Custom, Excise & Service Tax Tribunal
Commissioner Of Customs, Chennai vs M/S. Sagar Enterprises on 17 September, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal Nos. C/70 & 71/2010
(Arising out of Order-in-Appeal No. C. Cus. 1298 & 1299/2009 dated 19.10.2009 passed by the Commissioner of Customs (Appeals), Chennai)
Commissioner of Customs, Chennai Appellant
Vs.
1. M/s. Sagar Enterprises
2. M/s. Rajeshwari Graphics Respondents
Appearance Shri C. Dhanasekaran, SDR and Shri C. Rangaraju, SDR for the Appellant Shri P. Saravanan, Advocate for the Respondents Appeal Nos. C/73 to 77/2010 (Arising out of Order-in-Appeal No. C. Cus. 1293 to1297/2009 dated 19.10.2009 passed by the Commissioner of Customs (Appeals), Chennai) Commissioner of Customs, Chennai Appellant Vs.
3. M/s. Vignesh Impex
4. M/s. Vignesh Impex
5. M/s. Om Sadguru Trading Co.
6. M/s. Roshitha Intermediates
7. M/s. Arun Traders Respondents Appearance Shri C. Dhanasekaran, SDR and Shri C. Rangaraju, SDR for the Appellant Shri A.K. Jayaraja, Advocate for the respondents Appeal Nos. C/78 & 80/2010 (Arising out of Order-in-Appeal No. C. Cus. 1293 to 1297/2009 dated 19.10.2009 passed by the Commissioner of Customs (Appeals), Chennai)
8. M/s. Arun Traders
9. M/s. Om Sadguru Trading Co. Appellants Vs. Commissioner of Customs, Chennai Respondent Appearance Shri A.K. Jayaraj, Advocate for the Appellants Shri C. Dhanasekaran, SDR and Shri C. Rangaraju, SDR for the Respondent CORAM Honble Dr. Chittaranjan Satapathy, Technical Member Date of Hearing: 16.7.2010 / 17.9.2010 Date of Pronouncement: 24.9.2010 Final Order Nos. ____________ Appeal Nos. C/70/2010 and C/71/2010 were heard on 16.7.2010. The remaining seven appeals were head on 17.9.2010. Since all these nine appeals involve a common issue, the same are dealt with by this common order.
2. Out of these nine appeals, Appeal Nos.C/78/2010 and C/80/2010 have been filed by the appellant-importers. The learned counsel Shri A.K. Jayaraj through his letter dated 21.9.2010, acting under instructions from the appellants, has sought permission to withdraw these two appeals. Granting the prayer, these two appeals are dismissed as withdrawn.
3. The remaining seven appeals have been filed by the Department challenging the orders of the lower appellate authority reducing the amounts of redemption fine and penalty imposed by the original authorities. The details of redemption fines and penalties imposed by the authorities below in these seven cases are summarized in the Table below:-
Appeal No. Assessed Value Order-in-Original Order-in-Appeal R.F. Penalty R.F. Penalty (All in Rupees) C/70/2010 15,88,311 4,00,000 4,00,000 2,40,000 80,000 C/71/2010 17,94,152 5,38,000 4,49,000 2,70,000 90,000 C/73/2010 15,14,475 5,30,000 1,51,000 2,50,000 85,000 C/74/2010 16,67,025 4,00,000 1,00,000 2,30,000 75,000 C/75/2010 17,54,284 4,40,000 4,40,000 2,65,000 90,000 C/76/2010 18,08,947 5,43,000 4,52,000 2,70,000 95,000 C/77/2010 19,42,326 4,90,000 1,95,000 3,00,000 1,00,000
4. In all these cases, the respondents have imported second-hand digital photocopier machines variously described. The Customs authorities have adjudicated these cases enhancing the value of the consignments as the declared values were low. The authorities have also confiscated the consignments as the impugned goods were found to be imported in violation of the Import Policy and without valid import licences. In one case, there is also a charge of quantity mis-declaration. These charges have been accepted by the respondents. In two of these cases, appeals were filed by the appellants against the action taken for violation of EXIM policy but as stated in paragraph 2 above, the appeals have been withdrawn.
