Dismissed

the commissioner ocustoms-raigad v. kargawal corporation

Bombay HC23 Sept 2021CUAPP/5/2007

Case brief

AI extract

What is this about?

In this customs appeal, the High Court dismisses the Commissioner of Customs' challenge to the Customs, Excise and Service Tax Appellate Tribunal's reduction of redemption fines. The Court holds that fine quantum is essentially a question of fact and the Tribunal correctly reduced the fine based on averaging previous orders.

What did the court decide?

The appeal was dismissed, and the questions of law were answered in the affirmative, sustaining the Tribunal's reduction of the redemption fine.

the commissioner ocustoms-raigad Vs kargawal corporation — Intellectual Property | Bombay HC (2021)

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CUAPP 5.07.doc

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Urmila Ingale

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Digitally signed by URMILA URMILAPRAMOD PRAMOD INGALE INGALE Date:2021.10.01 16:25:36 +0530

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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CUSTOMS APPEAL NO. 5 OF 2007

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The Commissioner, JNCH,
JNPT, Nhava Sheva, Dist. Raigad

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.. Appellant

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vs.

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Kargawal Corporation
Survey No. 269/1/1/1/1/3, Village Athal,
P.O.Naroli, Silvassa,
U.T.of Dadra, Nagar & Haveli..Respondent

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Mr. Pradeep S.Jetly, Senior Advocate a/w Mr.Jitendra B.Mishra, for
Appellant.

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Mr.Anil Balani, for Respondent.

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CORAM : K.R.SHRIRAM, J.
 M. S. KARNIK, J.

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 DATE: SEPTEMBER 23, 2021

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ORAL JUDGMENT (K.R.SHRIRAM, J.) :

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1.This appeal is filed under Section 130 of the Custom Act,
1962 against an order dated 24th January 2006 passed by the
Customs, Excise and Service Tax Appellate Tribunal (the ‘Tribunal’).
The Tribunal, by the impugned order, had partly allowed the appeal
filed by the respondent by reducing the redemption fine imposed on
respondent for unauthorised import of restricted item, i.e., rough
marble blocks without an import licence in violation of the provisions

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CUAPP 5.07.doc

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of EXIM policy.

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2.Respondent had imported three consignments of the
restricted goods, i.e., rough marble blocks covered by three bills of
entry being B/E no. 999963, no. 999964, both dated 20th October
2005 and no. 621758 dated 16th November 2005. Mr.Jetly stated
that this appeal, presently will have to be restricted only with regard
to bill of entry no. 999964 dated 20th October 2005 since the
monetary limit in case of other two bills of entry is below Rs. 20
lakhs. Mr.Jetly stated that there are circulars and instructions
received to not to press the case where the subject matter of dispute
is below the limit prescribed for High Court, i.e., Rs. 20 lakhs.

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3.Admittedly, respondent had imported restricted item
without specific import licence issued by proper authority, i.e., the
Director General of Foreign Trade. It is alleged by Mr.Jetly that
respondent was a repeat offender and in the past also the goods
imported were cleared on payment of redemption fine in lieu of
confiscation of the goods.

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CUAPP 5.07.doc

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4.In the present case, respondent had waived issuance of a
show cause notice and requested that the case be adjudicated without
conducting a personal hearing. Respondent's case was adjudicated by
Commissioner of Customs (Imports), JNCH, Nhava Sheva [COC (I)]
and COC (I) passed an order dated 16th December 2005 and received
on 3rd January 2006 whereby, with regard to the bill of entry no.
999964 dated 20th October 2005, he ordered confiscation of the
goods which were valued at Rs. 44,46,247.63 in terms of Section
111(d) of the Customs Act, 1962. COC (I), however, permitted
respondent to redeem the goods on payment of redemption fine of
Rs. 37 lakhs and also imposed a penalty of Rs. 1 lakh on respondent
under Section 112(a) of the Customs Act, 1962. The fact that the
COC (I) has powers to give an option to the importer to pay in lieu of
confiscation such fine as the said officer thinks fit is not in issue.

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Section 125 of the Customs Act reads as under :

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“125. Option to pay fine in lieu of confiscation

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(1) Whenever confiscation of any goods is authorised
by this Act, the officer adjudging it may, in the case of any
goods, the importation or exportation whereof is prohibited
under this Act or under any other law for the time being in
force, and shall, in the case of any other goods, give to the
owner of the goods 1[or, where such owner is not known, the
person from whose possession or custody such goods have
been seized,] an option to pay in lieu of confiscation such
fine as the said officer thinks fit:

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Provided that where the proceedings are deemed to be

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CUAPP 5.07.doc

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concluded under the proviso to sub-section(2) of section 28
or under clause (i) of sub-section (6) of that section in
respect of the goods which are not prohibited or restricted,
[no such fine shall be imposed],

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Provided further that, without prejudice to the
provisions of the proviso to sub-section (2) of section 115,
such fine shall not exceed the market price of the goods
confiscated, less in the case of imported goods the duty
chargeable thereon.

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(2) Where any fine in lieu of confiscation of goods is
imposed under sub-section (1), the owner of such goods or
the person referred to in sub-section (1) shall, in addition, be
liable to any duty and charges payable in respect of such
goods.]

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(3) Where the fine imposed under sub-section (1) is
not paid within a period of one hundred and twenty days
from the date of option given thereunder, such option shall
become void, unless an appeal against such order is
pending."

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5.Against this order passed by COC (I), respondent
preferred an appeal before the Tribunal and the order dated 24th
January 2006 of the Tribunal is impugned in this appeal. The
Tribunal observed that the COC (I) has imposed almost 72 to 80%
fine and reduced it to 35% of the value determined.

