Customs, Excise and Gold Tribunal - Mumbai
Collector Of Customs vs K. Hargovindas And Co. on 13 August, 1990
Equivalent citations: 1992(57)ELT143(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. The aforesaid 4 appeals filed by the Department are directed against the orders of the Collector of Customs & Central Excise, Rajkot, noted against each as per the details below:
______________________________________________________________________________________ Appeal No. Collector's Order No. C.I.F. value R. Fine Penalty & Date ______________________________________________________________________________________ CD(Bom)216/85 6/Collr/84 15-10-84 15,99,060.05 2,00,000 75,000 217/85 5/Collr/84 15-10-84 22,83,956.66 3,00,000 1,00,000 218/85 4/Collr/84 15-10-84 31,78,702.63 4,00,000 1,00,000 219/85 3/Collr/84 15-10-84 7,84,864.86 1,00,000 50,000 ______________________________________________________________________________________
2. In all the aforesaid cases, the item imported is Dedecyl Benzene, which is a canalised item and is not allowed to be imported by the private individuals. The respondents in all the aforesaid cases pleaded before the Collector that the licences have been misplaced and they could not produce any valid licence for the clearance of the goods. It is the case of the Department in all the cases that one Mr. M.C. Desai was the brain behind of all the imports and he is associated with the firms in one way or the other either as Director, Manager, Partner or Proprietor. He has obtained REP licences and thereafter forged certain endorsement on these licences to import large quantities of canalised and other prohibited items, under the cover of the endorsements. This matter was investigated into Bombay Customs. Shri M.C. Desai admitted the fact before Bombay Customs that he was aware that the licences were having forged endorsements and hence he has destroyed the same. However, before Kandla Customs House, he changed his stand by filing an affidavit at a much later date giving a different version that the licences along with the letter of authorities were lost, after the opening of the letters of credit and the same could not be produced and hence sought for adjudication. The Collector of Customs, Rajkot initiated the adjudication proceedings, wherein, he has held that the goods are liable to confiscation and also the respondents are liable to penalty. He ordered confiscation of the goods but allowed the same to be redeemed on payment of fine as per the details indicated above and also imposed the aforesaid penalties on each of the respondents.
3. Under the authorisation from the Central Excise & Customs, directing the Collector to file Appeals against the aforesaid orders of the Collector, these Appeals have been filed seeking this Bench to enhance the quantum of fine and penalty considering the grave nature of the offence and deliberate import of canalised items carrying high margin of profit and also since the import is malafide and deliberate the penalties imposed are insignificant and hence are required to be suitably increased.
4. Shri Mondal, on behalf of the Department contended that all the imports have been engineered by Shri M.C. Desai, who has acted in the Respondents' firms in one way or the other either as a Director, or Partner, or Manager or Proprietor. He had come to adverse notice by the Bombay Customs House, where he was found to be producing the licences with forged endorsements permitting import of canalised items like Alkyl Benzene, Dodecyl Benzene etc. In the investigation done by the Bombay Customs House, Mr. Desai has clearly admitted that he was having the licences with forged endorsements and on that basis, clearances have taken place. However, sensing trouble, he destroyed those licences. In the adjudication proceedings held by the Bombay Customs House, Mr. Desai was also imposed with a penalty of Rs. 25 lakhs, which Sub-sequently, came to be reduced by Tribunal to Rs. 20 lakhs. Actually, the present goods were also meant for discharge at Bombay but deliberately diverted to Kandla under the instructions of the Respondents, consequent to which, they had to pay more detention charges. They were well aware of the proceedings already before the Bombay Customs House, in which Mr. Desai was seriously involved and hence clearances would not be easy. Shri Mondal also contended that notwithstanding the statement given by Mr. Desai before the Bombay Customs' Appraiser to the effect that the licences were destroyed, sensing trouble on account of forged endorsement, he took a different stand by filing an affidavit before the Kandla Customs contending that the licences along with the letters of authority have been lost after the opening of L/C. The Collector, while adjudicating, did not consider the background against which the licences were not produced by the Respondents and treated the matter without the due seriousness it deserves. He has only treated this import as one without valid licences, which were stated to have been lost. The gravity of the offence has not been properly appreciated by him, on account of which, fines and penalties imposed are too insignificant compared to the large volume of import of the canalised items valued about Rs. 78.46 lakhs (cif). The Collector's order is, therefore, not proper and hence the Department has come in appeal before the Tribunal for viewing the offence in the proper prospective and enhancing the quantum of fines and penalties. On the quantum of redemption fine, he stated that no one can get away with bonanza of profit made through an illegal import and in this context he cited the judgment of the Delhi High Court in the case of Jain Exports [1987 (29) ELT 753 (Delhi)].
