Calcutta High Court
E.C. Bose And Company Pvt. Ltd. vs Union Of India (Uoi) on 13 November, 1991
Equivalent citations: 1994ECR467(CALCUTTA), 1992(58)ELT432(CAL)
Author: Suhas Chandra Sen
Bench: Suhas Chandra Sen
ORDER Suhas Chandra Sen, J.
1. This matter was appearing in the list for quite some time before the Vacation. It has been appearing in the list on and from Monday last. It has appeared today. Nobody appears at the first call. The prayer for adjournment was made. I am not inclined to grant this prayer because of the gross negligence on the part of the respondents in dealing with the case. Moreover, although directions for filing affidavits were given as early as on 14th August, 1991, no affidavit in opposition has been filed. This should have been filed within 4th September, 1991. There is no explanation why this was not done. Moreover, this is an unusual case where the petitioner has been subjected to a penalty for short-landing of goods which took place allegedly on 17th September, 1981. The notice of penalty was issued nearly seven years thereafter on 25th March, 1988. There is no explanation for such inordinate delay. The following four points have been noted in the order of Collector of Customs and Central Excise (Appeals):-
"1. Show cause notice was issued after 7 years when many records of the case with the consignee as well as in the Customs House were lost and so exact position could not be found.
2. Goods were duty free by an ad hoc exemption and had the goods landed in full in sound condition, they would have not been subjected to duty.
3. There were endorsement on some Bills of Entries "passed in full" though lage, shortages were also indicated elsewhere.
4. Stavedoring agents in this case for unloading were appointed not by the pellants but by the S.T.C. and Indian Sugar Mills Association who were the signees".
It is not clear why after noting all these the Collector of Customs came to the conclu that the petitioner was liable to pay penalty.
2. The petitioner was merely a shipping agent. The petitioner acted as agei the owners of the shipping company. It was not the agent of the consignor or the coi nee. It was not responsible for clearing all the imported goods across the Customs rier. The goods were in any event exempted by Government State Trading Corpora to import two lacs tons of sugar free from customs duty. The S.T.C. appointed In Sugar Industries in turn appointed one M. Elias (P) Ltd. Calcutta as Stevedores to load the cargo at Calcutta and M/s. Tarapada Suhasini Marine Contractors (P) Ltd. cutta as clearing, forwarding and Handling agent in respect of the subject consignrt
3. Vessel M.V. "SILVER BAY" carrying 2,62,500 bags of sugar importe STC from USA to Calcutta unloaded a part of the cargo at Haldia Port (45,764 bags) and the balance at Calcutta Port. The petitioner acted as agent of the owner of the sel for its said voyage from USA to Calcutta.
4. The case of the petitioner is that on or about 17th September 1981 during loading of the cargo the Stevedores M. Elias & Co. used hooks, a number of bags' torn and a large quantity of sugar spilled over in the holds of the vessel. In the prem a planning meeting was held of the representatives of the Calcutta Port Trust author the Stevedores, the handling agents and Indian Sugar Industries in the office of the Deputy Docks Manager, Calcutta Port and it was decided, inter alia, that the sweepings would be collected by the labourers and the clearing agents and repacked into 100 bag as against standard packing of 50 Kgs. bag. It was also decided that both discharge and handling of cargo would be done by the receiver of the cargo, i.e., Indian Sugar dustry and its agents, on behalf of S.T.C.
5. On 28th September 1981, a letter was written by the Master of the vessel to the Stevedores and the Manager, Traffic Corporation (Port Trust), Haldia Port complaining of the manner of handling of the cargo and informing that because of mis dling a large quantity of sugar was lying loose in the holds and dock of the ship and on the land.
6. On 7th October, 1981 and 10th October, 1981, letters were sent by Surveyors The Superintendence Company of India (P) Ltd. to the Indian Sugar Industry Export Corporation Ltd. complaining about the mishandling and damage of the sugar which led to contamination of considerable quantity of sugar imported.
7. Thereafter the petitioner informed Indian Sugar Industries about the action in which the cargo had landed. The Handling agent M/s. Tarapada Suhasini Marine Contractors (P) Ltd. was also informed that aforesaid vessel had landed the entire manifested cargo of 2,60,500 bags. On 31st October, 1981 the survey report was issued by Hindustan Measurers and Surveyors. Survey report clearly mentioned about the dom use of hooks and the resultant loss of sugar. It was also stated that stitching c standardised bags was not satisfactory as a result of which loss took place. Stevedores, M. Elias, submitted final report. Customs Authority also duly endorsed the respective Bills of Entry recording therein that the entire goods consigned had landed and passed out of Customs jurisdiction and that the consignees/their agents had been granted full 'pass out' of the cargo.
