2014 (5) TMI 976 - AT - Customs

Confiscation of goods - Redemption fine - whether the appellants had used 29 machines imported by them for use in the factory of M/s. Chiramith Precision India (Chiramith for short), a 100% EOU as per the conditions of importation or not - Held that - There was an omission on the part of the Registry also. After noticing that the appeals were filed against the Superintendent s letter, the Registry should have pointed out the same as a defect and in such an event, if the appellants were to mention the Order-in-Original and filed a revised appeal, in the normal course the same would have been accepted. Therefore, I do not consider that this is not rectifiable defect and after considering the stay applications and there appeals, it is quite clearly seen that the appellants have brought out that they are aggrieved by the decision in the Order-in-Original which had not reconsidered the penalties imposed on them and the sum and substance of the appeals is reconsideration of the penalties and redemption fine and therefore it would be in the interest of justice that the appeal has to be treated as having been filed against the Order-in-Original and it may not be appropriate to deny and reject the appeals on this ground. whether the Commissioner is right in taking a view that there is no need for him to reconsider the issue of penalties imposed on the appellants on the ground that all the three appellants are juristic persons - Held that - there cannot be separate penalty or demand for duty on the firm and the proprietor. That being the legal position at least in the case of Chirag, the observation of the Commissioner that the penalty was imposed on a juristic person and therefore he was not required to reconsider the same is not correct. Therefore on this ground, the Commissioner has to be directed to reconsider the penalty imposed on Chirag and for this purpose; the matter is required to be remanded to the original adjudicating authority. As regards the other two appeals of Chiramith and Tavadec, one is a partnership firm and the other is private limited company and therefore both are to be considered as separate legal entities/juristic persons and in this regard I find that the discussion of the case law by the Commissioner in the impugned order and his conclusion that penalties on the partners/directors is separate from the penalty on the company is appropriate. However, I am handicapped by the fact that there was no assistance from both the sides in the form of any precedent judicial pronouncements as to whether a penalty imposed or imposable on a company or partnership firm can be called as personal penalty or it is to be called as penalty and personal penalty and penalty are to be treated as different - Matter remitted back - Decided in favour of assessee.

Issues Involved:
1. Use of imported machines by appellants in the factory of a 100% EOU.
2. Determination and reduction of redemption fine.
3. Reconsideration of penalties imposed on juristic persons.
4. Preliminary objection regarding the maintainability of appeals.
5. Compliance with the directions of the Hon'ble High Court.

Issue-Wise Detailed Analysis:

1. Use of Imported Machines:
The primary issue was whether the appellants had used 29 imported machines in the factory of M/s. Chiramith Precision India (Chiramith), a 100% EOU, as per the conditions of importation. The Commissioner initially decided that the machineries were not used as required, but this Tribunal had previously set aside the order demanding duty, imposing redemption fine, and penalties. The matter was remanded by the Hon'ble High Court of Karnataka for fresh adjudication.

2. Determination and Reduction of Redemption Fine:
The Commissioner, upon fresh adjudication, reduced the redemption fine from Rs. 25 lakhs to Rs. 12 lakhs, considering depreciation and the difficulty in determining the market value due to the passage of time. Chiramith contested this, arguing that the fine was too harsh and not based on market value. The Tribunal found that the Commissioner had no option but to allow depreciation and reduce the fine accordingly. However, the Tribunal further reduced the redemption fine to Rs. 7 lakhs, considering the appellant's status as a 100% EOU and the misuse of only 5 out of 29 machines.

3. Reconsideration of Penalties Imposed on Juristic Persons:
The Commissioner did not reconsider the penalties imposed on juristic persons (Chiramith, Chirag, and Tavadec), interpreting the High Court's direction to reconsider "personal penalty" as not applicable to juristic persons. The Tribunal disagreed, noting that Chirag is a proprietary firm and thus penalties on the firm and proprietor cannot be separate. The matter was remanded for reconsideration of penalties on Chirag. For Chiramith and Tavadec, the Tribunal acknowledged the lack of assistance in form of precedent judicial pronouncements but concluded that penalties on juristic persons should also be reconsidered as per the High Court's directions.

4. Preliminary Objection Regarding Maintainability of Appeals:
The Department raised a preliminary objection that appeals by Chirag and Tavadec were filed against the Superintendent's letter, which is not maintainable. The Tribunal noted that the appeals essentially contested the Order-in-Original and the penalties imposed therein. The Tribunal decided to treat the appeals as filed against the Order-in-Original, rejecting the preliminary objection.

5. Compliance with Directions of the Hon'ble High Court:
The Tribunal examined the compliance with the High Court's directions to reconsider the redemption fine and penalties. The High Court had directed reconsideration of penalties and redemption fine, implying a broader reconsideration beyond just individuals. The Tribunal interpreted the High Court's use of "personal penalty" to include penalties on all appellants, not just individuals.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority to redetermine the quantum of penalties on the three appellants, ensuring compliance with the High Court's directions. The appellants were to be given a reasonable opportunity to present their case. The nominal redemption fine on spares was upheld without interference.

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