2017 (8) TMI 90 - AT - Customs

Penalty - whether when the SCN dt. 17.3.2003 had asked the appellant to show cause why penalty should not be imposed only under Section 114A of the Act, whether the adjudicating authority can impose penalty under Section 112 instead? - Held that - the scope and extent of the two Sections 112 and 114A are different and penalties provided therein are imposed in different situations and reasons. Surely then, penalty proposed under Section 114A in the notice cannot be imposed under Section 112 in the adjudication order. Section 112 and Section 114A are certainly not interchangeable legal provisions nor are they statutory synonyms - decision of the Hon ble High Court Delhi in CC (Import & General) Vs Care Foundation 2014 (3) TMI 641 - DELHI HIGH COURT , relied upon, where it was unequivocally held that if Section 112 of the Customs Act is not invoked, penalty should not be imposed under it on the ground that it could have been imposed. In the event, we find that penalty imposed under Section 112 on the appellant in the impugned order is not supported by any show cause notice thereat and hence will have to be set aside, which we hereby do. There is an allegation in the SCN that the appellant had connived with Kunal Overseas in obtaining duty free licence in the name of Kunal Overseas and after taking possessionof the goods were instrumental in illegal diversion and sale in the local market for monetary gain - there is no legal sanction for such adjustment and appropriation of monies deposited by one person towards liability of another. It is not even the case that appellants have given No Objection Certificate or a carte blanche of any sort to the department to go ahead with such adjustment / appropriation. This being so, the impugned adjustment / appropriation is unsustainable in law. The order of the adjudicating authority for adjustment of ₹ 28,00,000/- (Rupees twenty eight lakhs only) towards penalty imposed on another person will require to be set aside, which we hereby do - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Imposition of penalty under Section 112 instead of Section 114A of the Customs Act, 1962.
2. Appropriation of ?28 lakhs deposited by Vishal Exports towards the penalty imposed on Paresh H. Parekh, M.D. of Kunal Overseas Ltd.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 112 Instead of Section 114A of the Customs Act, 1962:
The appellant, Shri Pradeep S. Mehta, contended that the penalty imposed under Section 112 of the Customs Act, 1962, was not justified as the Show Cause Notice (SCN) had proposed a penalty only under Section 114A. Section 114A provides for enhanced penalties equal to the duty or interest determined under Section 28 in cases involving collusion, willful misstatement, or suppression of facts. In contrast, Section 112 pertains to penalties for improper importation of goods and various related acts or omissions, with different levels of penalties for different situations.

The Tribunal found that the scope and extent of Sections 112 and 114A are different and penalties under these sections are imposed in different situations. The Tribunal held that penalties proposed under Section 114A in the SCN cannot be imposed under Section 112 in the adjudication order. The Tribunal cited the decision of the Hon'ble High Court Delhi in CC (Import & General) Vs Care Foundation, which held that if Section 112 is not invoked, penalties should not be imposed under it. Consequently, the Tribunal set aside the penalty of ?15 lakhs imposed under Section 112 on Shri Pradeep S. Mehta, allowing his appeal (C/248/2007).

2. Appropriation of ?28 Lakhs Deposited by Vishal Exports Towards the Penalty Imposed on Paresh H. Parekh, M.D. of Kunal Overseas Ltd.:
Vishal Exports Overseas Ltd. was aggrieved by the appropriation of ?28 lakhs deposited by them during adjudication towards the penalty imposed on Paresh H. Parekh. The Revenue defended this appropriation by stating that the amount was deposited towards duty liability arising from the diversion of 300 MTs of LDPE cleared duty-free under an advance license. However, the Tribunal found that this appropriation lacked legal merit. The deposit was made by Vishal Exports, and at most, it could have been adjusted towards any duty liability proposed and demanded from them, which was not the case here.

The Tribunal noted that allegations against Vishal Exports of conniving with Kunal Overseas were not fully corroborated in the SCN. The deposit of ?28 lakhs made by Vishal Exports was proposed to be adjusted against duty payable and penalty imposed, which was irregular. The adjudicating authority had further inappropriately adjusted the entire amount towards the penalty imposed on Paresh H. Parekh. The Tribunal held that there is no legal sanction for such adjustment and appropriation of monies deposited by one person towards the liability of another without consent. The Tribunal cited relevant case laws, including CC (EP) Mumbai Vs Virendra Kanshiram Gandhi and CC Kandla Vs Adani Enterprises Ltd., which supported their conclusion.

Consequently, the Tribunal set aside the order of the adjudicating authority for the adjustment of ?28 lakhs towards the penalty imposed on another person. The appeal of Vishal Exports Overseas Ltd. (C/249/2007) was allowed, with consequential benefits as per law.

Conclusion:
Both appeals (C/248/2007 and C/249/2007) were allowed, with consequential benefits, if any, as per law. The operative part of the order was pronounced in court.