2009 (7) TMI 648 - AT - Customs

Penalty- The exporters, their CHA and the shipping line in respect of export consignment covered by Shipping Bill are the appellants, who are aggrieved by the penalties imposed on them under Section 114 of the Customs Act. The exporter has also challenged the redemption fine imposed on them. A show-cause notice was issued by Commissioner of Customs to these appellants. The proposal, in that notice, to confiscate the goods under Section 113(g) of the Customs Act and impose penalties under Section 114(iii) of the Act was contested by the parties concerned. Held that- It is a common ground of these appeals that the penalties imposed on the appellants are harsh. Penalties on the exporter and the CHA are Rs. 2.60 lakhs each, which appears to have been determined at 10% of the FOB value of the goods. Under Section 114(iii) of the Act, the quantum of penalty shall not exceed the value of the goods as declared by the exporter or the value that is determined under the Act, whichever is the greater. The penalty on the above parties, is only about 10% of the FOB value of the goods. The penalty on the shipping line is Rs. 4.00 lakhs. By all means, the conduct of the shipping line is far more blameworthy and therefore, the higher penalty on them than what was imposed on the exporter and the CHA cannot be said to be unfair. However, a penalty of Rs 4.00 lakhs on the shipping line when compared to the penalty of Rs. 2.60 lakhs imposed on the exporter appears to be a little harsh.

Issues:
1. Penalties imposed under Section 114 of the Customs Act on exporters, CHA, and shipping line.
2. Challenge against redemption fine imposed on exporters.
3. Interpretation of provisions of Sections 34, 36, 40, 41, and 42 of the Customs Act regarding penal liability.
4. Quanta of penalties imposed on the parties involved.
5. Application of Let Export Order (LEO) requirement and consequences of non-compliance.
6. Comparison of penalties imposed on different parties.
7. Validity of redemption fine in the absence of goods.

Analysis:
1. The judgment deals with penalties imposed on exporters, CHA, and the shipping line under Section 114 of the Customs Act. The exporters challenged the penalties and redemption fine. The vessel carrying goods sailed off without the Let Export Order (LEO), leading to a show-cause notice for confiscation and penalties. The Tribunal analyzed the liability of each party under the Act based on the breach of provisions and upheld penalties on all three appellants.

2. The exporters and CHA argued against penal liability under Section 114, citing precedents and provisions like Sections 34, 36, 40, 41, and 42 of the Customs Act. They contended that the exporter should not bear penalties as the shipping line is primarily responsible. However, the Tribunal held that all parties involved in the export process have responsibilities under the Act, leading to penal liability.

3. The judgment extensively discussed the provisions of Sections 34, 36, 40, 41, and 42 of the Customs Act, emphasizing the obligations of exporters, CHA, and shipping lines. The breach of these provisions, especially regarding the LEO requirement, rendered the goods liable to confiscation under Section 113(g) and imposed penal liability under Section 114 on all three appellants.

4. Regarding the quanta of penalties, the Tribunal acknowledged the harshness of the penalties imposed but upheld them based on the value of the goods and the conduct of the parties involved. The shipping line received a higher penalty due to more significant culpability, while the penalties on the exporter and CHA were considered fair but slightly harsh in comparison.

5. The judgment highlighted the significance of the LEO requirement and the consequences of non-compliance. It emphasized that any exportation without LEO is prohibited, making the goods liable to confiscation under the Act. The Tribunal clarified that the exporter, CHA, and shipping line all breached provisions related to LEO, leading to penal liability.

6. The Tribunal addressed the issue of redemption fine imposed on the exporters in the absence of goods, citing a ruling of the High Court. It concluded that the redemption fine was liable to be set aside, aligning with the legal precedent.

7. In conclusion, the Tribunal partly allowed the appeal of the exporter by setting aside the redemption fine. The shipping line's penalty was reduced, and the CHA's appeal was dismissed. The judgment provided a comprehensive analysis of the legal issues involved, interpreting relevant provisions of the Customs Act to determine the liabilities and penalties for the parties involved in the export process.

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