2012 (10) TMI 654 - HC - Customs

Redemption fine and penalty - importers had declared that the country of manufacture was United States whereas the vehicles had been imported from Thailand - Held that - Violation of Para-2(II)(a)(iv) of the Licensing Note of Chapter 87 of the ITC(HS) Policy, which provides that the vehicle shall be imported from the country of manufacture. It is revealed from the Bill of Lading that the vehicle was loaded at Thailand. There is no evidence produced by the Appellants that the vehicles were imported from USA. So, the confiscation of the vehicles on this ground is justified - Tribunal was of the opinion that of the two grounds which persuaded the Commissioner to hold the imports to be in violation of Exim Policy, one was unsubstantial. The assessee does not argue that the surviving ground was unjustifiably upheld by the Tribunal. Reduction of redemption fine and penalty by Tribunal - Held that - An overall conspectus of the facts of the case would show that the redemption fine was barely 25% of the total amount which could have been recovered also the penalty was a fraction of the total value of the goods, including the different component. A further reduction, in the opinion of this Court, should have been resorted to only if there were certain unusual or exceptional features indicating hardship or benefits or complete good faith on the part of the importers. There is, however, no material on record to suggest that these elements were present in the cases of the assessees. The reduction directed by the Tribunal was, therefore, in clear error of law as it was not informed by any reason. Whilst the authority may possess the power to do something, there ought to be a justification for the exercise of that authority. Without such justification, action would be based on mere caprice or whim a proposition unacceptable in our legal system - against assessee.

Summary

Issues:
1. Reduction of redemption fine and penalty amount by the Tribunal.
2. Violation of conditions in Chapter 87 of Customs policies.
3. Tribunal's discretion in reducing the quantum of fine and penalty.
4. Lack of justification for the reduction by the Tribunal.

Analysis:
1. The primary issue in this case pertains to the reduction of the redemption fine and penalty amount by the Central Excise and Service Tax Appellate Tribunal (the Tribunal) in the appeals involving the import of Hummer H2 cars. The Tribunal upheld the validity of the penalty and confiscation but reduced the quantum of both in each case, lowering the redemption fine to Rs. 2,00,000 and the penalty to Rs. 1,00,000. The appellant contested whether the Tribunal erred in reducing these amounts, arguing that the reduction was unwarranted given the declared value of the cars and the duty payable.

2. The second issue revolves around the violation of conditions in Chapter 87 of the Customs policies by the importers. The Customs authorities contended that the importers had declared the country of manufacture as the United States while the vehicles were actually imported from Thailand. This discrepancy led to a determination that the vehicles were liable for confiscation and the importers were subject to penalties under the Customs Act.

3. The third issue concerns the Tribunal's discretion in reducing the redemption fine and penalty. The Tribunal justified its decision based on the argument that the allegation of violation of certain policy circulars was not maintainable and set it aside. However, the Tribunal upheld the confiscation of the vehicles for violation of specific import licensing notes but reduced the fine and penalty amounts. The Commissioner argued that the Tribunal did not provide sufficient reasoning for such a significant reduction.

4. The final issue addresses the lack of justification for the reduction by the Tribunal. The High Court opined that the Tribunal's reduction of the fine and penalty lacked a proper basis or explanation. The Court emphasized that without clear reasons or exceptional circumstances indicating hardship or good faith on the importers' part, such reductions should not have been made. The Court found the Tribunal's decision to be in clear error of law due to the absence of adequate justification, leading to the restoration of the Commissioner's order in both cases.

In conclusion, the High Court ruled in favor of the appellants, highlighting the necessity of providing justifications for any reductions in fine and penalty amounts, particularly in the absence of extraordinary circumstances.