5. Giving facts on landed costs and sale price, Shri Mondal contended that the Department has given only release price of STC during the relevant period, which may not be acceptable by this Bench and hence he prefered to go by the sale price given by the respondents themselves, which is indicated as Rs. 26 per Kg. for sale on high seas. On the basis of the calculation, cum duty price works out to Rs. 19,524/- per M. Tons and the difference between the sale price admitted by the respondents themselves at Rs. 26 per Kg. and the landed cost is of the order of Rs. 6,476 per M.Tons. This is the margin of profit, which is required to be mopped up in this case. On this basis, the Collector should have imposed a fine of Rs. 64,74,000/-, whereas, he has let off with a meagre fine of Rs. 10 lakhs, totally in respect of all the 4 respondents.
6. Shri Mondal also pleaded that the detention charges, warehousing charges and bank charges, which have been given by the respondents, cannot be set off against the sale price for purpose of arriving at the margin of profit, because it was not on account of the Department. Diversion of the vessel and detention of the vessel, by not taking delivery in time is the respondents' own making. The charges incurred towards this, cannot be set off against sale price for arriving at the margin of profit. Shri Mondal also contended that since the offence is a deliberate one especially viewed against the background of the Respondents in destroying the licences and importing canalised items in large quantities admittedly without having any licence and without any L/A, should have been imposed with a far more stringent penalty instead of merely imposing 3 to 5% penalties in each case. Having regard to the aforesaid factors, he pleaded that both fines and penalties are required to be enhanced and the appeals filed by the Department on this ground should be allowed.
7. Shri Pochkhanwalla, the learned advocate on behalf of the respondents, contended that as per the detailed calculation supported by the evidence on each of the items of expenditure, the landed cost works out to Rs. 24 per kg. and they have sold the goods on high seas at Rs. 26 per kg. The department has not produced any evidence to sustain their allegation that the respondents have made a huge margin of profit, whereas, the respondents on their own, have indicated the sale price, which has been adopted by the learned SDR. He also contended that bank charges, storage charges and insurance charges have been incurred in regard to the very same goods. If these are not taken into consideration, it would amount to grave injustice because even going by the Delhi High Court's judgment in the aforesaid case, one should not get away with the huge margin of profit. In this case, when the respondents could establish that there is no margin of profit left over and the Department does not have any evidence to rebutt it, on the contrary, chooses to adopt the same sale price given by them, it cannot be held that the respondents have got away with huge margin of profit. All these expenses have been incurred in clearances of the goods and this clearly shows that the margin of profit left was only Rs. 2 per kg. and on that basis the fines imposed are already on the higher side and do not call for any modification.
8. On the question of malafides and imposition of penalty, Shri Pochkhanwalla contended that the Collector has rightly passed the order. There had been no need to look into the affidavit or the retraction of the statement given before the Bombay Customs House, since in this case Shri Desai has pleaded that the goods imported are not covered by valid licences and Ls/A. In this context, he referred to the order of the Collector, wherein, the Collector has observed that it is not worthwhile to go into the merit of the affidavit regarding retraction of the statement, in the context of the fact that the party has failed to produce the valid licence to cover the import of the goods. It is also not the case of the Department that the Collector has passed order letting off the goods. He has ordered confiscation and also imposed fines taking into account all the various expenses, which have gone into the imports of the goods and on the landed cost. It is also not the case of the Department that the Collector has not imposed any penalties. Penalties have also been imposed by the Collector and they are adequate and commensurate with the offence. He, therefore, pleaded for dismissal of the department's appeals.
9. After hearing both the sides, we observe that the main grievance of the Department against the Collector's order is only on the question of quantum of fines and penalties. The orders of the Collector confiscating the goods and imposing fines and penalties are not challenged and both the sides agree that the goods are liable for confiscation and the respondents are liable to penalty. The respondents have also not come in appeals against the orders of the Collector. The Department's main grievance is that the Collector has not viewed the gravity of the offence in the proper perspective and his order allowing the goods to be cleared on a lower redemption fines and the penalties do not commensurate with the gravity of the offence.
