2014 (12) TMI 610 - HC - Customs

Quantum of penalty & redemption fine - Tribunal reduced both penalty & fine - whether there is discretion vested with the Tribunal to reduce the penalty imposed by the Original Authority under Section 114A of the Customs Act - Import licence issued by the Directorate General of Foreign Trade dated 20-6-1994 was re-validated up to 31-5-1998. During the course of investigation by the Department, clarification was sought for from the Additional Inspector General (Wild Life) in the Ministry of Environment and Forest. In pursuance to such request, the said Authority, by communication dated 21-7-1998, clarified that the respondent/importer was a Zoo and the certificate issued by the Deputy Director Wild Life (Protection) was valid. Once again the Department addressed the Member Secretary, Central Zoo Authority on 24-8-1998 to re-examine and clarify whether the importers have been accorded recognition as zoo in terms of provisions of Wild Life (Protection) Act, 1972 and the Recognition of Zoo Rules, 1992. It is only thereafter, the Ministry of Environment and Forest, during October, 1998, informed the appellant - Department that after examining the matter in detail, it was decided that the importer was not officially accorded Zoo Operation Status and directed that the .import may be treated as Other Live Animals . In order to attract penalty equal to the duty determined, there should be a clear finding that the importer had colluded or made a wilful mis-statement or suppressed the facts. Thus, in the absence of any such specific finding rendered by the Original Authority nor any such proposal in the show cause notice, we are inclined to confirm the order passed by the Tribunal reducing the penalty of ₹ 10.00 lakhs - Decided against Revenue. Entire importation has been handled by the Managing Director of the company and all the correspondences between various Authorities were personally handled by the Managing Director and therefore, he was fully aware that the firm had imported the subject goods. Therefore, he cannot plead ignorance of the facts. Further more, the respondent had not questioned the order of confiscation or the imposition of duty. Thus, the order of confiscation has attained finality and there is no discretion vested under Section 112(a) of the Customs Act and there is no requirement to record a finding that there has been any wilful mis-statement or concealment or suppression of facts, as is found under Section 114A of the Customs Act. Tribunal was not right in setting aside the penalty imposed on the Managing Director under Section 112(a) of the Customs Act. Further, it has to be pointed out that under Section 112(a), any person, who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, shall be liable to pay penalty not exceeding the duty sought, to be evaded on such goods or five thousand rupees, whichever is greater. Thus, considering the facts, the Managing Director is liable to pay penalty, which is fixed at ₹ 5,000 - Decded in favour of Revenue.

Summary

Issues:
1. Reduction of penalty amount by the Tribunal under Section 114A of the Customs Act.
2. Discretion of the Tribunal in setting the penalty equal to duty under Section 114A.
3. Penalty imposed on the Managing Director contrary to Section 112(a) of the Customs Act.

Issue 1: Reduction of Penalty Amount under Section 114A:
The case involved the appeal against the reduction of fine and penalty by the Tribunal under Section 114A of the Customs Act. The Original Authority confirmed the duty liability on imported sea mammals, leading to the imposition of a penalty equal to the duty amount under Section 114A. The Tribunal reduced the penalty, questioning the wilful misstatement or suppression of facts by the importer. The High Court analyzed the evidence, including certifications and communications supporting the importer's claim as a zoo. Not finding evidence of collusion or wilful misstatement, the Court upheld the Tribunal's decision to reduce the penalty to Rs. 10.00 lakhs.

Issue 2: Discretion of the Tribunal in Setting Penalty Equal to Duty:
The Court examined whether the Tribunal had the discretion to reduce penalties imposed under Section 114A of the Customs Act. Section 114A mandates penalties equal to the duty in cases of non-levy or short-levy due to collusion or wilful misstatement. The Court emphasized the necessity of clear findings to levy such penalties. In this case, the importer's documentation and clarifications from authorities indicated compliance with zoo regulations. As no evidence of wilful misstatement was found, the Tribunal's decision to reduce the penalty was deemed appropriate by the High Court.

Issue 3: Penalty Imposed on Managing Director under Section 112(a):
Regarding the penalty imposed on the Managing Director under Section 112(a) of the Customs Act, the Tribunal set it aside for lack of specifics on the Director's involvement. However, the Department argued that the Director was actively involved in the importation process and correspondence, making him aware of the goods imported. The Court noted that under Section 112(a), any act or omission rendering goods liable to confiscation attracts penalties. Since the Director's involvement was established, a penalty of Rs. 5,000 was upheld. Consequently, the Court partly allowed the appeals, confirming the reduced penalty of Rs. 10.00 lakhs and imposing a penalty of Rs. 5,000 on the Managing Director under Section 112(a) of the Customs Act.

This detailed analysis of the judgment highlights the key legal issues, the arguments presented, and the Court's reasoning in each aspect of the case.