1990 (9) TMI 158 - AT - Customs

Summary

Issues Involved:
1. Validity of the import license.
2. Misdeclaration of goods.
3. Imposition of redemption fine and penalty.
4. Requirement of mens rea for penalty.
5. Quantum of redemption fine.

Issue-wise Detailed Analysis:

1. Validity of the Import License:
The appellants imported ball bearings under a license in the name of M/s. Rastriya Casting Works, which was later found to be suspended. The Additional Collector held the license void ab initio due to the non-existence of the licensee. The appellants argued that the license was valid at the time of importation and was only suspended later. The Tribunal concluded that a license issued to a non-existent entity is void from the beginning and cannot be considered valid for any importation, rendering the importation illegal.

2. Misdeclaration of Goods:
The appellants were found to have misdeclared the weight of the ball bearings, leading to an attempt to evade duty. The Additional Collector found that the appellants had declared the weight incorrectly, which was accepted by the appellants in their letter dated 13-11-1988. However, the Tribunal noted that the appellants had voluntarily agreed to pay the difference in duty before the Show Cause Notice was issued, and thus, the charge of misdeclaration was dropped.

3. Imposition of Redemption Fine and Penalty:
The Additional Collector imposed a redemption fine of Rs. 8,00,000 and a penalty of Rs. 2,00,000 on the appellants. The Tribunal upheld the redemption fine under Section 125 of the Customs Act, as it is a fine in rem, applicable irrespective of the knowledge of the person importing the goods. However, the penalty under Section 112, which requires proof of mens rea, was set aside due to the lack of strict proof of the appellants' knowledge or involvement in the fraudulent license.

4. Requirement of Mens Rea for Penalty:
The appellants argued that mens rea is essential for the imposition of penalty and that suspicion cannot replace proof. The Tribunal agreed, stating that penalty proceedings are quasi-criminal and require strict proof. Since the appellants acted under the belief that the license was valid and there was no strict proof of their knowledge of the fraud, the penalty was not justified and was set aside.

5. Quantum of Redemption Fine:
The appellants contended that the redemption fine was excessive and based on market prices at the time of the order, not at the time of importation. The Tribunal agreed that the fine was on the higher side and noted that the details of market enquiries were not disclosed to the appellants, violating principles of natural justice. The matter was remanded to the Additional Collector to redetermine the redemption fine after giving the appellants an opportunity to present evidence.

Conclusion:
The Tribunal upheld the confiscation of the goods and the imposition of redemption fine but set aside the penalty due to the lack of mens rea. The quantum of the redemption fine was remanded for reconsideration, ensuring compliance with principles of natural justice.