2013 (10) TMI 1005 - HC - Customs

Penaltry u/s 112(a) - Whether the Tribunal was right in holding that the appellant had abetted and was liable to pay penalty under Section 112(a) of the Customs Act, 1962 and the quantum of penalty is justified - Misdeclaration of goods - Abatement for misdeclaration - Held that - quantum of penalty imposed on the appellant M/s. J. Mitra & Bros. is not justified and is disproportionate. No doubt that the appellant M/s. J. Mitra & Bros. has abetted the offence of misdeclaration and is liable to pay penalty under Section 112(a). The statements recorded of the Secretary and the Chairman during the investigation clearly show that the Secretary and Chairman were well aware of the fact that the goods were sought to be misdeclared. It is not that the Secretary and Chairman were driven up the garden path unknowingly by the appellant M/s. J. Mitra & Bros. by the brochure. From the statements recorded, as extracted by the Commissioner of Customs, it is apparent that the Secretary and Chairman were well aware of the reason why the said system was being wrongly declared as an endoscopic system. They were fully aware that the system would only qualify for an exemption in case it was declared in a particular manner and words. They acted being fully aware of all the facts and it was a conscious and well informed decision. The actus reus was present and was motivated by a common goal and with a common purpose. All of them were aware as to why the system was being declared as an endoscopic system and the role played by each one was more or less similar and as culpable. It cannot be said that the Secretary played any lesser role than the appellant M/s. J. Mitra & Bros. Even if the appellant M/s. J. Mitra & Bros. had suggested misdeclaration of the equipment to save duty, the Secretary and the Chairman could have easily declined. The fact that the Secretary and the Chairman of M/s. CARE accepted the suggestion of the appellant M/s. J. Mitra & Bros. makes their role equal. The appellant is being punished as an abettor. The gravity of the role of the abettor and a well informed principal offender cannot be different. Where the degree of offence is same the scale of punishment should also be equal. Applying principle of parity of consequence, as all are ascribed the same role and responsibility, the scale of punishment/ penalty should also be the same - penalty imposed on the appellant M/s. J. Mitra & Bros. of Rs.25 lakhs is not justified. Applying the principle of parity, we are of the view that the appellant M/s. J. Mitra & Bros. should also be imposed the same penalty as that of the Chairman. Accordingly, we reduce the penalty under Section 112(a) from Rs.25 lakhs to Rs.5 lakhs - Decided partly in favour of assessee.

Summary

Issues involved:
1. Whether the Tribunal was right in holding that the appellant had abetted and was liable to pay penalty under Section 112(a) of the Customs Act, 1962.
2. Whether the quantum of penalty imposed is justified.

Detailed Analysis:

1. Liability of the Appellant under Section 112(a) of the Customs Act, 1962:

The appellant, M/s. J. Mitra & Bros., was the sole indenting agent of M/s. Intuitive Surgical Inc., USA, in India. M/s. CARE filed a bill of entry for importing the "Da Vinci Surgical System" and claimed a concessional rate of customs duty by misclassifying the system under a category that allowed for such a concession. The equipment was declared as an "Endoscopic System" based on a brochure provided by the appellant, which described the equipment as a "Fiber optic endoscopic system," whereas the manufacturer's literature described it as a "surgical system."

The Commissioner of Customs found that M/s. CARE, in connivance with the appellant, misdeclared the goods to evade customs duty. The appellant advised M/s. CARE on the description to be used in the bill of entry and provided a misleading brochure. Statements from M/s. CARE officials confirmed that the appellant suggested the misdeclaration to claim the concessional rate.

The Tribunal (CESTAT) upheld the findings of the Commissioner, confirming that the equipment was not an endoscopic system and was not eligible for exemption. The High Court agreed with the factual findings and held that the appellant had clearly abetted the misdeclaration of the goods, making them liable under Section 112(a) of the Customs Act, 1962.

2. Justification of the Quantum of Penalty:

The Commissioner of Customs imposed a penalty of Rs. 25 lakhs on the appellant for their role in the misdeclaration. The Tribunal reduced the penalties imposed on the Secretary of M/s. CARE but did not grant any relief to the appellant. The High Court noted that the Secretary and Chairman of M/s. CARE were well aware of the misdeclaration and acted with the same intent as the appellant.

The High Court held that the penalty on the appellant should be proportionate to the penalties imposed on the Secretary and Chairman of M/s. CARE, who played an equal role in the misdeclaration. Therefore, the penalty on the appellant was reduced from Rs. 25 lakhs to Rs. 5 lakhs, applying the principle of parity.

Conclusion:

The High Court upheld the Tribunal's decision that the appellant abetted the misdeclaration and was liable under Section 112(a) of the Customs Act, 1962. However, the quantum of penalty was reduced to Rs. 5 lakhs to ensure parity with the penalties imposed on the officials of M/s. CARE. The appeal was disposed of with no order as to costs.