8. On the 25th of March, 1988 the petitioner duly received a notice of show cause from the Assistant Collector of Customs asking for show cause why the penalty under Section 116 of the Customs Act should not be imposed on the petitioner.
9. On 9th of August, 1988 an order was passed by the Deputy Collector of Customs, Calcutta imposing a penalty of Rs. 6,58,11,533/- upon the petitioner under Section 116 of the said Act as, according to him, he had "no option but to invoke" the said provisions for alleged shortage which "appeared" to him stood confirmed.
10. On 3rd March 1989, an appeal was preferred by the petitioner which was allowed by the Collector of Customs (Appeals) Calcutta, and the matter remanded to the Deputy Collector for a de novo adjudication "after duly taking into consideration the duty free nature of goods" and after giving the petitioner "an opportunity to explain its position."
11. On 26th July, 1989, Deputy Collector of Customs rejecting the petitioner's contention imposed a penalty of Rs. 13 lakhs on the petitioner under Section 116 of the said Act for alleged short-landing of 7342 bags of sugar.
12. On the 11th October, 1989 petitioner's appeal was partly allowed by the Collector of Customs by reducing the quantum of penalty. On 28th February, 1990 the revisional application of the petitioner was dismissed by the Central Government.
13. There are peculiar aspects of the case. The S.T.C. had no grievance against the loss that has taken place. S.T.C. is not making any claim about the loss of sugar. Customs authorities have not suffered in any way. No case has been made out for loss of Customs duty. The goods imported were duty free. Because of loss of sugar, customs duty has not been avoided or evaded. Section 116 of the Customs Act, 1962, enables the Customs Officer to impose "penalty not exceeding twice the amount of duty that would have been chargeable on the goods not unloaded". If the duty payable on the goods not unloaded was nil then no penalty can be imposed, at all. A zero mutiplied by two is zero. In a case like this, there cannot be any question of imposition of penalty.
14. Moreover, penalty can only be imposed if the failure to unload or the deficiency is not accounted for to the satisfaction of the Assistant Collector of Customs. There is nothing to show that the Assistant Collector of Customs came to a finding about any failure to unload. On the contrary, the finding was that in course of unloading the bags in which the goods were being brought were split up by the goods used by employees of the unloading agents. S.T.C. has not made any grievance. There is no grievance from the Customs department for seven long years. It has been recorded by the Collector of Customs in his order that many of the records of the case were lost. So, exact position could not be ascertained. If that be so, penalty cannot be imposed. The proceedings for imposition of penalty are of quasi-criminal character. If records cannot be found the benefit of doubt must go to the assessee.
15. Moreover, no explanation has been given as to why the proceedings were initiated after long seven years. It is true that no period of limitation was prescribed by the Customs Act for imposition of penalty or commencement of proceedings. But even in such a case the department has to act with diligence and within reasonable period of time. The Supreme Court in construing the provisions of Medicinal and Toilet Preparations (Excise Duties) Act observed in the case of Government of India v. Citadel Fine Pharmaceuticals, 184 Income Tax Reports P. 467:
"Although rule 12 does not prescribe any period within which recovery of any duty as contemplated by the rule is to be made, that by itself does not render the rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation, it is settled that every authority is to exercise the power within a reasonable period. Whenever a question regarding inordinate delay in the issuance of the notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the officer concerned to consider the question whether in the facts and circumstances of the case the notice of demand for recovery was made within a reasonable period. What would be a reasonable period would depend on the facts of each case, and no hard and fast rule can be laid down in this regard."
In the instant case also, the short-landing, if any, took place in September, 1981. The show cause notice was issued on 25th March, 1988. Admittedly, some of the records of the Customs department were lost by that time. In my view, there is inordinate and unexplained delay in issuance of the show cause notice after a long lapse of seven years for which no explanation is forthcoming from the respondents. Another curious fact is that the penalty of Rs. 6,58,11,533/- was originally imposed under Section 16 of the Customs Act, which was reduced to Rs. 13 lakhs by the Deputy Collector of Customs in appeal. Collector of Customs futher brought down the quantum of penalty to Rs. 10 lakhs. It is not clear why the quantum of penalty was reduced. There is no clear finding that the material facts were withheld by the petitioner from the Customs. On the contrary, duty free commodities were imported by S.T.C. through the petitioner. I have anxiously considered all the aspects of the case and I am of the view that this writ petition must succeed. The writ petition is accordingly allowed. Let a writ do issue in terms of prayers A, B and C of the writ application.