2015 (9) TMI 455 - HC - Customs

Misclassification due to suppression of facts Imposition of penalty Settlement Commission vide order imposed penalty upon on petitioner Main issue was of misclassification arising due to alleged suppression of facts regarding source of insoluble sulphur crystex HB OT 20 by petitioners Held that - if letter, informing source of elemental sulphur, issued from overseas supplier was required so as to term dispute as not genuine or bonafide, that aspect has not been at all considered by Commission Commission must render finding when it is pointed out that petitioners are liable to penal action as proposed in show cause notice Commission ought to be aware of ramifications of imposing penalty Commission failed to apply its mind to this important aspect of matter and court constrained to set aside order passed by Commission to this limited extent As result petition succeed Commission s order to extent it imposes penalties on petitioner set aside Matters sent back to Commission to examine whether it can impose penalties on parties and if it can in law whether there are circumstances justifying such imposition Commission to re-examine this aspect and uninfluenced by its earlier order Petition disposed of.

Summary

Issues:
Challenge to penalty imposed by Settlement Commission on a company and its employees.

Analysis:
The writ petitions challenged an order passed by the Settlement Commission imposing penalties on the petitioner company and its employees. The petitioner's counsel argued that the imposition of penalties could have adverse legal consequences, potentially preventing them from approaching the Settlement Commission in the future. It was contended that the penalties lacked justification as the Commission had not provided satisfactory reasons for imposing them. The petitioner claimed that the classification issue was genuine and not indicative of suppression or misdeclaration of facts. The reliance on a letter from an overseas supplier was contested as insufficient grounds for penalty imposition.

The petitioner further argued that the Commission overlooked the statutory scheme, emphasizing that the provisions of the Customs Act, 1962, regarding penalty imposition were not applicable to matters covered under the Customs Tariff Act, 1975. The respondent supported the impugned order, stating that the duty demand had been accepted without dispute, precluding the petitioners from challenging it now. The Court noted allegations of misclassification due to alleged suppression of facts regarding the imported product and the reliance on a specific letter as the basis for penalty imposition.

The Court found that the Commission had not adequately considered the petitioner's stance on the classification issue and failed to provide a detailed and independent finding on the penalty imposition. Emphasizing the importance of rendering a thorough decision on penalties, the Court set aside the Commission's order on this limited aspect. While acknowledging the usual non-interference with Settlement Commission's findings, the Court deemed it necessary to intervene due to the Commission's failure to fulfill its duty in providing comprehensive reasoning for penalty imposition.

Consequently, the Court allowed the writ petitions, setting aside the penalties imposed and remanding the matters back to the Commission for a fresh examination. The Commission was directed to reconsider the imposition of penalties, ensuring a fair hearing for both parties and delivering a new finding unswayed by the previous order. The Court clarified that its decision did not express any opinion on the parties' contentions, leaving all aspects to be re-examined by the Commission without influence from the Court's observations.