2024 (2) TMI 98 - HC - Customs

Penalty imposed under Section 112 of the Customs Act - confiscation of goods - WPC license were forged and fabricated - Existence of mens rea or not - HELD THAT - In the instant case, had the authorities applied Section 114AA, the penalty could have been upto five times the value of the Goods. Reference may also be held to section 125 of the Customs Act which provides for option to pay fine in lieu of confiscation and stipulates that the fine shall not exceed the market value of the goods confiscated less duty chargeable thereon. In the instant case, the value of the goods imported were 3.13 crores and the redemption fine imposed is Rs 60 Lakhs which is nearly 19% of the value of the goods and the fine imposed is Rs 15 Lakhs on each of the appellants which translates to about 4.75% (totalling to 9.5%) of the value of the goods - The redemption fine as well as penalty imposed could have been upto the value of the goods i.e. Rs. 3.13 crores, whereas in the instant case, the redemption fine imposed is about 19% and the penalty on both the appellants cumulatively amounts to about 9.5% of the value of the goods. In Akbar Badrudin Giwani 1990 (2) TMI 50 - SUPREME COURT , the Supreme Court also considered the proportionality of conduct vis-a-vis the quantum of penalty. In the present case the Commissioner of Customs could have imposed redemption fine and penalty each of 100% of the value of the goods but has restricted the redemption fine to 19% and penalty to 9.5%. It is found that discretion has been judicially exercised and in fact has been exercised in favour of the appellants by not imposing a harsh or excessive penalty. The question of law is answered in favour of the authority/respondent and against the Appellants/Assessee - there being no infirmity in the impugned order warranting any interference - appeal dismissed.

Summary

Issues Involved:
1. Liability of appellants under Section 112 of the Customs Act.
2. Confiscation of goods under Section 111 of the Customs Act.
3. Quantum of redemption fine and penalty imposed.

Summary:

1. Liability under Section 112 of the Customs Act:
The appellants contended that they had no mens rea and were unaware that the WPC licenses were forged. However, the court clarified that Section 112(a) of the Customs Act operates on a strict liability principle, meaning no mens rea is required. The appellants' actions rendered the goods liable for confiscation, thus justifying the penalty imposed. Section 112(b), which requires mens rea, was not applicable in this case.

2. Confiscation of Goods under Section 111 of the Customs Act:
The court emphasized that the importation was carried out using forged WPC licenses, contravening Section 111(d) of the Customs Act. This section mandates confiscation of goods imported contrary to any prohibition imposed by the Act. The court concluded that the goods were rightly confiscated as the appellants failed to produce valid WPC licenses.

3. Quantum of Redemption Fine and Penalty:
The appellants argued that the redemption fine and penalty were harsh and excessive. The court noted that the Commissioner of Customs had exercised discretion judicially, imposing a redemption fine of 19% and a penalty of 9.5% of the goods' value, which was within legal limits. The court referenced the Supreme Court's judgment in Akbar Badrudin Giwani, affirming that the penalty and fine were not excessive given the circumstances. The court also cited Jain Exports Pvt Ltd, reiterating that once contravention is established, the penalty must follow, and only the quantum is discretionary.

Conclusion:
The court upheld the Tribunal's judgment, dismissing the appeals and confirming the confiscation of goods and penalties imposed. The discretion exercised by the Commissioner of Customs was deemed judicial and appropriate, with no grounds for interference.