2012 (5) TMI 67 - HC - Customs

Discretionary power of tribunal to release the confiscated goods - inadequate redemption fine - levy of penalty under two sections - Anti dumping duty on CD-R - Evasion of anti dumping duty - held that - The essence of the circumstances relevant to inference is the sine qua non and must be demonstrable. Section 125 no doubt gives discretion to release the goods on payment of redemption fine but the discretion must be exercised in a just and fair manner and on the basis of facts and has to be exercised after recording cogent and relevant reasons. There should not be failure of justice or grave injustice. Statutory discretion is not usually absolute. It is qualified by express or implied legal duty to comply with the substantive and procedural requirement before the decision is taken. Scope of Discretion - held that - Discretion, in general, is the discernment of what is right and proper. It denotes knowledge and prudence, that discernment which enables a person to judge critically of what is correct and proper united with caution; nice discernment, and judgment directed by circumspection; deliberate judgment; soundness of judgment; a science or understanding to discern between falsity and the truth, between wrong and right, between shadow and substance, between equity and colourable glosses and pretences, and not to do according to the will and private affections of persons. When it is said that something is to be done within the discretion of the authorities, that something is to be done according to the rules of reason and justice, not according to private opinion; according to law and not humour. It is to be not arbitrary, vague and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man, competent to the discharge of his office ought to confine himself. the findings or reasoning given by the tribunal is not in consonance with the provisions of Section 125 of the Act. We have, therefore, two options. One is to remand the matter to the tribunal for fresh consideration or pass appropriate orders in consonance with the statutory language and to do justice. We are inclined to accept the second course in the present case as delay is not in the interest of either party and is likely to cause prejudice and serve no purpose. Counsel for Achiever International had made affirmative submissions to the said effect. A reading of the two provisions show that they refer to different violations. In a given case, it is possible that only one provision may be attracted and in another case both provisions may be violated. When both provisions are violated, penalty under the two Sections can be imposed. There is no provision/section in the Act, which states that should penalty under one Section be imposed, penalty under the second provision should be waived. - Decided in favor of revenue.

Issues Involved:

1. Whether the goods imported were prohibited under the Customs Act, 1962.
2. Whether redemption fine under Section 125 can be levied on prohibited goods.
3. Whether the tribunal was correct in directing the release of goods on payment of redemption fine and the quantum thereof.
4. Whether separate penalties can be imposed under Sections 112(a) and 114AA of the Customs Act, 1962.
5. Whether the tribunal was right in reducing the penalty under Section 114AA from Rs.30 lakhs to Rs.10 lakhs.

Issue-wise Detailed Analysis:

1. Prohibited Goods under the Customs Act, 1962:

The court examined whether the imported DVD-Rs/CD-Rs were prohibited goods under Section 2(33) of the Customs Act, 1962. Section 2(33) defines prohibited goods as those whose import or export is subject to any prohibition under the Act or any other law. The court noted that the term "prohibited goods" is broader than the goods specified under Section 11(1), which gives the Central Government the power to prohibit import or export of goods. The court referenced Supreme Court decisions, including Om Prakash Bhatia vs. Commissioner of Customs, to affirm that the goods in question were prohibited because they were imported using false and fraudulent means, thus violating the conditions for lawful import.

2. Redemption Fine under Section 125:

The court clarified that Section 125 of the Customs Act allows for the imposition of redemption fine on prohibited goods. The section states that an officer adjudging confiscation may give the owner an option to pay a fine in lieu of confiscation. The court rejected the Revenue's contention that Section 125 does not apply to prohibited goods, stating that the section explicitly applies to such goods.

3. Tribunal's Direction for Release of Goods and Quantum of Fine:

The tribunal had directed the release of the goods on payment of a redemption fine of Rs.40 lakhs. The court found this amount inadequate, considering the assessable value of the goods was approximately Rs.2.25 crores. The court noted that the tribunal failed to consider the market value of the goods and the conduct of the importer. The court emphasized that the redemption fine should be proportionate to the market value and the nature of the violation. Consequently, the court enhanced the redemption fine to Rs.80 lakhs.

4. Separate Penalties under Sections 112(a) and 114AA:

The court held that penalties under Sections 112(a) and 114AA of the Customs Act can be imposed simultaneously if the violations pertain to different aspects of the same transaction. Section 112(a) deals with improper importation of goods, while Section 114AA addresses the use of false or incorrect material. The court found that both provisions were violated in this case, justifying separate penalties.

5. Reduction of Penalty under Section 114AA:

The tribunal had reduced the penalty under Section 114AA from Rs.30 lakhs to Rs.10 lakhs. The court upheld this reduction, stating that the penalty imposed was not perverse and was justified given the circumstances of the case.

Conclusion:

The court answered the substantial questions of law as follows:

1. Affirmed that the tribunal can issue directions for the release of goods on payment of redemption fine but increased the fine to Rs.80 lakhs.
2. Held that the tribunal's decision on the quantum of redemption fine was inadequate.
3. Confirmed that penalties can be imposed under both Sections 112(a) and 114AA.
4. Upheld the penalty of Rs.10 lakhs under Section 114AA.
5. Imposed an additional penalty of Rs.10 lakhs under Section 112(a).

The appeal by the Revenue was partly allowed, and the appeal by the assessee was dismissed.

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