2015 (6) TMI 773 - SC - Customs

Reduction of penalty - Exemption under Notification No.64/88-CUS dated 1.3.1988 - Import of Nuclear Magnetic Resonance Scanner, which is a medical instrument - Held that - Insofar as the payment of duty at the reduced value is concerned, Mr. A.K.Sanghi, learned senior counsel may have something to say, but we find that in the order dated 3.11.2003 passed in this appeal, notice was issued limited to the question of reduction of penalty. Therefore, we refrain from going into the issue raised in the appeal and would confine ourselves only to the reduction of the penalty. - no reason whatsoever is given for reducing the penalty from ₹ 20 lakhs to ₹ 1 lakh except observing that it appears to be excessive . We have already taken note of the circumstances under which the breach has been committed by the respondent. More serious breach is the violation of undertaking given to this Court. - was not a fit case where penalty should have been reduced. Since the respondent is now to pay the duty at the depreciated value of the machinery, we set aside the order of the CEGAT in so far as reduction of penalty from ₹ 20 lakhs to ₹ 1 lakh is concerned - Decided in favour of Revenue.

Summary

Issues:
1. Import duty exemption under Notification No.64/88-CUS for a Nuclear Magnetic Resonance Scanner.
2. Breach of conditions leading to withdrawal of exemption, imposition of redemption fine, and penalty.
3. Reduction of redemption fine and penalty by the Tribunal.
4. Appeal challenging the Tribunal's decision on duty calculation, redemption fine, and penalty reduction.

Analysis:
1. The respondent imported a Nuclear Magnetic Resonance Scanner under an exemption notification requiring certification from the Ministry of Health and Family Welfare for charitable hospital use. The respondent breached conditions by selling the equipment to another establishment without proper notice, leading to the withdrawal of exemption.

2. The CEGAT upheld the withdrawal of exemption, directing the respondent to pay duty at the depreciated value of the machinery. Additionally, a redemption fine and penalty were imposed, later reduced by the Tribunal from Rs. 50 lakhs to Rs. 5 lakhs and from Rs. 20 lakhs to Rs. 1 lakh, respectively. The Tribunal considered the duty payment at reduced value due to prior compliance by the respondent.

3. The Department appealed the Tribunal's decision on duty calculation, redemption fine, and penalty reduction. The Supreme Court limited its review to the penalty reduction issue. The CEGAT's reduction of penalty lacked reasoning beyond being "excessive," despite serious breaches by the respondent, including violating an undertaking given to the Court.

4. The Supreme Court found the penalty reduction unjustified and set aside the Tribunal's decision. The Court directed the penalty to be the same as the duty to be paid on the depreciated machinery value, capped at Rs. 20 lakhs. The appeal was disposed of accordingly, maintaining the penalty amount and duty calculation based on the depreciated value of the machinery.