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TMI Blog1992 (12) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... der No. A. 445/90-NRB had upheld the order of confiscation but set aside the penalty and remanded the case to the Additional Collector for determination of the redemption fine for the reason that the charge of the importer's complicity in obtaining the licence by misrepresentation or in fabricating letter of authority had not been proved. Regarding the quantum of fine, the Tribunal felt that the imposition was justified under Section 125 but it was on the higher side. The Tribunal also observed that the adjudicating authority had not disclosed the details of market enquiries to the appellants before determining the redemption fine. The Tribunal also vide Misc. Order No. 242/90-NRB dated 13-9-1990 had ordered the documents presented by the appellants relating to the market price of the imported goods to be taken on record as necessary for determining the redemption fine. In the re-adjudication proceedings it was contended before the Additional Collector that certain expenses were to be added to the CIF value and duty payable in respect of the imported goods and the expenditure was indicated on C.H.A. Bill, Steamer Agent's charges, Transportation charges up to Ghaziabad and various e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of passing the order, the price of the goods would have fluctuated because of numerous factors such as the import policy for the goods as a necessary consequence of which the volume of goods available in the market would have been affected one way or the other, the changes, if any in the rate of duty on the goods and numerous other factors like deterioration, if any, in the goods on account of storage etc., even availability of identical goods indigenously produced which may affect the price of the imported goods. If what the adjudicating authority has to ensure is that the option to be exercised by the importer is real and not illusory, he will have to keep in mind all the factors which affect the exercise of the option at a time when he is about to pass the order and this cannot be done with reference to market price on the date of import or even with reference to market price on the date of issue of the show cause notice because of the long time that lapses after the notice is issued but before the order is passed. Since the question of giving the option is to be decided at the time of passing the order, the fine has necessarily to be relatable to the circumstances prevailing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore or after. He referred to Section 15 of the Customs Act, which provides that the rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force in the case of goods entered for home consumption under Section 46, on the date on which a bill of entry in respect of such goods is presented under that section. He also referred to Section 14(1) of the Customs Act which relates to the valuation, wherein it is provided that the duty of Customs chargeable on any goods by reference to their value, the value of such goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other, and the price is the sold consideration for the sale or offer for sale. He also referred to the definition "market price" as given in the Act. In terms of provisions of sub-section 30 of Section 2 of the Customs Act, 1962, "market price", in relation to any goods, means the wholesale price of the goods in the ordinar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the order passed by the adjudicating authority. He also referred to a decision of the Delhi High Court in the case of Jain Exports Pvt. Ltd. v. Union of India reported in 1987 (29) E.L.T. 753 (Del.). The High Court has held that "Various allegedly extenuating features, urged by the petitioners, such as absence of mens rea, bona fide belief, genuine undertaking of the import policy can be put forth before the authorities concerned and taken into account by them for seeing that a bona fide mistake may not unduly harshly penalise or cause irreparable injury to the importer. But it seems equally plain that the resort to Section 125 to impose fine in lieu of confiscation cannot be so exercised as to give a bonanza or profit for an illegal transaction of import. Otherwise, there may be serious danger and risk to the success of the whole import and export policy with inevitable adverse economic consequences for the nation. The amount of redemption fine would and must necessarily be determined by these considerations". Shri Bhushan also relied on the referring order to the Larger Bench and argued that the observations are correct. He argued that the market value at the time of adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or under the law for the time being in force, give to the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit. Even if the importation of the goods is prohibited under the Act, the adjudicating officer has the discretion to give an option to the importer to pay in lieu of confiscation such fine as the officer thinks fit. The Act has not provided the circumstances under which the prohibited goods should be released upon payment of fine in lieu of confiscation. The Adjudicating Officer may, in his discretion, give the importer an option to pay in lieu of confiscation a fine. The exercise of this discretion by the adjudicating officer is a quasi-judicial function and cannot be controlled by the dictates of the Central Board of Excise and Customs or any other authority. The power to give option to the importer to release the prohibited goods upon payment of fine is a power coupled with the duty and in any event it should be exercised fairly and reasonably and not arbitrarily and capriciously." 