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2023 (3) TMI 1029 - HC - CustomsConfiscation of imported goods - levy of redemption fine and penalty - import of 2249.867 M/T Palm Fatty Acid distillate in bulk and 1502.079 M/T Palm Acid Oil in bulk - restricted item or not - department took a stand that the two items imported are canalised items permissible for import by State Trading Corporation only - contravention of Clause 3(2) of Import (Control) Order, 1955 and with Section 3 of the Import and Export (Control) Act, 1947. HELD THAT - Admittedly on the date when the orders were placed by the appellant for purchase of the products i.e. on 12th and 14th March, 1986 legal position was clearly in favour of the appellant. Added to that the clarifications issued by the Joint Chief Controller of Imports dated 17.03.1986, the minutes of the meeting of the Central Board of Excise and Customs and Principal Collector of Customs dated 03.04.1986, the circular issued by the Under Secretary to the Government of India to port authorities dated 23.04.1986 and the letter addressed by the Principal Collector of Customs to the Federation of Indian Export Organization dated 14th/15th May, 1986 all clarified position that the appellant would be entitled to import canalized items under the additional licenses which were issued to them. It cannot be disputed that the contract having been entered into and processed, it is virtually next to impossible to stop, the consignment mid sea which the Customs Department would be well aware and there are several procedures intervening such matters if at all it is feasible of being performed. Therefore, the Collector of Customs has faulted the appellant not performing of an act (stoppage of the shipment in the mid sea) which was next to impossible. In any event, the conduct of the appellant should be examined on the date when they placed the order i.e. on 12th and 14th March, 1986 and as stated earlier the law on the subject was clearly in favour of the appellant and the concerned department were also of the clear view that canalized items can be imported on additional license. Therefore, failure to examine bonafides of the appellant on the above facts has led to an erroneous approach by the department. In Hindustan Steel Limited Versus State of Orissa 1969 (8) TMI 31 - SUPREME COURT , it was held that the discretion to impose penalty must be exercised judicially, penalty will ordinarily be imposed in cases where party acts deliberately in defiance of law or is guilty of contemptuous or dishonest conduct or acts in conscious disregard of its obligation but not in cases where there is a technical or venial breach of the provisions of the Act or where the breach flows from bonafide belief that the offender is not liable to act in the manner prescribed by the statute. Thus, bearing in mind the above legal principles and taking note of the facts which were set out above, the case on hand is a case where no penalty could have been imposed. Whether the imposition of redemption fine of Rs. 80,00,000/- was justified? - HELD THAT - Admittedly on the date when the goods arrived in the Calcutta Port and when the appellant sought for clearance of the said goods the decision in UNION OF INDIA VERSUS GODREJ SOAPS PVT. LTD. AND ANOTHER 1986 (9) TMI 203 - SUPREME COURT held the field and consequently import was unauthorized as the goods imported were canalized items and could not be imported under additional licenses. If that be the case, the appellant can have no other option except to accept the fact that the import is unauthorized, but however we have considered the conduct of the appellant and we were satisfied with the bona of the appellant. Nevertheless, on the date when the goods were sought to be cleared from the Kolkata Port there was a clear bar for importing such goods under the additional licenses and this being a bar created under the policy which binds the appellant as additional licenses were issued under the policy, the appellant cannot escape from the rigour of imposition of redemption of fine - In the case on hand the total quantity of both the products imported by the appellant more or less is 3700 metric tons and if the same yardstick as applied by the department in the case of Shashi Kant is applied to the case on hand the redemption fine could at best be imposed to the tune of around Rs. 50 to 53 lakhs and definitely not Rs. 80,00,000/-. Therefore, the redemption fine imposed on the appellant was excessive and disproportionate and inconsistent with the stand taken by the department in other contemporaries imports of same product in the same factual background. Therefore, we are inclined to interfere with the quantum of redemption fine which was imposed. The orders passed by the authority imposing a redemption fine of Rs. 80,00,000/- is set aside and the fine stands reduced to Rs. 50,00,000/- and the penalty imposed on the appellants is set aside in its entirety - Appeal allowed in part.
Issues Involved:
1. Confiscation of goods and imposition of redemption fine and penalty. 2. Relevance of mens rea in adjudging liability for confiscation and penalty. 3. Determination of quantum of redemption fine and penalty. Summary: Issue 1: Confiscation of Goods and Imposition of Redemption Fine and Penalty The appellant challenged the order of the Customs, Excise and Service Tax Appellate Tribunal which upheld the confiscation of goods imported under Additional Licences issued for the 1978-79 Import Policy period and imposed a redemption fine of Rs. 85 lakh and a penalty of Rs. 15 lakh. The Court noted that the appellant sought clearance of goods against Subsidiary Additional Licences issued in terms of the Supreme Court's order dated April 18, 1985, which allowed import of items permissible to export houses under the 1978-79 Import Policy, excluding banned items. The department argued that the items were canalised and only importable by the State Trading Corporation, thus rendering the licences invalid. The Tribunal upheld the confiscation and penalties, citing the Supreme Court's decision in Pine Chemical Suppliers, which held that mens rea was not relevant for confiscation and penalty under the Customs Act, 1962. Issue 2: Relevance of Mens Rea The Court examined whether the Tribunal erred in holding that mens rea was irrelevant for adjudging liability for confiscation and penalty. The Tribunal had relied on the Supreme Court's decision in Pine Chemical Suppliers, which stated that mens rea is not necessary for confiscation under Section 111 and penalty under Section 112 of the Customs Act. The Court agreed with this interpretation, affirming that mens rea is not a requisite consideration for determining liability for confiscation and penalty. Issue 3: Quantum of Redemption Fine and Penalty The Court considered whether the lack of mens rea should influence the quantum of redemption fine and penalty. The appellant argued that their actions were based on a bona fide belief, supported by various clarifications and meetings with the authorities, that canalised items could be imported under the additional licences. The Court acknowledged that the appellant's conduct was bona fide at the time of placing the orders and that the subsequent legal developments, including the Supreme Court's decision in Godrej Soaps, changed the legal landscape. The Court found the redemption fine of Rs. 80,00,000/- excessive and disproportionate compared to similar cases, reducing it to Rs. 50,00,000/-. The penalty was set aside entirely, as the appellant's actions were not contumacious or in deliberate defiance of the law. Conclusion: The appeal was allowed in part. The redemption fine was reduced to Rs. 50,00,000/-, and the penalty was set aside. The appellant was entitled to a refund of the excess redemption fine and the entire penalty. The authorities were directed to process the refund application within 45 days of receipt.
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