5. As indicated in paragraph 3 above, various amounts of redemption fines and penalties were imposed by the original authorities who adjudicated the respective cases but the lower appellate authority has reduced the redemption fine and penalty to the level of 15% and 5% of the assessed values respectively. The Department has come in appeal against such reduction. The main ground taken in the departmental appeals is that higher redemption fines and penalties are warranted for repeated undervalued imports in violation of the Import Policy without valid licences in respect of habitual offenders.
6. I find that the only justification that the lower appellate authority has given is that the Honble Madras High Court has upheld 15% of fine and 5% of penalty in the case of Commissioner of Customs, Tuticorin Vs. Sai Copiers 2008 (226) ELT 486 (Mad.).
7. The learned counsel Shri P. Saravanan cites the decision of the Bangalore Bench of the Tribunal in the case of Shri Dilip Ghelani & Others Vs. Commissioner of Customs, Cochin Final Order Nos. 643 to 648/2009 dated 2.2.2009 where the fine and penalty have been reduced by that Bench to the level of 10% and 5% of the value of photocopiers.
8. Reliance has also been placed by both the learned counsel on other decisions of the Chennai Bench of the Tribunal, where the fine and penalty have been reduced to the level of 15% and 5% of the value of the photocopiers.
9. The learned counsel Shri A.K. Jayaraj also states that the department has no ground to challenge the reduction in redemption fine and penalty as they have not challenged such reduction in respect of other cases.
10. The learned SDRs Shri C. Dhanasekaran and Shri C. Rengaraju emphasize the fact that these are cases of repeated violations against the law and the respondents are habitual offenders. It is argued on behalf of the Department that the cited decisions of the Honble Madras High Court in the case of Sai Copiers (supra) has to be distinguished as the same does not authorize imposition of low fines and penalties in respect of repeated offences and habitual offenders. Shri C. Dhanasekaran also cites the following decision to support the contention of the Department that higher fines and penalties are warranted in cases of repeated offences:-
(i) Jain Exports Pvt. Ltd. Vs. Union of India 1993 (66) ELT 537 (SC) :
Quantum of redemption fine would depend on the facts and circumstances of each case and no hard and fast rule can be laid down in that behalf. Fixation of the quantum of redemption fine is in exercise of the discretionary jurisdiction of the authorities under the Customs Act and ordinarily this Court while exercising writ jurisdiction would be slow to interfere with such an order unless it is shown to be thoroughly arbitrary or whimsical resulting in gross miscarriage of justice.
(ii) Sophisticated Marble & Granite Industries Vs. Commissioner of Customs, Mumbai 2004 (165) ELT 33 (Tri. Mumbai) upheld by the Honble Bombay High Court vide 2004 (166) ELT 318 (Bom.) and subsequently upheld by the Honble Supreme Court vide 2004 (170) ELT A264 (SC) :
General level of fine and penalty not to be fixed by Tribunal for a class of goods to be applied in every case of import irrespective of margin of profit and gravity of offence. Import of marble blocks made by the same importer six times earlier without a valid licence, hence redemption fine of 48% and penalty of 10% imposed (total 58%) are reasonable.
(iii) Commissioner of Customs, Mumbai Vs. Vaibhav Exports 2009 (244) ELT 527 (Bom.) :
Redemption fine to be sufficient so that the person should not find it profitable to import without proper licence.
11. After hearing both sides and perusal of the case records and the cited case laws, I find that there is only a short question to be decided in respect of these seven appeals. That question is whether the lower appellate authority was justified in reducing the redemption fine and penalty to a lower level of 15% and 5% (total 20%) uniformly in all these cases, thereby interfering with the discretionary power exercised by the original authorities. I find that several batches of cases have been decided earlier by the Tribunal Benches at Chennai and Bangalore as evidenced from the orders cited before me. It is quite obvious that despite imposition of fines and penalties on such imports, large scale imports of these goods are taking place at ports of Chennai, Tuticorin and Cochin at undervalued prices and without necessary import licences. It is quite obvious that the low levels of fines and penalties determined by the Tribunal earlier have not proved to be effective to stop such illegal imports which are being made repeatedly contrary to the law of the land.