6. Shri Jain, the learned advocate, has contended before us that while fixing the quantum of fine the margin of profit has to be calculated, and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that arise in the construction and application of the aforesaid provision, it would be material to remember all the time that while a proceeding for confiscation is, undoubtedly, one in rem rather than in personam like, e.g. penalty under S. 112 of the Customs Act, 1962, - one in relation to the offending goods rather than in relation to the person in any way concerned with them nevertheless, it is no less penal in nature or quasi-criminal in character, even though such proceedings are under a fiscal enactment [AIR 1974 SC 859 - Collector of Customs v. Boormal - Para 22 of the report where confiscation is referred to as a penalty]. The test to adjudge if an action is penal or quasi-criminal is not in the mens rea prescribed. If that were the true test, a proceeding for the levy of penalty is also not penal or quasi-criminal, seeing that no mens rea is prescribed at all in S. 112(a) although penalty is, indisputably, penal. On the contrary, confiscation as an act of appropriating private property for State or Sovereign use was known since the Roman Empire and "usually been the result of the doing by the owner of some prohibited act... It is also the penalty for trying to carry cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise this discretion according to law. In the absence of such indications, the discretion exercised by an inferior tribunal should not be interfered with. Here, there is no such indication. I, therefore, do not propose to interfere." (iv) The aforesaid issue was neither raised nor considered in appeal to the Supreme Court in AIR 1971 SC 293. It cannot be, therefore, said that the aforesaid observation was affirmed by the Hon'ble Supreme Court; (v) Even so, the aforesaid observation is inapplicable in the facts and circumstances of this case. This is not a case where the inferior tribunal imposed one type of penalty rather than another which is less onerous. The learned adjudicating officer did indeed afford an option for redemption. The question is, if the fixation of the fine in lieu of confiscation could be in his absolute discretion unfettered by any principles or "well established lines" - "according to the rules of reason and justice and not according to private opinion : Rookes case (5 Rep lOOa); according to law and not humour. It is to be not arbitrary, vague, fanciful but legal and regular" [passage extracted in Para 26 of the report in AIR 1966 Cal. 237 from the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly take into account all relevant and material circumstances, including the extenuating factors on which the owners may reply". In view of this decision, no contention of an absolute unfettered discretion - not to be interfered with in appeal by a superior forum and not merely by way of a writ - can be advanced. We, however, observe that in the instant case no extenuating circumstances exist as has been held in Tribunal's decision in Jayant Oil Mills case and about which there is no dispute. Illegal importation with a view to making profit has been found in a similar case of M/s Jain Exports by Delhi High Court (C.W. 4037 and 4038/82 - copy of the judgment made available). (e) In fact, in enacting Section 125 of the Customs Act, 1962, in the place of Section 183 of the Sea Customs Act, 1878, the legislative intent is explicitly expressed, to (i) Categorise the classes of cases into those where an option for redemption is discretionary and where it is mandatory, and (ii) Provide a ceiling for the fine in lieu of confiscation that may be imposed, so that while the fine should be deterrent, the option should not be illusory. The new section, thus clarifies the considerations r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any particular day in a particular place is a notional concept, a hypothesis, implying merely the price a willing purchaser would pay a willing seller for the property in the goods and is evidenced by the price paid in a plurality of transactions of sales and purchaser occurring on that day or nearest to it and in that place in identical goods or goods of like kind or quality, or failing that similar goods at that place or at a time and place nearest to it. In the words of Lord Blanesburgh in Vacuum Oil case the wholesale cash price for which goods of a like kind or quality are sold or capable of being sold is "that price current for staple articles the amount of which, if not a subject of daily publication in the press, is easily ascertainable in appropriate trade circles". This is nothing but "market price". The "market price" of the goods confiscated is, in the circumstances, no more and no less than the market price for goods of the like kind or quality or similar goods ascertained on the basis of the prices paid in the course of multiple transactions of sale and purchase; (v) Market price when and where? Obviously at the time and place of importation. The offending act wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the computation of damages on breach of contract as laid down in AIR 1915 P.C. 48 [A.K.A.S. Jamal v. Moola