2006 (9) TMI 373 - AT - Customs

Summary

Issues Involved:
1. Confiscation of imported goods.
2. Imposition and quantum of redemption fine.
3. Imposition and quantum of penalty.
4. Admissibility of additional grounds and evidence.
5. Request for auction proceeds.

Detailed Analysis:

1. Confiscation of Imported Goods:
The importer, M/s. La Grande Projects Limited, imported 1669 used Diesel Car Engines from Singapore, declaring them as Capital Goods for a Granite Processing Plant. The Customs Authorities, upon enquiry, clarified that used Diesel Car Engines were not permitted under the licence granted to the importer. Consequently, a show cause notice was issued proposing confiscation of the goods under Sections 111(d), (f), and (n) of the Customs Act, 1962. The Commissioner of Customs ordered confiscation with an option to redeem the goods on payment of a fine of Rs. 125 lakhs and imposed a penalty of Rs. 5 lakhs on the importer. The proceedings against co-noticees were dropped. The Tribunal upheld the confiscation but was tasked with reassessing the quantum of fine and penalty by the Bombay High Court.

2. Imposition and Quantum of Redemption Fine:
The Tribunal initially reduced the redemption fine to 30% and the penalty to 5% of the CIF value of the goods, following a precedent. However, the Bombay High Court found this reduction unsustainable due to a lack of justification and remanded the matter for fresh determination. The Tribunal considered the Chartered Accountant's certificate indicating a loss of Rs. 3,77,235.59 incurred by the importer, showing that the engines were sold at a loss. The Tribunal concluded that ordinarily, no redemption fine should be imposed if the importer suffered a loss. However, in light of the High Court's directive, the Tribunal reduced the redemption fine to 10% of the CIF value, which was deemed sufficient to meet the ends of justice.

3. Imposition and Quantum of Penalty:
The Tribunal was directed by the High Court to reassess the penalty. The importers argued that their import was bona fide and covered by SIA approval, thus not warranting a penalty. The Tribunal noted the Bombay High Court's directive to determine an appropriate penalty and found that there was reasonable doubt regarding the coverage of second-hand car diesel engines under the SIA approval. Considering the importers' loss and the fact that similar penalties had been reduced in other cases, the Tribunal reduced the penalty to 5% of the CIF value.

4. Admissibility of Additional Grounds and Evidence:
The importers filed an application to raise additional grounds and bring on record additional evidence, arguing that the import was bona fide and covered by SIA approval. The Tribunal allowed the application, noting that the additional grounds and evidence were vital for determining the quantum of fine and penalty. The Tribunal emphasized the importance of ascertaining the actual margin of profit or loss, which would only be known upon the sale of the goods.

5. Request for Auction Proceeds:
The importers requested directions for receipt of auction proceeds from the auction of 248 diesel engines conducted during the pendency of a writ petition. The Tribunal noted that this issue was not covered by the High Court's remand order and thus was not considered in the present proceedings.

Conclusion:
The Tribunal, after considering the High Court's remand order, reduced the redemption fine to 10% and the penalty to 5% of the CIF value of the goods. The appeal of the importer was partly allowed to this extent, while the Revenue's appeal seeking enhancement of fine and penalty was rejected. The Tribunal's decision was influenced by the Chartered Accountant's certificate indicating a loss, the bona fide belief of the importers regarding SIA approval, and the need to determine appropriate penalties based on the specific facts and circumstances of the case.