Section 117 penalty cannot be imposed for bona fide import errors voluntarily disclosed and rectified.

The appellant, an importer of scientific and laboratory instruments, filed Bill of Entry No. 3184049 dated 17 March 2021 for goods covered by Invoice No. 541497 dated 26 February 2021, declaring an assessable value of ₹2,38,087 and paying customs duty of ₹69,718.

After Out of Charge was granted on 19 March 2021, the appellant discovered that the consignment also contained goods covered by a second invoice, No. 541498 dated 26 February 2021, valued at ₹26,74,480, which had inadvertently not been submitted by the German supplier.

The appellant voluntarily informed Customs on 25 March 2021, requested cancellation of the Out of Charge and reassessment, and offered to pay differential duty of ₹7,41,754.

The goods were consequently reassessed, but a penalty of ₹2,00,000 was imposed under Section 117 of the Customs Act, 1962. The Commissioner (Appeals) upheld the penalty, leading to the present appeal.

Whether a penalty under Section 117 of the Customs Act, 1962 could be imposed where the importer voluntarily disclosed, shortly after clearance, that additional goods had been inadvertently omitted from the Bill of Entry and offered to pay the differential duty.

Whether imposition of a general penalty under Section 117 was sustainable when the Customs Act contains specific penal provisions for contraventions relating to improper importation or incorrect declaration.

Whether the appellant’s bona fide error, absent any evidence of intention to evade duty, warranted setting aside the penalty.

The Tribunal considered Section 117 of the Customs Act, 1962, which provides a general penalty for contravention of the Act or failure to comply with a statutory requirement where no specific penalty is otherwise provided.

It also referred to the availability of specific penal provisions under Sections 112 and 114 for customs-related contraventions, and to the CBIC directive on self-assessment, Chapter I, paragraph 2.2, directing that penal provisions should not ordinarily be invoked for bona fide errors in self-assessment where mens rea, wilful intention to evade duty, or wilful non-compliance cannot be established.

The Tribunal found that the appellant had itself detected and disclosed the omission within six days of clearance, produced the supplier’s explanation, requested reassessment, and offered to pay the entire differential duty.

The record contained no evidence that Customs would have detected the discrepancy but for the appellant’s voluntary disclosure, nor any indication of an intention to evade duty.

In these circumstances, the omission was treated as a bona fide inadvertent error rather than a deliberate contravention.

The Tribunal further held that penalising the appellant under the general provision in Section 117, despite the existence of specific statutory penalty provisions and the absence of mens rea, was legally unsustainable and oppressive in the circumstances.

The appeal was allowed, and the Commissioner (Appeals)’s order imposing a penalty of ₹2,00,000 under Section 117 was set aside, with consequential relief, if any.