10. For appreciating the stand of the Department, we are to look into the relevant provisions of the Customs Act, whereunder, powers have been vested with the Board for examining the records of proceedings and adjudication done by the Collector of Customs and issuing directions for filing the appeal to the Appellate Tribunal. Section 129D is the relevant Section in this regard. The relevant Section 129D(1) read as below:
"The Board may, of its own motion, call for and examine the record of any proceeding in which a Collector of Customs, as an adjudicating authority, has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such Collector to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board, in its order"
From the above, the purpose of satisfying should be with regard to the legality or propriety of the decision taken by the Collector in his order. It is not the case of the Department in these cases that the Collector's orders suffer from any legal infirmity. Both the sides accept that the goods are liable to confiscation and penalties could be imposed on the respondents. The question, therefore, boils down only to the one of propriety of the orders passed by the Collector. The ground of propriety taken by the Department in these cases, is that the offence being deliberate and the quantum of imports being huge and the attempt to clear them by diverting the goods from Bombay to Kandla have not been properly appreciated by the Collector, and hence on this ground the order of the Collector is not proper and is required to be modified by enhancing the fines and penalties.
11. Normally, on the ground of propriety, if any order of the Collector is challenged by the Department, it is put to a more vigorous test. The Department is required to discharge the burden that the order of the Collector is not proper and has been passed without application of mind or is malafide. In these cases, we are to go into whether the Department has discharged this burden.
12. In so far as the quantum of redemption fines are concerned, the Department's appeals allege that there is a margin of 20%. However, they have not given any details regarding sale price or market price of the goods. They have only furnished release price of the STC, which is reported to be ranging between Rs. 21.055 and Rs. 21.338 per kg. during March-April, 1984.
13. The Release price of STC cannot be taken to be the market price and even going by this price, the Department's case for enhancing the redemption fines does not stand justified because comparison of the cum duty price with the release price indicates a difference of only Rs. 1.80 per kg. (difference between Rs. 21.3 and Rs. 19.5). Even going by this difference, the fines imposed do not call for any modification. However, Shri Mondal preferred the arguments on the basis of sale price at Rs. 26 per kg. It is also observed that the respondents have given sale invoices showing that they have sold the goods at Rs. 26 per kg. to some of the parties like M/s. S.K. Patel, Mahavir Engineering etc. In the absence of any data furnished by the Department, we are to go by the sale price as given by the Respondents at Rs. 26 per kg. When this price is compared to be the cum duty price, the difference works out to Rs. 6.47 per kg. The respondents plead that they have incurred interest charges, storage charges and clearance charges on the very same goods and only after meeting these charges, they can make any margin of profit. This contention has got considerable force and cannot be dismissed lightly, especially, when their own sale price is taken as the basis for computing the margin, which is higher than the release price of the STC during the material period. If these charges are also taken into consideration, in view of the peculiar circumstances of the case, the margin is only Rs. 2 per kg. The Department has not substantiated their appeal that the respondents have made a higher margin of profit by producing any tangible evidence. Hence, the Department's appeal for enhancement of redemption fines fail and we dismiss the same on this ground.
14. Now coming to the question of quantum of penalty, even admitting that the offence is deliberate and there is a malafide, it is not as though the Collector has let off the respondents without any penalties. He has imposed penalties against each of the respondents. The question is what should be the quantum of penalty. It is again a matter of discretion and the discretion is to be exercised judiciously. When the Department could not establish the existence of a huge margin of profit made by the respondents in the case for enhancing redemption fine, we cannot find fault in the discretion exercised by the Collector in imposing the penalties as thought by him. So long as penalties have been ordered and they are also not a mere token, they cannot be held to be improper. We also take note of the fact that the main person alleged to be the brain behind these imports has already been penalised by Bombay Customs and substantial portion of the same has been upheld by this Bench. We, therefore, do not propose to interfere with the quantum of penalties also, since the alleged main brain is already heavily penalised.
In the result, the Department's appeals fail on both the counts. Accordingly, we dismiss the same.
P.K. Desai, Member (J)
15. I have the privilege of going through the order proposed by brother Shri R. Jayaraman. I am in total agreement with the conclusion drawn by brother Shri R. Jayaraman. He has already reproduced the factual datas on which these appeals have to be considered. Repetition thereof is therefore not called for.
16. Two points have been raised by the Department in these appeals :
(i) Redemption fine imposed is inadequate in view of the profits that the respondents were expected to earn by the import at issue.
