Full Judgment Text
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CASE NO.:
Appeal (civil) 1389-1392 of 2002
PETITIONER:
U.K. Enterprises & Anr.
RESPONDENT:
Commissioner of Customs and Central Excise & Anr.
DATE OF JUDGMENT: 22/11/2007
BENCH:
ASHOK BHAN & V.S. SIRPURKAR
JUDGMENT:
JUDGMENT
ASHOK BHAN, J.
1. These appeals are directed against the order dated 06th December 2001
passed by the Customs, Excise & Gold (Control) Appellate Tribunal (Now
known as Customs, Excise & Service Tax Appellate Tribunal) [for short, ‘the
Tribunal’] in Appeal No.C/39-41/2001-A filed by the appellants and
No.C/372/2001-A filed by the Revenue whereby and whereunder the Tribunal,
while dismissing the appeal filed by the appellants, accepted the appeal
filed by the Revenue and enhanced the amount of penalty under Section 114A
of the Customs Act, 1962 (for short ‘the Act’) from Rs.50,000/- as imposed
by the Commissioner of Customs, Goa to Rs.10,00,000/- and the redemption
fine under Section 125 of the Act from Rs.2,50,000/- to Rs.
10,00,000/-.
2. The assessee-appellants herein had imported Integrated Circuits (ICs)
from a firm in Hong Kong by declaring the value of the consignment at HK
$40,492.49. Directorate of Revenue Intelligence (DRI) authorities at Goa
examined the consignment and upon examination thereof, found certain
stickers and labels indicative of the particulars of the manufacture and
transport of the goods by air etc. inside the cartons in which ICs were
packed. After investigation, the authorities found that ICs had been
manufactured by M/s. Philips Ltd., M/s. Motorola (I) Ltd. and M/s. NEC.
They sought information from the concerned manufacturers as to the cost of
the ICs. Manufacturers of six out of the seven varieties of ICs furnished
the said information to the authorities. Based upon the said information,
the authorities came to the conclusion that the declared price of the goods
was undervalued. Hence, after adding 10% towards profit of the dealer in
Hong Kong, the authorities fixed the value of the goods at Rs.23.4 Lac as
against the declared value of over 2.3 Lac (CIF Goa). On the said value
fixed by the authorities, the differential duty of Rs.4,91,000/- was
demanded and paid by the appellant.
3. While framing the assessment, the authority in original levied a penalty
of Rs.50,000/- under Section 114A of the Act on the firm and Rs.50,000/- on
the proprietor of the firm under Section 112 of the Act. Redemption fine of
Rs.2,50,000/- under Section 125 of the Act was also imposed on the firm.
4. The assessee as well as the Revenue filed separate appeals before the
Tribunal. The Tribunal dismissed the appeal filed by the assessee and
accepted the appeal filed by the Revenue and enhanced the amount of penalty
on the proprietor of the firm to Rs.10,00,000/-. The penalty imposed on the
firm was set aside. Insofar as the redemption fine is concerned, the same
was enhanced to Rs.10,00,000/-.
5. Being aggrieved by the order of the Tribunal, the assessee has come up
in appeal before us.
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6. Shri L.P. Asthana, learned counsel appearing for the appellants did not
either dispute the value of the goods which was fixed by the
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authorities
at Rs.23.4 Lac or the amount of differential duty. He has not disputed the
culpability of the appellants as well. The only point raised by him is
regarding the enhancement of the amount of penalty as well as the
redemption fine.
