Redemption Fine of Imports made in contravention of Legal Provisions

PJ/Case laws/2012-13/1068

Case:- COMMISSIONER OF CUSTOMS VS NAVPAD ENTERPRISES

Citation: - 2012(278) E.L.T. 172 (Ker.)

Issue:- Fixing of rate of redemption fine on imports made in contravention of provision.

Brief Fact:- Respondent imported second hand "photocopiers without obtaining licence which was in violation of the ITC regulation and the EXIM policy [Foreign Trade Policy Para. 2(17)]. They, however, declared certain value and wanted to clear them on payment of duty.

The Original Authority on finding that the respondent has violated the excise provisions and in view of the DGFT Circular held that there is a policy violation and proceedings were initiated against them. The value as declared by the respondents was not accepted and it was refixed based on the Chartered Engineer's certificate, which was higher than the value as declared by the respondent. The Adjudicating Authority held that goods are liable for confiscation; but it allowed to redeem the goods on payment of fine and also imposed penalties.

In appeal, respondents inter alia contended that the redemption fine imposed was done in an arbitrary fashion and there was no market enquiry and the redemption fine fixed is not in accordance with the provisions of Section 125 of the Customs Act. Placing reliance on some of the decisions of the Tribunal, the redemption fine was sought to be reduced to 10% of the value of the goods and penalty to 5%. Thus, the confiscation of the goods was beyond challenge. The scope of the appeal was limited to the consideration regarding the quantum of redemption fine and penalty imposed. It was urged that the redemption fine and penalty imposed are exorbitant when the actual price of the imported goods is much less than the value fixed by the Revenue on the basis of the Chartered Engineer's certificate, that the enhancement of the value itself has escalated the duty and there is escalation in redemption fine and penalty imposed on the appellants. It was also contended that the profit margin of 20% to 30% as found by the Commissioner was factually incorrect. Thus, they prayed that the redemption fine and the penalty be reduced to 10% and 5% respectively of the value of the imported goods.

The Tribunal held that the value declared by the respondent has since been enhanced by the Revenue on the basis of the Chartered Engineer's certificate and in the absence of any evidence brought out by the Revenue to show that they had paid more than what they had declared to the Customs, redemption fine of 10% and penalty of 4% would be appropriate. It was also held that in the absence of any factual difference, the Bench cannot deviate from the ratio of its own decision rendered in other cases and they were persuaded to follow the precedence while fixing the rate of redemption fine and penalty.

Department is therefore in appeal before the High Court.

Appellant’s Contention: - Department contended that the Appellate Authority committed an error in reducing the redemption fine and penalty and following a uniform rate in all the cases and thereby the discretion vested in the Authority has not been properly exercised and in all the cases the rate of redemption fine and penalty are uniformly applied, thereby showing non-application of the mind to individual cases. It is also contended that the object of imposing a redemption fine in lieu of confiscation must be with a view to prevent the importers from earning any profits by such import done contrary to the exemption rules. They also submitted that what exactly should be the redemption fine and penalty to be imposed may differ from case to case depending upon the peculiar facts and circumstances of the case. So however, when the import made in contravention of the provisions is repeated the respondents are repeated offenders and hence there was no case made out for reduction of redemption fine and penalty from the one imposed by the adjudicating authority.

Respondent’s Contention: -Respondent submitted that the facts in hand would clearly show from the perusal of the order of the Appellate Tribunal that the Tribunal in fact considered the fact that for the purpose of imposing the redemption fine and penalty, it is not the value as declared by the importer is taken rather it is the valuation made as per the Chartered Engineer's certificate which clearly shows that it was an enhanced value from the one declared by the importer. Thus, the enhancement of the value has resulted in the escalation of duty as also the redemption fine and penalty. This has necessarily weighed with the Appellate Authority and the Appellate Authority has given its reasons for reduction of the redemption fine and penalty and thus exercised the discretion in an objective manner having due regard to the facts in the case which does not give rise to any question of law much less any substantial question of law. It is also contended that when discretion is vested on an Authority, in the absence of any guideline inbuilt in the provision or rule, it has to be exercised in an objective manner on well-founded principles is beyond any dispute. But in the factual situation, the Authority has applied its mind and exercised its discretion which does not call for interference. It is also his case that the respondent is not a repeated offender as contended by the Revenue. According to him, the policy change was brought out notification only in 2005, that for the earlier import made though he was imposed with a penalty and confiscation was ordered, by ultimately the matter was taken to the Apex Court in appeal and finally it was held that the policy change has to be brought out not by circular but by notification and as such the orders passed by the Authorities were quashed. Hence in no the way can it be said that he is a repeated offender. They have further case that in the absence of any materials placed by the Revenue to draw any distinction between the case decided earlier the Tribunal was perfectly justified in following the to precedence and imposing the redemption fine at the same rate. It is pointed out that various decisions referred to in the order of the Tribunal in which redemption fine imposed was only 10% and penalty 5% which was accepted by the Department and did not prefer any further appeal to higher forum and thereby they accepted the decision and it is not open for them now to contend that the rate of redemption fine as fixed by the Tribunal is on a lower side.

Reasoning of Judgment: - TheHigh Court perused the following case laws cited by both sides:

·          Commissioner of Customs, Tuticorn v Sai Copier [2008 (226) E.L.T. 486(MAD.)].
·          Commissioner of Customs (Import) vs Shankar Trading Co. [2008 (224) E.L.T. 206 (BOM.)]
·          Jain export Pvt.Ltd vs Union of India [1993(66) E.L.T. 537 (S.C.)
·          State of U.P. and Others vs Sukhpal Singh Bal[(2005) 7 SSC 615]

It was held that it is settled that power of discretion by the authority is to be exercised based on well founded principles and should not be done in a mechanical way. The High Court already perused the order of the Tribunal and found that the Tribunal had given its own reasons for supporting as to why the redemption fine is to be reduced. That the rate at which the redemption fine is imposed in similar cases has been taken note of only for the limited purpose of maintaining consistency. Had it been a case where materials were placed by the appellant to draw a distinction from the rest of the cases, certainly, the Tribunal would have and ought to have considered those additional materials in arriving as to whether the rate imposed should be the same or whether any variation has to be made in the factual situation. In so far as no such attempt is made by the Department before the Tribunal, the High Court could not find that this is dissimilar to the other cases. Any authority exercising the power is also bound by law of precedence and it is necessary to maintain consistency as otherwise it will be characterized as discriminatory. Therefore, this is not a case where the rate is applied uniformly in a mechanical way; but similar rate of redemption fine was adopted for parity of reasons. As already stated, the decision rendered cannot be said to be perverse and hence no question of law, much less any substantial question of law arises for consideration. No merit in the appeals and accordingly dismissed.

Decision:- Appeal dismissed.

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PJ/Case laws/2012-13/1068

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