(ii) Personal penalties imposed on the respondents were too meagre, considering the gravity of the breach involved. The department has prayed for enhancement in the quantum of both redemption fine and personal penalties.
17. Provisions for levy of redemption fine are found in Section 125 of the Customs Act,-1962, which reads thus :
"125. Option to pay fine in lieu of confiscation. - Whenever confiscation of any goods is authorised by this Act, the officer adjudicating it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods an option to pay in lieu of confiscation such fine as the said officer thinks fit:
Provided that, without prejudice to the provisions of the proviso to Sub-section (2) of Section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.
(1) For the removal of doubts it is hereby declared that any fine in lieu of confiscation in addition to any duty and charges payable in respect of such goods."
Provisions for imposition of personal penalty are found in Section 112 of the Customs Act, which reads thus :
"112. Penalty for improper importation of goods etc. - Any person, -
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111 or abets the doing or omission of such an act, or
(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111, shall be liable:-
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five times the duty sought to be evaded on such goods or one thousand rupees, whichever is the greater;
(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under Section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the greater;
(iv) in the case of goods falling both under Cls (i) and (ii), to a penalty not exceeding five times the value of the goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest;
(v) in the case of goods falling both under Cl (ii) and (iii), to a penalty not exceeding five times the duty sought to be evaded on such goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest."
18. Reading the aforementioned provisions indicate that so far as the question of redemption or imposition of fine in lieu of confiscation is concerned, a discretion is invested in the officer adjudicating to decide whether to permit the redemption or not and if the same is permitted, what should be the quantum of fine. In the said section, upper ceilings have been fixed for specific types of cases, but no provisions is made fixing the lower limit. This shows that the officer adjudicating may in his discretion, offer the party importing, option to pay fine in lieu of confiscation and may also in his discretion, fix such amount that he deems proper, payable as the fine amount, subject of course, to the upper limit duly specified. Similarly, as regards imposition of personal penalties, in various categories of exigencies, different penalty amounts have been provided. However, while specifying maximum amount leviable as penalty, the same is necessarily prefixed by the words "not exceeding". The Section does provide the minimum penalty that should be imposed. Reading of the relevant provisions indicate that the adjudicating authority may in his discretion impose any penalty amount not exceeding the maximum limit fixed but not less than the minimum limit specified. In other words, discretion is vested in the adjudicating authority to fix the quantum of penalty within the range duly specified in the statute.
19. The discretion invested in the officer adjudicating has to be exercised judiciously.
20. When the officer adjudicating exercises such a statutory discretion, the other authority including the appellate authority ought to be reluctant in interfering with the same, particularly when the interference is sought for the purpose of enhancement. Some basic principles have been evolved to deal with such a situation. They are : (1). The appellate authority ought not to consider the issue from the angle as to what it would have done, had it been dealing with the issue as the original authority; (2) The appellate authority shall refrain from interfering with the same unless it is found that the order passed was based on either mistake of fact or misapprehension of the principles applicable or when the penalty imposed was disproportionate to the gravity of the crime/breach committed, resulting into miscarriage of justice. The principles are so well settled, and accepted as good law, that no citations are called for to substantiate the same. However, to pick up some few of them, reference can be had to the Supreme Court decision in Corporation of Calcutta v. Mulchand Agarwala reported in AIR 1956 SC 110; Samwat Singh and Ors. v. State of Rajasthan AIR 1961 Supreme Court 715; Sitaram Durgaprasad v. State of M.P. AIR 1975 Supreme Court 77. Though all these decisions pertain to trials under the Criminal Law, when the question of imposition of personal penalty under Section 112 of the Customs Act is concerned, the adjudicating as well as the appellate authorities exercise quasi-judicial powers and the proceedings are treated as quasi-criminal proceedings and therefore the ratio of the aforesaid decisions would squarely stand attracted. The said ratio is made applicable even to the adjudication proceedings as is evidenced from the order of the North Regional Bench in Collector of Central Excise v. Sahni Saree Emporium -1986 (26) ELT 389 (Tri.).
21. Examining the facts of the present set of appeals, it appears that the adjudicating authority has not transgressed beyond the statutory frame work both as regards fixing the quantum of the redemption fine and personal penalties.
22. In computation of the redemption fine, the bonanza of profit generally remains an accepted criteria, and in ascertaining the same, what is considered is cum duty price, as also the other overhead expenditure. Brother Jayaraman, while considering the said point has considered all the relevant aspects and has come to a conclusion that the redemption fine imposed was not unreasonably low, and called for no interference. I am in agreement with the same and hence deem it not necessary to further deliberate on the point.
