Whether fine on assessee sustainable even if SCN had no proposal for imposition of fine regarding confiscation?

PJ/Case Law /2016-17/3341

Case:-SHIVAM DEVELOPMENT TRUST VersusUNION OF INDIA
Citation:-2016 (340) E.L.T. 45 (Guj.)
Brief facts:-The petitioners before this Court challenge action of recovery of redemption fine from the petitioners and also for a prayer to declare that the petitioners are not liable to pay any amount as fine in lieu of confiscation of any goods.
The brief facts necessary for the present case areas under:-
1. Petitioner No. 1 is a charitable trust registered under the provisions of the Bombay Public Trusts Act. The said trust is engaged in charitable and philanthropic activities. The second petitioner is a trustee.
2.It appears that one Motilal Saraf wanted to import old and used cloths for helping the victims of earthquake in Kutch and thereby wanted to take advantage of Central Government Notification No. 7 of 2001, dated 27-1-2001 allowing exemption from Customs duty.
3. In connection with this import, a show cause noticedated 26-3-2002 came to be issued and it appears that the show cause notice was directed towards 10 persons, which included the petitioners. The show cause notice proposed, amongst other things, confiscation of goods of 22 bales which could not be located and seized and which were part of the import, and as to why the same should not be held liable for confiscation under Section 111(O) of the Customs Act. This show cause notice came to be adjudicated by Order-in-Original dated 31-3-2005, wherein the adjudicating authority passed an order to absolutely confiscate the goods of 22 bales which could not be located and seized by the DRA, which were part of the goods imported and as the goods were not available, fine in lieu of confiscation was imposed. The order also contained other directions. But, it seems that this particular part of the order imposing fine in lieu of confiscation was not acceptable to the petitioners and hence, an appeal was preferred before the CESTAT. Though in appeal, a prayer was made to set aside the redemption fine, but it appears that the same is not addressed to by the CESTAT. So far as the petitioners are concerned, the penalty imposed was set aside.
4. It is after the order of CESTAT that the Department issued notice first on 4-3-2015 and thereafter on 30-3-2015 calling upon the petitioner to pay up the redemption fine. It is this communication which required the petitioners to approach this Court.

Appellant’s contention:-Learned Counsel Shri Paresh M. Dave for the petitioners submitted that the initial action of the show cause notice was against 10 persons and since the petitioner himself was not the ultimate importer, atleast, the issue of redemption of fine cannot be proposed against him. In the show cause notice, there is nothing to suggest that the petitioners are responsible for importing the goods. Learned Counsel also took through the Order-in-Original, where also finding is given to the effect that one Shri Motilal Saraf has masterminded entire conspiracy of diversion of goods into local area with the help of other persons and the actual role that appears is that some wrong documents of the petitioner trust are put forward. Therefore, apparently, there does not appear to be any nexus connecting directly the petitioners to the import or that they have anything to do with the goods imported. In that view of the matter, the petitioner cannot be held responsible for the redemption fine as is sought to be imposed.
Respondent’s contention:-The respondent reiterated the findings of the impugned order.
Reasoning of judgment:-From the record, it emerges that in the show cause notice dated 26-3-2002, all 10 noticees were inter alia called upon to state why “The goods of 22 bales which could not be located and seized which were part of the goods imported under B/E No. 8836, dated 25-9-2001 having approx. market value Rs. 15.26 lakhs should not be held liable to confiscation under Section 111(o) of the Customs Act, 1962. However these goods are not available for confiscation”. Neither in the body of the show cause notice, nor in the ultimate proposal noted above, there is anything to suggest that the petitioner trust was called upon to state why for non-availability of the goods for confiscation, redemption fine should not be imposed.
In the order-in-original dated 29-4-2005 issued by the Commissioner, in this respect, he provided as under:-
I absolutely confiscate the goods of 22 bales which could “(b) not be located and seized by the DRI, which were part of the goods imported vide Bill of Entry No. 8836, dated 25-9-2001, having approximately value of Rs. 15.26 lacs. However, since the goods are not available, I impost fine of Rs. 7,25,000/- (Rs. seven lacks twenty five thousand only) in lieu of confiscation.”
In this order as well as in the above-noteddirections also, there was no indication that the petitioner trust is liable to pay the fine of Rs. 7.25 lacs in lieu of confiscation. In absence of any proposal in the show cause notice for imposition of fine in lieu of confiscation relatable to the petitioner and in absence of any directions contained in the order-in-original that such fine would be borne by the petitioner, it was simply not open for the department to seek recovery thereof from the petitioner.
In that view of the matter, communications dated 4-3-2015 and 30-3-2015 are quashed. Petition is allowed to this extent and disposed of.
Decision:-Petition allowed.
Comment:-The gist of the case is that the department sought recovery of fine from the petitioner even though the show cause notice had no proposal for imposition of fine in lieu of confiscation. Further, Order-in-original did not have any directions that fine would be borne by the noticee. Hence, it was held that department cannot recover fine from the noticee.
Prepared by:-Praniti Lalwani

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PJ/Case Law /2016-17/3341

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