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PJ/Case Laws/2011-12/1219

Penalty for short landing under Section 116 - sustainability of order passed without complying with requirements thereof

Case: UNION OF INDIA AND ANOTHER v/s AREBEE AND COMPANY
 
Citation: 1987 (31) E.L.T. 636 (Bom.)
 
Issue:- Penalty for short landing under Section 116 - Order passed mechanically without complying with requirements of Section – whether sustainable?
 
Adjudication proceedings – show cause notice issued after 7 years of event – request for adjpurnment not accepted and order passed ex-parte - whether intimation required before passing ex-parte order?
 
Brief Facts: - Respondent-assessee were Steamship Agents for Rajkumar lines Limited, a shipping company, plying ships in India. That company’s ship S.S.K.R. Ashok reached Bombay Port on 6.6.1967, the start being Calcutta. Its cargo was said to be less than shown in the manifest submitted under the Customs Act. A person in charge of the ship satisfied the Customs authorities that the goods in the ship were not for export.
 
It was alleged against the respondent that they had passed a bond accepting their liability to pay the duty and penalty, if any.
 
Customs Authorities issued notices on 4.12.1973 proposing to impose penalty under Section 116 of the Customs Act. Respondent sought adjournments from time to time. On one hearing in 1974, respondents were not present. Thereafter, respondent wrote a letter to the Assistant Collector which later recited that the Rajkumar Lines had informed them about their office at Calcutta having caught fire. A request was made that the matter be kept pending for two months so as to enable the respondents to settle or short out the matter through P. & I. Services with whom the ship was insured. No reply was given to this communication by the Department and the Assistant Commissioner passed the impugned orders were passed holding the respondent had failed to account for the shortage and penalty under Section 116 of the Customs Act, 1962 was imposed. Double the total export duty was payable was fixed as penalty and the respondents were called upon to pay the same.
 
Respondent-assessee filed writ petition questioning the penalty. It was contended that the action had been initiated by the Customs authorities after a great deal of time and this had prevented them from giving a proper explanation for the alleged short-landing. Next, it was contended that the show cause notices given to them were barred by the limitation prescribed under Section 28 of the Customs Act. Lastly, it was incumbent upon the Customs authorities to proceed against the principal and that had not been done. They had been picked up for being penalised, merely because of happening to be available at Bombay whereas their principal was at Calcutta.
 
Revenue that Section 28 of the Customs Act did not apply and that in any case respondents had given the bond under which they were deemed liable. Their liability extended to making up for duty not paid. The requisite hearing had been offered. It was the respondents who had failed to turn up for that hearing before the Assistant Collector. In any case, the Orders assailed could be impugned in appeal under the Customs Act itself, and, this not having been done, the court should not entertain the writ petition.
 
Single judge bench of the High Court held that Sections 28 and 147 of the Customs Act applied. The Customs authorities had acted unjustly and inequitably. The rule was made absolute with parties were being left to bear their own costs.
 
Hence, Revenue is before the Division Bench of the High Court.
 
Reasoning of Judgment: - The Division bench of the High Court only examined the question that whether the requirements of Section 116 of the Customs Act had been complied with.
 
It was found that the Assistant Collector had not acted as per Section 116. It was held that in the instant case, before the passing of the impugned orders on 18th June 1975, the respondents had offered an explanation for their inability to answer the charge of short-landing. The communication sent by them on 7th December 1974 recited that the respondents could not give a proper account in the absence of documents, which documents had been lost in the fire that had broken out in the office of their principal at Calcutta. This aspect of the matter has not even been touched upon by the Assistant Collector of Customs in the orders which were impugned by the respondents in the petition filed by them.
 
The Division Bench held that Section 116 requires the Assistant Collector to give a reasoned order, so that he can reach the satisfaction prescribed by that section, only after considering the material factors. In the instant case, the ship steamed into Bombay Port in 1967. The show cause notice was given nearly 7 years later. A great deal of time intervened between the dates fixed for hearing and the passing of the order. In the meantime, a communication of some importance had been received. Yet the Assistant Collector choose to disregard it and passed a mechanical order reciting that there had not been a satisfactory account for the shortage. The satisfaction prescribed by Section 116 has not been properly reached. For compliance with that section, it was necessary to assess or scrutinize the reason given by the respondents. An order passed mechanically does not comply with the requirement of Section 116. On this short ground, the orders penalizing the respondents cannot be sustained.
 
Hence, it was held that the learned Single Judge was right in holding that the appellants acted unjustly. Having waited for 7 years, they should have acceded to the short request for an adjournment made by the respondents in their communication dated 7.12.74. If they did not want to wait, the respondents should have been so intimated before the passing of the impugned order.
 
Decision: - Appeal dismissed.
 
 

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