Dawood Sons Company]. In that case, on a breach by the buyer in a contract of sale of certain shares in consequence of a fall in the market, the seller demanded payment of damages on the basis of the difference between the contract rate and the market rate ruling on the date of breach. Subsequently, however, the seller happened to sell them in a rising market at some profit. This resulted in mitigation of his loss to a certain extent. The question that was considered was whether the measure of damages for breach of contract was the difference between the contract price and the market price at the date of breach or the measure of actual loss sustained after re-sale in a rising market. If the seller was bound to reduce the damages by subsequent sale at better prices and if the purchaser is entitled to the benefit of such sale, it must be that he must bear the loss also, if any, in consequence of such sale. Their Lordships categorically held that the latter is impossible and the former proposition is equally unsound. If the seller holds on to the shares after the breach, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Sr. No. 62 under Appendix 4 of the relevant policy book. Under para 5 of Appendix 17 of the policy book, it has been absolutely clear that import of an item appearing in Appendix 4 (absolute banned list) will not be permitted against R.E.P. licences entitled to import 'banned items' except under certain conditions mentioned in the table appearing in Chapter 17. The staples are not mentioned in this table. It therefore implies that the import of staple pins is absolutely banned and is not permitted. This position is not affected by the entries at G. 2 in Appendix 17 which inter alia permits import of packing material. In view of the aforesaid legal position there is no justification in the distinction sought to be drawn between staple pins for stationery and staple pins for industrial purposes. The catalogue produced by the appellants shows that the staple pins are for use with a simple carton stitcher which can be screwed on to work bench. The catalogue therefore, does imply that the goods are meant for stapling cardboard sheets for converting them into cartons. But this position is not altered under the relevant policy book. Besides, the staples can be used for other purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir entry in the market. Therefore, the market price mentioned in the proviso cannot refer to the market price of the goods under import but market price of the goods of like kind and quality. The appellants have not stated as to what the market price of goods of like kind and quality was at the time import, and in absence of such an argument their plea that the redemption fine is ultra vires Sec. 125(1) C.A. is not valid and has to be rejected. In the above light, the fact that the goods under import were sold at a loss is of no consequence. Finally, the appellants' request for acceptance of the Licence No. P/L 0375251/C/XX/76/B/79 dated 21-7-1980 to cover the goods under import is found to be invalid. The list attached to this licence includes Pearl headed pins and pins of all types. But this description falls under the Head 'A' for Trimming and embellishments, the following': Therefore, what are permitted for import under the list attached with the licence are pins in the nature of trimmings and embellishments and not staple pins which are banned. Since staple pins are absolutely banned under Appendix 4, there is no question of the description of staple pins being included in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise a discretion. 8. In the present case I should like to note that the same adjudicating authority has imposed a fine of about 10% of the value of the goods on appellant Krishanlal Balram (in Appeal no. C. 449/87) and on appellant Ananda Trading. Company (in Appeal No. C. 493/87) whereas in all other orders passed on the same date, except one order which was passed on 16-4-1987, a quantum of fine of 15% has been imposed. While I find some force in the submission of the learned Counsel for the appellants that reduction in the quantum of the fine should be given in all these cases where 15% of the fine has been imposed conforming to the quantum of 10% adopted by the very same adjudicating authority in two cases referred to above, I am not inclined to modify the order and reduce the quantum of fine, because the exercise of the discretion though marginally varies from one case to other cases cannot be said to be either arbitrary or perverse. A small variation by itself cannot be a circumstance warranting modification of the same conforming to a rigid formula". (4) Shah Trading Company v. Collector of Customs, Bombay, Reported in 1988 (33) E.L.T. 165 (Tribunal) Para 5 of the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department should keep the property in fact if it is brought to its notice that an appeal is pending. In the present case, the petitioner also did not take out any application seeking suspension of the operation of the impugned order appealed against, nor is there any evidence on record to show that the department was aware of the pendency of an appeal before the Tribunal. In such a situation, we find no warrant for giving a direction that the petitioner is entitled to the prices on the date of the order of the Tribunal. Further, the case relied upon by the learned Counsel for the appellant is not applicable to the facts of this case because in that case the very order of the