7. In this context it would be appropriate to refer to the relevant
sections, viz., Section 114A and Section 125 of the Act which read as under
:
"114A. Penalty for short-levy or non-levy of duty in certain cases.-Where
the duty has not been levied or has not been short- levied or the interest
has not been charged or paid or has been part paid or the duty or interest
has been erroneously refunded by reason of collusion or any wilful mis-
statement or suppression of facts, the person who is liable to pay the duty
or interest, as the case may be, as determined under sub-section (2) of
section 28 shall, also be liable to pay a penalty equal to the duty or
interest so determined:
Provided that where such duty or interest, as the case may be, as
determined under sub-section (2) of section 28, and the interest
payable thereon under section 28AB, is paid within thirty days from
the date of the communication of the order of the proper officer
determining such duty, the amount of penalty liable to be paid by
such person under this section shall be twenty-five per cent of the
duty or interest, as the case may be, so determined:
Provided further that the benefit of reduced penalty under the
first proviso shall be available subject to the condition that the
amount of penalty so determined has also been paid within the
period of thirty days referred to in that proviso:
Provided also that where the duty or interest determined to be
payable is reduced or increased by the Commissioner (Appeals), the
Appellate Tribunal or, as the case may be, the court, then, for the
purposes of this section, the duty or interest as reduced or
increased, as the case may be, shall be taken into account:
Provided also that where the duty or interest determined to be
payable is increased by the Commissioner (Appeals), the Appellate
Tribunal or, as the case may be, the court, then, the benefit of
reduced penalty under the first proviso shall be available if the
amount of the duty or the interest so increased, along with the
interest payable thereon under section 28AB, and twenty-five per
cent of the consequential increase in penalty have also been paid
within thirty days of the communication of the order by which such
increase in the duty or interest takes effect:
Provided also that where any penalty has been levied under this
section, no penalty shall be levied under section 112 or section
114.
Explanation.-For the removal of doubts, it is hereby declared that-
(i) the provisions of this section shall also apply to cases in which
the order determining the duty or interest under sub-section (2) of section
28 relates to notices issued prior to the date on which the Finance Act,
2000 receives the assent of the President;
(ii) any amount paid to the credit of the Central Government prior to
the date of communication of the order referred to in the first proviso or
the fourth proviso shall be adjusted against the total amount due from such
person."
125. Option to pay fine in lieu of confiscation.-(1) Whenever confiscation
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of any goods is authorised by this Act, the officer adjudging 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 or,
where such owner is not known, the person from whose possession or custody
such goods have been seized, 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.
(2) Where any fine in lieu of confiscation of goods is imposed under sub-
section (1) the owner such goods or the person referred to in sub-
section(1) shall, in addition, be liable to any duty and charges payable in
respect of such goods."
8. According to the learned counsel for the appellants, the maximum penalty
which could be imposed under Section 114A of the Act
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can be equal to the
duty demanded which, in the present case, was Rs.4,91,000/- whereas the
Tribunal has enhanced it to Rs.10,00,000/-. It is further submitted by him
that under Section 125 of the Act the Commissioner could impose the fine in
lieu of confiscation as he deemed fit but it could not exceed the market
price of the goods confiscated, less in the case of imported goods the duty
chargeable thereon. According to him, the fine under the said Section has
been increased to Rs. 10,00,000/- without ascertaining the market value of
the goods confiscated.
9. After hearing learned counsel for the parties, we find substance in the
first submission of the learned counsel for the appellants, that the amount
of penalty could not be more than the amount equal to the duty chargeable.
A bare perusal of Section 114A makes it clear that the liability to pay
penalty can be equal to the amount of duty and could not exceed the payable
duty. Hence, the penalty imposed was against the express provisions of law.
In these circumstances, we reduce the amount of penalty under Section 114A
to Rs.4.91,000/-.
10. Although we agree with the learned counsel for the appellants that the
Tribunal had enhanced the amount of fine in lieu of confiscation to
Rs.10,00,000/- without determining the market price of the goods in
question on the date of imposing the fine, but, in the facts and
circumstances of the case, we are not inclined to interfere with the order
of the Tribunal insofar as the enhancement of the said fine is concerned,
as it is evident from the facts placed before us that the market price of
the goods could not be less than Rs.10,00,000/-. Admittedly, the value of
the goods has been fixed at Rs.23.4 Lac, which includes the profit of the
dealer, as against the declared value of more than Rs.2.3 Lac (CIF Goa).
The purchase price would be deemed to be Rs.23.4 Lac minus 10% which was
added as profit of the dealer which comes to Rs.21,06,000/- approx. Under
the circumstances, it cannot be said that the market price of the goods was
not known or determinable. Even otherwise, taking a common sense view, we
conclude that the market price of the goods, on the date of imposition of
fine, could not be less than the purchase price thereof. Even if it is
assumed that the appellants sold the goods at a loss, it could not be less
than half of the purchase price.
11. For the reasons stated above, the appeals are disposed of in the above
terms. The Department shall now proceed with the computation of the amount
due towards penalty and fine in lieu of confiscation in terms of this
order.