2007 (11) TMI 27 - SC - Customs

Penalty u/s 114A Since duty payable is only 4,91,000, penalty can be imposed equal to duty demanded not more than duty demanded On date of imposition of redemption fine, market price of goods was Rs. 23.4 lakh which is much more than the fine of Rs. 10 lakh So fine imposed was correct

Summary

Issues:
1. Appeal against the order of the Customs, Excise & Gold (Control) Appellate Tribunal regarding penalty and redemption fine under the Customs Act, 1962.
2. Undervaluation of imported Integrated Circuits (ICs) leading to differential duty demand.
3. Imposition of penalty and redemption fine under Sections 114A and 125 of the Act.
4. Dispute over the enhancement of penalty and redemption fine by the Tribunal.
5. Interpretation of Sections 114A and 125 of the Act regarding the maximum penalty and fine in lieu of confiscation.

Analysis:
1. The appeals challenged the Tribunal's order enhancing the penalty and redemption fine under the Customs Act, 1962. The Tribunal increased the penalty on the proprietor of the firm while setting aside the penalty on the firm. The redemption fine was also raised. The appellants contested the enhancement of the penalty and fine, leading to the appeal before the Supreme Court.

2. The case involved the import of Integrated Circuits (ICs) from Hong Kong, declared at a lower value than determined by authorities. After investigation, the authorities concluded that the declared price was undervalued, leading to a demand for a higher differential duty. The penalty and redemption fine were imposed by the original authority based on the undervaluation of the goods.

3. The authorities imposed a penalty under Section 114A of the Act on the firm and its proprietor, along with a redemption fine under Section 125 of the Act. Both the assessee and the Revenue filed separate appeals before the Tribunal, resulting in the enhancement of the penalty and redemption fine by the Tribunal.

4. The Tribunal's decision to enhance the penalty and redemption fine was challenged before the Supreme Court. The appellants primarily disputed the increase in the penalty and fine, raising concerns about the legality and proportionality of the enhanced amounts.

5. The Supreme Court analyzed Sections 114A and 125 of the Act to determine the legality of the enhanced penalty and redemption fine. It held that the penalty imposed cannot exceed the payable duty under Section 114A, reducing the penalty to the duty amount demanded. Regarding the redemption fine under Section 125, the Court found that in the circumstances of the case, the market price of the goods was known and justified the enhancement of the fine to Rs. 10,00,000.

6. The Court concluded by disposing of the appeals, directing the Department to calculate the revised penalty and fine based on the Court's order. The judgment clarified the limits of penalty imposition under Section 114A and upheld the Tribunal's decision on the redemption fine under Section 125, considering the known market price of the goods.