CESTAT Mumbai Sets Aside ₹1.40 Crore Customs Penalty on Director in Removable Disc Drive Classification Dispute

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 05.10.2026

CESTAT Mumbai Sets Aside ₹1.40 Crore Customs Penalty on Director in Removable Disc Drive Classification Dispute

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai has granted relief to Kapal Suresh Pansari, Director of Rashi Peripherals Pvt. Ltd., by setting aside penalties imposed upon him under Section 112(a) of the Customs Act, 1962 in a dispute concerning the classification of imported “Removable or Exchangeable Disc Drives.”

The Tribunal held that the penalty could not survive when the underlying classification dispute had already been decided in favour of the importer and the corresponding duty demands and penalties against the importing company had been set aside.

Background of the Dispute

• The dispute arose from imports made by Rashi Peripherals Private Limited of goods described as “Removable or Exchangeable Disc Drives.”
• The importer had declared the goods under Customs Tariff Item (CTI) 8471 7020. Customs rejected this classification and sought to reclassify them under CTI 8471 7030, resulting in denial of the exemption benefits claimed by the importer.
• The adjudicating authority consequently confirmed differential Customs duty under Section 28 of the Customs Act, 1962, together with interest, and imposed a penalty equivalent to duty and interest upon the importing company under Section 114A.

₹1.40 Crore Penalty Imposed on Director

Apart from the demand against the company, Customs proceeded against its Director, Kapal Suresh Pansari, under Section 112(a) of the Customs Act.

The Commissioner imposed:

• ₹1,40,00,000 penalty concerning consignments imported through Air Cargo Complex, Sahar, Mumbai; and
• ₹35,000 penalty concerning importation through JNCH, Nhava Sheva.

The adjudicating authority attributed suppression of facts, wilful misdeclaration, omissions and commissions to the Director and held that the goods had consequently become liable to confiscation under Section 111 of the Customs Act.

Director Challenges Penalty Before CESTAT

• Before CESTAT, the appellant argued that the main Customs dispute against Rashi Peripherals Pvt. Ltd. arising from the very same adjudication order had already been decided by the Tribunal through Final Order No. A/87663/2019 dated 9 December 2019.
• That decision had gone in favour of the importer.
• The Director therefore contended that once the principal proceedings concerning the classification and duty liability of the importing company had failed, the penalty imposed upon him arising from the same dispute could not independently survive.
• Revenue, on the other hand, reiterated the findings contained in the adjudication order.

CESTAT Examines Section 112(a) of Customs Act

• The Tribunal identified the central question as whether the Director could legally be subjected to penalty under Section 112(a) of the Customs Act, 1962.
• Section 112(a), as reproduced by the Tribunal, covers a person who, in relation to goods, does or omits to do an act which would render such goods liable to confiscation under Section 111, or abets such an act or omission.
• The Tribunal noted that although the Commissioner had held the imported goods liable to confiscation under Section 111(m), no redemption fine was imposed because the goods were not physically available at the time of adjudication.
• On this basis, CESTAT observed that in the absence of confiscation of the goods and the resultant imposition of redemption fine under Section 125, there was no legal basis to fasten penal liability upon the appellant under Section 112(a).

Classification Dispute Already Settled in Importer’s Favour

• The Tribunal found an additional and decisive reason for setting aside the penalty.
• The appeal filed by Rashi Peripherals against the same adjudication order had already succeeded. In that proceeding, CESTAT held that the classification controversy was no longer res integra in view of earlier Tribunal decisions.
• The goods were held to be appropriately classifiable under Tariff Item 84717020, which was the classification originally claimed by the importer.
• Consequently, the earlier Tribunal order had set aside the change in classification as well as the resulting demands against Rashi Peripherals.

Cases Relied Upon in the Classification Dispute

The order records that the earlier Rashi Peripherals decision had relied upon the following authorities:

Commissioner of Customs, New Delhi v. Supertron Electronic Pvt. Ltd. – 2017 (357) E.L.T. 401 (Tri.)

and

Sony India Pvt. Ltd. v. Commissioner of Customs – 2018-TIOL-1445-CESTAT-DEL

• In both matters, the Tribunal had held that the disputed goods were appropriately classifiable under Tariff Item 84717020. The present order further records that Revenue’s civil appeals against those Tribunal decisions were dismissed by the Supreme Court on 25 October 2017 and 18 October 2019, respectively.
• CESTAT also referred to the coordinate Bench decision concerning M/s Neoteric Infomatique Ltd., Final Order No. A/85477/2019 dated 12 March 2019, which similarly upheld classification under Tariff Item 84717020.

Penalty Cannot Survive Once Foundation of Customs Case Fails

• The ruling is significant because the penalty against the Director arose from the same classification dispute that had already been resolved in favour of the importer.
• Once CESTAT had set aside the duty demands and penalties against Rashi Peripherals and accepted classification under CTI 84717020, the Tribunal found no merit in continuing the separate Section 112(a) penalty against its Director.
• CESTAT accordingly held that the Commissioner’s order, to the extent it imposed penalty upon Kapal Suresh Pansari under Section 112(a), was unsustainable.

Final Decision

• CESTAT Mumbai allowed the appeal in favour of Kapal Suresh Pansari and set aside the impugned order to the extent it imposed the penalty upon him.
• Thus, the Director obtained relief from both the ₹1.40 crore penalty relating to Air Cargo Complex imports and the ₹35,000 penalty relating to JNCH imports that had been imposed under Section 112(a).

Key Legal Takeaway

The decision reinforces the importance of establishing the statutory foundation for a personal penalty under Section 112(a) of the Customs Act. In this case, CESTAT found the penalty unsustainable not only on its analysis concerning confiscation and redemption fine, but also because the underlying classification and duty dispute against the importer had already been decided in the importer’s favour.

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Source: CESTAT Mumbai

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Ravi Shekhar Jha – Advocate, Bar Council of Delhi