12. I also find that the cited decision of the Bangalore Bench of the Tribunal in the case of Shri Dilip Ghelani (supra) states in paragraph 9 that the restriction of fine and penalty to 10% and 5% has also been upheld by the Honble High Court of Madras. This order does not give reference to which order of the Honble Madras High Court has upheld restriction of fine and penalty to the level of 10% and 5%, based on which the Bangalore Bench has reduced the fine and penalty to such lower levels. In fact, the learned counsel Shri P. Saravanan who cited this decision of the Bangalore Bench was not able to either refer to or submit any decision of the Honble Madras High Court in this regard.
13. The only decision of the Honble Madras High Court which has been shown is that of the cited decision in the case of Sai Copiers (supra). The relevant extract of the same is reproduced below:-
There is no statutory prescription that the penalty should not be reduced by the appellate authority. Before the Tribunal, the importers relied on the earlier order of the Tribunal in the case of Sri Venkatesh Enterprises Vs. Commissioner of Customs, Chennai 2005 (192) ELT 818, wherein the quantum of redemption fine imposed in lieu of confiscation of second-hand photocopiers valued at Rs.17.7 lakhs was restricted to Rs.2.5 lakhs and the quantum of penalty was restricted to Rs.85,000/-. The same was followed in the case of the respondents also by the Tribunal. The fixation of the quantum of redemption is an exercise of discretionary jurisdiction of the authorities under the Customs Act. The Court can interfere only in the circumstances in which it was demonstrated before it that the order of the Tribunal is thoroughly arbitrary, whimsical and resulting in miscarriage of justice. As already stated, the Tribunal has followed its own earlier decision wherein the Tribunal has consistently imposed the redemption fine at 15 percent and penalty under Section 112(a) at 5 percent of the value of the goods, which factum has not been disputed by the counsel appearing for the Department. In the above said view of the matter, we find no question of law, much less a substantial question for entertaining these appeals. Hence the appeals are dismissed.
14. From the above cited decision of the Honble Madras High Court, it is clear that fixation of the quantum of redemption fine is an exercise of discretionary jurisdiction of the authorities under the Customs Act. It is also clear that the fixation of the quantum of redemption fine and penalty can only be interfered if the same is fixed in an arbitrary and whimsical manner resulting in miscarriage of justice. The Honble High Court has also held that there is no statutory prescription that the penalty should not be reduced by the appellate authority and also that in the Departmental appeal against the Tribunals order in the cited case there was no question of law involved. The cited decision of the Honble Madras High Court nowhere imposes a restriction on the discretion of the customs authorities nor it can be taken to authorize imposition of a low level of fine and penalty even in cases of repeated imports contravening the provisions of Import Policy, mis-declaring the value of the goods as found in all these seven cases. As such, it appears that the lower appellate authority was not correct in placing reliance on the aforecited decision of the Honble Madras High Court in arbitrarily reducing the fines and penalties to a lower level without taking note of the fact that he was dealing with cases of repeated offences and habitual offenders.
15. The higher courts have always taken a stricter view in respect of habitual offenders. For example, in the case of Sophisticated Marbles (supra), the Honble Bombay High Court had held as follows:-
The petition is directed against the final order dated 18th December, 2003 incorporated at Exhibit - D to the petition. The challenge is at the instance of the petitioners wherein the fine and penalty is levied upon for importing marbles without the licence.
2. Whenever, petitioners import marble without licence, they pay fine and penalty, as may be levied under the provisions of the Customs Act.
3. In the past similar consignments were imported by the petitioners and in spite of levy of fine and penalty the petitioners continued to import marble without any licence. In other words, penalty and fine did not get as deterrent to stop further illegal import. In other words, petitioners continued to indulge in illegal import of marble without licence and litigation ensued therefrom was used to get fine and penalty reduced on technical legal pleas. This petition is product of such illegal activities of the petitioners. An act constituting import of marble without licence has given rise to the present litigation which reached up to the Tribunal. The Tribunal was pleased to allow the release of goods subject to imposition of duty, redemption fine and penalty as determined by the adjudicating authority. The Tribunal has specifically observed in the order that it is clear from the facts that the fine imposed earlier did not act as deterrent to stop further illegal imports.
