CESTAT Kolkata Quashes ₹40 Lakh Penalty on Generator Set Importer, Says Delayed Action Cannot Prevent Pollution

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Kolkata has set aside ₹40 lakh in penalties imposed on a Kolkata-based importer of kerosene generator sets.

The tribunal observed that the show cause notice was issued long after the goods had been cleared and sold in the market.

A Bench of Judicial Member R. Muralidhar and Technical Member Rajeev Tandon noted that even if the imports were assumed to have resulted in the clearance of polluting generator sets, issuing a show cause notice after the goods had entered the market would not address the alleged environmental concern.

"Even if for a moment it is taken that this has resulted in allowing a polluting Genset to be cleared out of the Customs area, we do not see as how this act of issuing the SCN could prevent the pollution, when the goods have been sold long back in the market. This is a classic case of the Revenue failing to prevent the clearance even after going through the Certificate," the tribunal observed.

The appeal was filed by General Agencies (Kolkata) Pvt. Ltd., which imported kerosene generator sets in August 2020 and October 2021. The company classified the goods under tariff heading 85023990 and submitted emission certificates issued by Envirotech East Pvt. Ltd. along with the Bills of Entry.

Customs authorities examined the documents and permitted clearance of both consignments for home consumption.

More than two years after clearance of the first consignment and more than one year after clearance of the second, Customs issued a show cause notice.

The notice alleged that the certificate furnished by the importer was not in the prescribed "Type Approval" form required under the applicable environmental notification.

The department also contended that the certificate did not contain details relating to noise levels. According to Customs, the notification requirements had therefore not been satisfied.

The tribunal noted that Envirotech East Pvt. Ltd. was among the agencies authorised by the Ministry of Environment to conduct tests and issue environmental certificates. It further recorded that the certificates had been placed before Customs officers at the time of import. No objection was raised at the time of clearance.

According to the bench, Customs officials were aware of the notification when the consignments were cleared. Yet no objection was raised that the certificate was not in the nature of a Type Approval certificate.

"After the Certificate issue was issued and presented before the Customs Officials, no objection was raised about the same not being in the nature of 'Type Approval'," the tribunal observed.

The bench also referred to the manufacturer's technical specifications. Those specifications indicated a maximum noise level of 71 dBA. The tribunal noted that this was well below the maximum noise level of 86 dBA prescribed under the notification.

The tribunal then considered whether the facts justified imposition of penalties. It found no attempt by the importer to suppress or conceal any facts from Customs authorities.

"We do not find that any attempt was made by the appellant to suppress or conceal any facts. They have acted in a Bonafide way," the tribunal found.

Holding that the importer had furnished all relevant documents, including certificates issued by a duly authorised agency, the tribunal concluded that the failure to identify the Type Approval issue at the time of import was attributable to the Revenue rather than the importer.

"The error of non-detection of the Type Approval certificate at the time of the import is on the part of the Revenue, rather than it being any act of concealment on the part of the appellant," it held.

The tribunal accordingly set aside penalties of ₹15 lakh and ₹25 lakh imposed on the importer. The appeal was allowed with consequential relief

For Appellant: Shri Biswajit Mukherjee, Shri Shovendu Banerjee and Shri Soumyajit Mishra, Advocates

For Revenue: Shri S. Debnath, Authorised Representative