2016 (11) TMI 558 - HC - Customs

Imposition of penalty on petitioner - IEC - petitioner permitted the IEC to be used by a person known to petitioner (very closely) and that too for a consideration, though for a very insignificant amount - Held that - When once the IEC is allowed to be used by someone else, the associated risks could be understood to have been well within the realm of knowledge of such an individual. In that view of the matter, we think that for the acts of lending IEC, rubber stamp and letter heads of the firm, the consequences which follow from Sections 113 and 114 of the said Act, cannot be avoided - However, what still remains to be examined by us is the justification behind the adjudicating authority in imposing a penalty of ₹ 1,00,000/- on the appellant before us, while all others, including the individual who has misused the IEC of the appellant and also the Customs House Agent, were imposed with lesser punishment of penalty of ₹ 50,000/-. Section 114 of the said Act has provided for discretion in the hands of the Adjudicating Authority to impose a penalty, which can go up to three times the value of the intended goods to be exported. Therefore, it is axiomatic that such a discretion should be exercised on sound lines. When discretion has been used while imposing the penalty of ₹ 50,000/- on all others, the same does not appear to have been exercised properly and even handed manner. At any rate, when it came to the appellant, in the absence of any specific mallacious intent attributable to the appellant exclusively for the entire episode, imposition of greater amount of penalty of ₹ 1,00,000/-, which is double the amount of penalty imposed on the others, does not appear to be justifiable - the amount of penalty against the appellant substituted to ₹ 50,000/- as against ₹ 1,00,000/-. Petition disposed off - penalty imposed, only penalty on petitioner reduced - decided partly in favor of petitioner.

Summary

Issues:
1. Export of prohibited goods under the guise of permitted goods.
2. Liability for confiscation and penalty under the Customs Act, 1962.
3. Discretion in imposing penalties by the Adjudicating Authority.

Issue 1:
The case involves the export of goods under the guise of permitted goods, raising suspicion whether prohibited goods were being exported. The goods in question were described as 'Incense Raw Material,' but concerns were raised regarding the actual nature of the goods. Samples were collected and examined, revealing that the goods were different from Red sanders but fell under the category of wood products prohibited for export under the Foreign Trade (Development and Regulation Act) 1992.

Issue 2:
Under Section 113 of the Customs Act, 1962, goods attempted to be exported contrary to any prohibition are liable for confiscation. Furthermore, Section 114 imposes penalties on individuals responsible for rendering goods liable for confiscation. The appellant claimed innocence, stating that someone else used their Import Export Code (IEC) without authorization. However, the authorities found the appellant's actions, such as allowing unauthorized access to the IEC and providing firm letterheads and rubber stamps, as risky and liable for penalties under the Act.

Issue 3:
The Adjudicating Authority imposed a penalty of ?1,00,000 on the appellant, while others involved were penalized with a lesser amount of ?50,000. The High Court noted that Section 114 allows discretion in penalty imposition, up to three times the value of the goods. The Court found the discrepancy in penalties unjustifiable, especially considering the absence of malicious intent solely attributable to the appellant. As a result, the Court modified the penalty against the appellant to ?50,000, aligning it with others involved in the case.

In conclusion, the High Court modified the penalty imposed on the appellant, emphasizing the need for just and consistent application of penalties under the Customs Act.