interest. β Additionally, a penalty of Rs. β 57,18,554/- was imposed under Section 114A of the Customs Act, 1962. β
The appellant argued that the exemption notification excluded only diagnostic tables, while the imported goods were interventional tables, which were not excluded. β Despite this, the appellant paid the demanded duty and interest before the issuance of the Show Cause Notice (SCN) dated June 6, 2024, in an attempt to resolve the matter. β However, the SCN also proposed penalties under Section 114A, which the appellant contested in the appeal. β
Key Legal Issue
The primary issue before the Tribunal was whether the penalty imposed under Section 114A of the Customs Act was justified in the given circumstances. β Section 114A stipulates that penalties can be imposed for non-payment or short payment of duty due to collusion, wilful misstatement, or suppression of facts. β
Tribunalβs Observations and Decision
The Tribunal carefully examined the submissions made by both parties. β The appellant argued that the self-assessment of duty was based on its understanding of the exemption notification, and there was no collusion, wilful misstatement, or suppression of facts. β The appellant maintained that it was eligible for the exemption but chose not to contest the demand for duty and interest to settle the matter amicably. β
The Tribunal noted that the remedy for incorrect self-assessment is re-assessment, and an incorrect self-assessment cannot automatically be deemed as collusion, wilful misstatement, or suppression of facts. β The appellant had acted in good faith, believing it was entitled to the exemption, and had voluntarily paid the duty and interest before the issuance of the SCN. β Therefore, the Tribunal concluded that the penalty under Section 114A was not justified in this case. β
Final Order
The Tribunal allowed the appeal and modified the impugned order by setting aside the penalty imposed under Section 114A of the Customs Act. β The appellant was granted consequential relief, and the judgment was pronounced in open court. β
Key Takeaways from the Judgment
- Self-Assessment vs. Re-Assessment: The Tribunal clarified that incorrect self-assessment does not automatically imply collusion, wilful misstatement, or suppression of facts. β The proper remedy for incorrect self-assessment is re-assessment. β
- Good Faith Actions: The appellantβs voluntary payment of duty and interest before the issuance of the SCN demonstrated its intent to resolve the matter amicably, which played a crucial role in the Tribunalβs decision to set aside the penalty. β
- Penalty under Section 114A: The judgment emphasized that penalties under Section 114A can only be imposed if there is evidence of collusion, wilful misstatement, or suppression of facts. β In the absence of such evidence, penalties cannot be justified. β
- Importance of Clear Notifications: The case highlights the need for clarity in exemption notifications to avoid disputes and misinterpretations.
Conclusion
The decision in the M/s Allengers Medical Systems Ltd. case serves as a significant precedent in interpreting Section 114A of the Customs Act, 1962. It underscores the importance of distinguishing between genuine errors in self-assessment and deliberate acts of evasion. β This judgment is a reminder to importers and businesses to act in good faith and ensure compliance with customs regulations while also advocating for clear and unambiguous notifications to prevent unnecessary litigation.
Source: CESTAT Delhi
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