23. As regards the personal penalties imposed, the adjudicating authority, while negativing the respondents' plea for non imposition of any personal penalty, has observed thus:
"The plea that penalty is unwarranted is not tenable. As is evident from the case record, that the party has failed to produce import licences. The import prima facie, was incorrect and the intention in such import oriented towards contravention of the law on manifest."
The adjudicating authority has thus not erred on any factual position, and is aware that the import is not proved to have been covered under any valid licence. He has however felt it justifiable to impose the penalty amount to the extent of 3% to 5% of the CIF value.
24. The Department has however pleaded, while seeking enhancement in the same, that huge quantity of Dodacyl Benzene, a canalised item was sought to be imported against licences with unauthorised endorsements, and that one Mr. M.C. Desai, had played a king pin role by importing 1000 M.T., part of which was off loaded at Bombay, whereas other part was diverted to Kandla. It is contended that the Bombay Customs initially detected the same, and that Mr. M.C. Desai, somehow managing to retrive those licences, manage to destroy the same and did not produce them for release of the consignment off loaded at Kandla. The plea of the department is that the said Mr. M.C. Desai, is in one capacity or the other, connected with all the respondents here. Mr. M.C. Desai, according to the department has already admitted before the Customs authorities at Bombay, that he was aware of forged endorsements on the licences, which otherwise were not available for import of the canalised items. As pleaded by the Department, the import at Bombay and Kandla being in the course of the same transaction, the import at Kandla also being based on the forged and/or fabricated entries in the licences, could not be viewed as lightly as is done by the adjudicating authority and gravity of the inner conspiracy to defraud the Government called for very heavy and rather exemplary punishment and as such the penalties imposed be enhanced.
25. When the imports at Bombay and Kandla are sought to be tagged, and role allegedly played by Mr. M.C. Desai is sought to be highlighted, and his connection with the respondents has been emphasised, a note has to be taken that adjudication proceedings against the said Mr. M.C. Desai, and those who were projected as the ostensible importers at Bombay were initiated, and personal penalty of Rs. 25,00,000/- was imposed on Mr. M.C. Desai, and each one of the party shown as importing parties was imposed personal penalty of Rs. 1,50,000/-. In the appeal before this Bench of the Tribunal, penalty on Mr. M.C. Desai was reduced to Rs. 20,00,000/-, whereas the same on each individual importer was reduced to Rs. 50,000/-.
26. Thus when the department has projected the role played by Mr. M.C. Desai, and highlighted his attachment to each of the respondents, and has pleaded that therefore the breach has gravity, it has to be considered that Mr. Desai has already been imposed personal penalty of Rs. 20,00,000/- (Rs. Twenty lacs only) for his involvement in the unauthorised import. In considering the question of enhancement of the penalty, this aspect also cannot be ignored.
27. When Mr. M.C. Desai for his alleged involvement in this deal has been individually penalised to the extent of Rs. 20,00,000/-, the question that then remains to be examined is whether in view of this there exists any justifiable ground to hold the penalties as imposed are gravely inadequate and highly disproportionate, under the existing set of circumstances.
28. With involvement of Mr. M.C. Desai with each of the importing firm in one capacity or the other, it can be assumed that it is only Mr. M.C. Desai who has shown them as importers. These firms thus appear to have played in the hands of said Mr. M.C. Desai, who, to repeat, has been separately penalised by imposition of personal penalty of Rs. 20,00,000/- and considering the said aspect, imposition of personal penalty on the respondent firms cannot be branded as highly disproportionate to the gravity of the offence, and in any case, the authority adjudicating cannnot be attributed with improper exercise of discretion. Even in the import through Bombay Port, each of the importer is imposed with the personal penalty of Rs. 50,000/-.
29. As indicated herein above, fixing of the quantum of penalty is within the discretion of the adjudicating authority, and it is not open to the Tribunal to examine the issue from the angle as to what it would have thought to be adequate penalty, if it was sitting as the adjudicating authority. It has only to consider whether the discretion has been properly exercised and whether the penalty imposed is disproportionate. Examining the quantum of penalty in the light of the set principles discussed, herein above, there does not appear any justifiable reason to interfere with the penalty amount also and as such I agree with the findings given by brother Shri R. Jayaraman.