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2015 (2) TMI 300 - HC - CustomsReduction in penalty imposed - Validity of order passed by CESTAT - Whether order passed by CESTAT is arbitrary - Option to redeem goods on payment of partial redemption fine given - Held that - CESTAT has affirmed intentional mis-declaration of goods but thereafter reduced penalty by merely recording that the penalty is on the higher side. The order, in our considered opinion, is nonspeaking and as a consequence, arbitrary. - CESTAT has assigned a reason for reducing penalty namely that the penalty imposed is on the higher side but while doing so, has not supported its findings by a process of reasoning much less a perceptible process of reasoning. The reduction of penalty without disclosing as to how the penalty is on a higher side, must necessarily be held to be arbitrary. At this stage, it would be appropriate, to point out that penalty has to be calculated under Section 114 of the Customs Act, 1962 and the respondents may be liable either under Section 114(2) or Section 114(3) of the Customs Act, 1962 depending on the date of confiscation and the nature of the provisions in force on the relevant date. The maximum possible penalty was ₹ 15.30 crores but the adjudicating authority imposed a total penalty of ₹ 1.75 crores. The CESTAT has reduced penalty to ₹ 12 lacs without assigning any clear and cogent reasons much less reference to any relevant facts or law. - Consequently, we set aside order dated 15.04.2005, passed by the CESTAT insofar as it relates to reduction of penalty and restore the matter to the CESTAT for adjudication afresh and in accordance with law. - Decided in favour of Revenue.
Issues:
1. Reduction of penalty by the Customs Excise & Service Tax Appellate Tribunal (CESTAT) without proper reasoning. 2. The power of CESTAT to assess penalty under Sections 113 and 114 of the Customs Act, 1962. 3. Non-redemption of goods by the respondents leading to revival of the order of confiscation. 4. Compliance with the mandatory provisions of the Customs Act, 1962 and the Foreign Trade (Development and Regulation) Act, 1992. Reduction of Penalty by CESTAT: The High Court examined the case where a large number of consignments were seized due to mis-declaration of goods by the respondents. The adjudicating authority ordered confiscation of the goods and imposed a penalty of Rs. 1.75 crores. The CESTAT, in a common order, affirmed the mis-declaration but allowed redemption subject to payment of a fine and significantly reduced the penalty. However, the respondents did not redeem the goods within the specified time, leading to the revival of the confiscation order. The High Court found the CESTAT's reasoning for reducing the penalty to be inadequate and arbitrary. The CESTAT failed to provide a clear and cogent rationale for the reduction, which is essential for quasi-judicial orders. The Court emphasized the necessity of a perceptible process of reasoning in such decisions and highlighted the arbitrary nature of the penalty reduction without proper justification. Power of CESTAT to Assess Penalty: The counsel for the revenue contended that the CESTAT's reduction of penalty without proper reasoning was contrary to the mandatory provisions of Sections 113 and 114 of the Customs Act, 1962, when read along with Section 11 of the Foreign Trade (Development and Regulation) Act, 1992. On the other hand, the respondents' counsel argued that the CESTAT's discretion in assessing penalties was not arbitrary and was empowered by Section 114 of the Customs Act, 1962. The High Court observed that penalties should be calculated under the relevant provisions of the Customs Act, and the CESTAT must provide a reasoned decision when reducing penalties. The Court highlighted the importance of clear reasoning and reference to relevant facts or laws when imposing or reducing penalties under the Customs Act. Non-Redemption of Goods: The respondents did not redeem the goods within the specified time, rendering the challenge to the redemption allowed by the CESTAT moot. This led to the revival of the confiscation order, leaving only the challenge to the reduced penalty for consideration by the High Court. The failure to redeem the goods within the prescribed period had a significant impact on the legal proceedings and the outcome of the case. Compliance with Legal Provisions: The High Court emphasized the necessity of complying with the mandatory provisions of the Customs Act, 1962, and the Foreign Trade (Development and Regulation) Act, 1992. In this case, the CESTAT's reduction of penalty without proper reasoning was deemed to be in violation of the statutory requirements. The Court set aside the CESTAT's order related to the penalty reduction and directed the matter to be adjudicated afresh with proper reasoning and in accordance with the law. The decision underscored the importance of following due process and providing adequate justifications in quasi-judicial proceedings to ensure fairness and legality. In conclusion, the High Court's judgment addressed the issues of penalty reduction without proper reasoning, the statutory provisions governing penalty assessment, the non-redemption of goods affecting the legal proceedings, and the importance of compliance with legal requirements in customs cases. The Court emphasized the need for reasoned decisions, adherence to statutory provisions, and proper legal procedures to uphold the integrity and fairness of judicial outcomes in matters concerning customs violations and penalties.
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