4. It is thus clear that the petitioners who are in the business of marble and have become a habitual importer of goods in spite of the fact that they are very well aware of the law that the imports have to be backed by a valid licence. In spite of this, if the petitioners are repeatedly indulging in importing marbles without licence, or subsequently obtain licence to cover up illegal imports then it would be a duty of writ Court to arrest such tendency prevailing amongst the importers of the goods. The Apex Court in the case of Her Shankar and Others v. Deputy Excise & Taxation Commissioner and Others [1975 (1) SCC 737] ruled that the writ jurisdiction of High Court under Article 226 of the Constitution of India is not intended to facilitate avoidance of legal obligation and to commit breach of law for the time being in force. The extraordinary jurisdiction of the High Court under Article 226, which is of a discretionary nature and is to be exercised only to advance the interest of the justice, cannot certainly be employed in aid of such persons; who have no respect for the law of land and who are deliberately indulging in committing breach thereof. This Court would not be justified in invoking writ jurisdiction in favour of such persons. Writ jurisdiction is available to further the cause of regime of law, not to abrogate the same. In the facts of this case the consignments confiscated by the Customs authorities cannot be allowed to be released on the licence which were sought to be produced by the petitioners. The importers who are importing goods without licence and then seek to validate the import by obtaining subsequent licence or licences cannot be allowed to take advantage of their own wrong. The petitioners are one of them.
5. The? petition, in the circumstances, is dismissed in limine, with no order as to costs.
16. In the case of Vaibhav Exports (supra), the Bombay High Court noted that the premium on import of imported diamonds in that case was around 3% only and that the importers in that case could have made profit of about 3% by the illegal imports without valid licences. Yet, the Honble Bombay High Court authorized imposition of redemption fine equal to 20% of the value of the imported diamonds with observations that the importers should not find it profitable to make the imports without proper licence. The Honble High Court took into account the fact that if the offender is required to pay only the amount which he has saved by not paying the premium for securing a genuine licence, he will never feel the pinch of being caught. He may commit same wrongs repeatedly and as and when he is caught, he may pay amount equivalent to the premium only. In the considered opinion of the Honble High Court the redemption fine should be more than such amounts.
17. In the appeals filed by the Department it is clearly mentioned that all these cases are repeated offences and that the respondents are repeatedly importing second-hand digital photocopiers without licences, undervaluing the same and in one case even the quantity was found to be misdeclared. In respect of Appeal No. C/70/2010 and C/71/2010, it has been indicated by the learned SDR that these are the 4th and 6th imports of the same kind by the same importers. As stated earlier, fines and penalties imposed on such importers previously have not deterred the respondents from continuing to make illegal undervalued imports. In fact, the fine and penalty at some what higher levels (together ranging from about 30% to about 55%) imposed in these cases are not at all excessive as the respondents have found it still profitable to clear the goods on payment of the fines and penalties levied and have only subsequently filed appeals before the lower appellate authority. Reductions in fine and penalty granted by the said authority has only gone to further increase their profit margin.
18. Under the circumstances, I am of the considered view that the fines and penalties imposed by the original authorities in these cases of repeated offences are not unreasonable or arbitrary or whimsical considering the fact that the authorities under the law have a duty cast upon them to prevent illegal imports and effectively implement the Import Policy validly laid down by the Government and to curb undervaluation and misdeclaration apart from preventing repeated offences. Hence, the lower appellate authority is totally unjustified in reducing the fines and penalties in these cases to very low levels totaling 20% only. Accordingly, I set aside the impugned orders passed by the lower appellate authority insofar as they relate to lowering of redemption fines and penalties and restore the orders passed by the original authorities. All the seven departmental appeals are allowed in the above terms.
19. Appeal Nos. C/78 & 80/2010 are dismissed as withdrawn and all the seven Departmental Appeals Nos. C/70 & 71, 73 to 77/2010 are allowed.
(Pronounced in open court on 24.9.2010) (Dr. Chittaranjan Satapathy) Technical Member Rex ??
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