2002 (10) TMI 110 - HC - Customs

Summary

Issues Involved:
1. Legality of the penalty of Rs. 15,00,000/- imposed on the Petitioner.
2. Applicability of the Kar Vivad Samadhan Scheme (K.V.S.S.) to the Petitioner.
3. Proportionality of the penalty imposed on the Petitioner.

Summary:

Legality of the Penalty:
The Petitioner, a proprietor of M/s. Mahavir Export & Import Company, challenged the order of the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT), which confirmed a penalty of Rs. 15,00,000/- imposed by the Commissioner of Customs, Mumbai. The Commissioner found the Petitioner to be the central figure in fraudulent transactions involving the illegal sale and clearance of duty-free goods using fictitious documents. The Petitioner was penalized u/s 112(a) & (b) of the Customs Act for his involvement in importing goods valued at approximately Twenty-five lakhs based on fraudulent documents.

Applicability of K.V.S.S.:
The Petitioner argued that he should be entitled to the benefits of K.V.S.S. since the principal noticee, M/s. Choice Laboratories, had settled part of the tax arrears under the scheme. However, the court held that the liability of the Petitioner and M/s. Choice Laboratories arose from separate and distinct causes of action. M/s. Choice Laboratories settled only part of the tax arrears related to glycerine, S.L.S., and peppermint oil, but not Clove Bud oil. The court concluded that the benefit of K.V.S.S. granted to M/s. Choice Laboratories could not be extended to the Petitioner, as the latter's fraudulent actions were independent and more severe.

Proportionality of the Penalty:
The court found that the heavy penalty of Rs. 15,00,000/- imposed on the Petitioner was justified due to his contemptuous disregard for the law and his involvement in creating fictitious documents for the clearance of duty-free goods. The Petitioner, a Chartered Accountant, fabricated bogus High Seas Sale contracts and signed documents on behalf of other entities without their consent. The court emphasized that the penalty was not excessive given the severity of the Petitioner's actions compared to the principal noticee.

Conclusion:
The court dismissed the petition, upholding the penalty of Rs. 15,00,000/- imposed on the Petitioner. The court also granted an 8-week stay on the recovery of the penalty amount.