confiscation was set aside in appeal and apart from the finding was that there was no evidence to show as to when the gold was sent to the Mint. We, therefore, record the undertaking of the learned D.R. that the Department would pay the petitioner the value of the gold on the date of its seizure. Ordered accordingly". (6) Jain Exports Pvt. Ltd v. Union of India reported in 1990 (47) E.L.T. 213 (S.C.) Para numbers 5 and 6 of the judgment is reproduced below :- "5. Before the Appellate Tribunal the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal had itself observed that the Collector's order imposing redemption fine of Rupees five crores was not based on any material, but it refused to consider the reduction of redemption fine merely on the ground that the importers had failed to place additional material other than those which had already been considered by the High Court and the Supreme Court while determining the legality of the import. In our opinion the Tribunal committed apparent error in refusing to take into account the extenuating circumstances leading to the import of the disputed goods for purposes of determining the quantum of redemption fine. 6. While determining the question of quantum of redemption fine it is essential to consider the facts and circumstances relevant to the bona fide conduct of the importer in importing the goods. The question of bona fide import is relevant for determining the quantum of redemption fine as held by this Court in M/s. D. Navinchandra Co., Bombay Ors. v. Union of India Ors. - 1987 (29) E.L.T. 492 (S.C.) -1987 (3) SCC 66; and B. Vijay Kumar v. Union of India AIR = 1987 SC 1794. In these two decisions, this Court held that while imposing fine or penalty for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is or ought to be of universal application save where the statute bars the exercise of judicial discretion either in awarding punishment or in releasing an offender on probation in lieu of sentencing him forthwith. The words of Section 4(1) of the Probation of Offenders Act are wide and would evidently include offences under the Customs Act and the Gold Control Rules." 7. The learned SDR has laid heavy reliance in the case of Jain Exports Pvt. Ltd., New Delhi and Another v. Union of India and Others reported in 1987 (29) E.L.T. 753 (Del.) Para 71 which is relevant to the issue is reproduced below :- "It should also be noted that once it is found as I have that the goods were illegally imported, the same became liable to confiscation. Of course the Collector has given option to pay fine in lieu of confiscation. In that context it seems to me that the authorities have to examine various circumstances, details of facts, which cannot obviously be examined herein these proceedings. The redemption fine is in the discretion of the Collector. That is why various allegedly extenuating features which Mr. Sen urges can be put before the authorities concerned. No doubt the various features ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of Arvind Mohan Sinha v. Amulya Kumar Biswas fortifies our views that the redemption fine should be calculated on the basis of the gravity of the offence. We are of the view that redemption fine quantum should be fixed on the basis of the value of the similar or like goods on the date of importation, and as such the redemption fine has to be calculated on that basis. In view of the above discussion, we are of the view that Additional Collector was not justified in imposing the redemption fine at Rs. 7 lakhs. We direct the adjudicating authority to recalculate the redemption fine on the basis of the market price prevalent on the date of the importation of the goods in accordance with law. The appeal is disposed of in the above manner. 9. [Contra per : N.K. Bajpai, Member (T)]. - I have carefully studied the order written by the Hon'ble President and concurred in by three learned Members of the Larger Bench. I do not find it possible, with great respect, to persuade myself to fall in line with the majority view. Hence this separate order. 10. The question referred to the Larger Bench was - what should be the date for the purpose of ascertaining the "market p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fine has been fixed with reference to the market price prevailing on the date of import, it is quite clear that the importer will not be able to dear the goods because the fine would be high having been calculated with reference to the market price prevailing on the date of import. Conversely, in a case in which the market price has gone up, the fine having been fixed with reference to the increased market price, the importer cannot get the "bonanza or profit for an illegal transaction of import" referred to by the Delhi High Court in Jain Exports case (supra). Thus, in both circumstances, the option would not be rendered "illusory" if the material date for ascertaining the market price is the date when the adjudicating authority is about to pass the order of confiscation. The position, as we have seen, would be very different if the date for ascertaining the market price is the date of import. 14. A careful reading of Section 125 would also indicate that this section does not specify that the market price should be the one prevailing on the date of import. The Courts have also interpreted the section to invest a large measure of discretion in the adjudicating authority. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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