2013 (6) TMI 693 - HC - Customs

Confiscation of goods - Misdeclaration of goods - Held that - Import of raw materials more than what was required was done under the licence granted by the DGFT. In the circumstances, the Tribunal rejected the contention of the Revenue on the aspect of intentional misdeclaration on the part of the assessee so as to attract the provisions of Section 111(o) of the Customs Act. The Tribunal, on appreciation of the above-said vital fact, cancelled the redemption fine of ₹ 1.00 lakh imposed in lieu of confiscation. Even though the Tribunal viewed that there was mala fide on the part of the assessee to import these goods, however, on the aspect of levy of penalty under Section 114A of the Customs Act at a sum equivalent to the duty amount, taking note of the circumstances that the assessee had the benefit of licence to import, the Tribunal reduced it to a sum of ₹ 3.00 lakhs. So too, the imposition of penalty on the Managing Director at ₹ 5.00 lakhs was also cancelled - Import itself had been effected consequent on the licence granted by the DGFT and the circumstances were taken note of by the Tribunal - Decided against Revenue.

Summary

Issues:
1. Interpretation of Section 111(o) of the Customs Act, 1962 regarding intentional misdeclaration and confiscation.
2. Authority of the Appellate Tribunal to reduce penalties under Section 114(a) of the Customs Act, 1962.
3. Imposition of penalty on a party involved in the diversion of inputs.

Analysis:
1. The High Court examined the Tribunal's decision on intentional misdeclaration under Section 111(o) of the Customs Act, 1962. The Tribunal found that although there was mala fide intent in importing excess raw materials, the import was conducted under a valid license from the DGFT. Consequently, the Tribunal rejected the Revenue's argument for intentional misdeclaration and confiscation under Section 111(o). The Tribunal canceled the redemption fine of &8377;1.00 lakh imposed in lieu of confiscation due to the circumstances surrounding the import. The Court upheld the Tribunal's decision, emphasizing the importance of the valid license and the lack of intentional misdeclaration to trigger Section 111(o).

2. Regarding the authority of the Appellate Tribunal to reduce penalties under Section 114(a) of the Customs Act, 1962, the High Court analyzed the Tribunal's actions. The Revenue contested the Tribunal's power to reduce penalties imposed under Section 114(a). The Tribunal had reduced the penalty amount from the duty equivalent to &8377;3.00 lakhs due to the circumstances of the case, where the importer had a valid license for the excess import. The Court upheld the Tribunal's decision, stating that the circumstances justified the reduction in penalty. The Court dismissed the Revenue's argument, affirming the Tribunal's authority to reduce penalties under Section 114(a) based on the specific case details.

3. The High Court further considered the imposition of penalties on individuals involved in the diversion of inputs. The Tribunal had canceled the penalty of &8377;5.00 lakhs imposed on the Managing Director due to the circumstances of the case. The Tribunal noted the involvement of the Managing Director in the diversion of inputs but decided to cancel the penalty considering the overall situation. The Court upheld the Tribunal's decision, stating that the circumstances warranted the cancellation of the penalty on the Managing Director. The Court dismissed the Revenue's appeal, affirming the Tribunal's decision on the penalty imposition in this regard.