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6.The order of the COC (I) and of the Tribunal are very
brief and it will be useful to reproduce the relevant portions of those
orders. Paragraphs 4 & 5 of the order of the COC (I) read as under :

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"4. The facts of the case are self explanatory - the item
under import Rough Marble Block is restricted as per the
EXIM Policy 2004-2009 and hence its impost requires a

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CUAPP 5.07.doc

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specific licence. No such licence is admittedly available and
has been produced. There is thus a violation of Section 3(2)
of the Foreign Trade (Development & Regulation) Act, 1992
read with the EXIM Policy. The goods thus are liable for
confiscation since their import in the absence of any such
licence is a contravention of the provisions of Section
111(d) of the Customs Act, 1962. The importers are held to
be persons concerned with the offence and hence are liable
for penalty in terms of Section 112(a). The importer has
pleaded for restricting fine/penalty to 35%. However,
given the facts of the case viz. that the fact of import rough
marble blocks requires a specific licence being a well
established requirement of the Foreign Trade Policy, this is
untenable.

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ORDER

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5. Having regard to my findings. I order confiscation of the
goods valued at Rs.44,46,247.63 imported vide B/E No.
999964 dated 20.10.2005 in terms of Section 111(d). I
however permit the importer to redeem the goods on
payment of RF of Rs.37,00,000 (Rupees Thirty Seven Lakhs
only). I impose a penalty of Rs.1,00,000/- (Rupees One
Lakhs only) on the importer M/s.Kargwal Corporation in
terms of Section 112(a) of the Customs Act, 1962."

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Paragraphs 1 & 2 of the order of the Tribunal read as under :

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1. After allowing the applications for stay filed by the
importer against the orders of the Commissioner of
Customs, we proceed to hear and decide the appeal
themselves as the dispute before us, viz. appropriate fine to
be levied in the case of import of rough marble blocks,
stands settled by a series of orders of the Tribunal. We find
that the Commissioner has levied a fine of approximately
72 to 80% and penalty of Rs. 1,00,000/- in each case. The
appellants seek reduction of the percentage of fine on the
basis of earlier orders to the extent of approximately 35%.

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2. On hearing both sides and noting the submission of the
learned SDR that no leniency ought to be shown to the
appellants herein on the ground that they are repeated
offenders, we find that there is no such conclusion reached
by the adjudicating authority in any of the three
adjudication orders challenged before us in these appeals.
We find that there is no discussion in the impugned orders

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CUAPP 5.07.doc

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as to how the quantum of fine has been arrived at and as
to what would be the margin of profit in order to arrive at
the quantum of fine. Noting that in the case of import of
similar goods and of rough marble slabs also, the Tribunal
has been consistently holding that a fine which works out
to about 20 to 30% of the assessable value would be
sufficient, in a serious of decisions, we reduce the fines in
each case to 35% of the value determined which is the
transaction value because the value has been accepted,
keeping in mind the fact that the appellants herein had
earlier also imported rough marble blocks, as seen from
the earlier orders of the Tribunal and, therefore, they have
been importing these goods over a period of time even
without a licence."

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7. On 8^th February 2007, this appeal was admitted and

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following questions of law were framed.

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1. Whether on the facts and circumstances of the case, the
Hon'ble Tribunal was right and justified in law in reducing
redemption fine, imposed u/s 125 of the Customs Act,
1962, in all the three cases from Rs. 30,00,000/- to
Res.37,00,000/- and Rs. 21,00,000/- to 35% of the
determined value of the goods, which worked out to
approximately Rs.13,37,000/- to Rs. 16,57,000/- and
Rs.9,68,305 ?

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2. Whether on the facts and circumstances of the case, the
Hon'ble Tribunal was right and justified in law in
intervening with the amount of redemption fine, imposed
under Section 125 of the Customs Act, 1962, on the
Respondents for unauthorised import of restricted items
without which specific import licence, by reducing the
redemption fine from Rs. 30,00,000/- Rs. 37,00,000/- and
Rs. 21,00,000/- to 35% of the determined value works out
to Rs.13,37,000/-, Rs.16,57,000/- and Rs.9,68,305/-
approximately.

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3. Whether in the facts and circumstances of the case,
reduction of redemption fine imposed on an importer for
unauthorised import of restricted items to the extent that
the importer will be able to make profit even after paying
the fine and penalty and thus giving an incentive to
continue to import such restricted item, is justified in law

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CUAPP 5.07.doc

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and whether a substantial question of law can be said to
have arisen out of an order of the Tribunal reducing such
redemption fine imposed as a deterrent for the
unauthorised import?"

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We have heard Mr.Jetly and Mr.Balani.

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8.COC (I) has not given any basis as to how he decided a

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redemption fine of Rs. 37 lakhs. It is settled law that the quantum of
redemption of fine which could be imposed is always dependent on
the determination of the market price of the goods confiscated. 1The
Apex Court in the case of Commissioner of Customs, Mumbai Vs.
Mansi IMPEX says “this is one of the pre-requisites prescribed in the
statute itself”. In the case at hand, the COC (I) has not even
conducted a sample market survey for determining the market price
of the goods, without doing that, it could not have been possible for
the COC (I) to arrive at a legally justified and correct quantum of
redemption fine to be imposed.

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Paragraphs 12 to 15 of Mansi IMPEX (supra) read as under :

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"12. Section 125 of the Act being the provision for levying the redemption fine in lieu of confiscation, the said provision is to be strictly followed and, therefore, said redemption fine should be imposed by the competent authority which amount would not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.

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13. It is true that in the present case, the respondents had

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1 2011(270) E.L.T. 631 (S.C.)

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CUAPP 5.07.doc

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imported Marble Blocks without any licence and, therefore,
their goods which were sought to be imported, were
confiscated. On payment of duty as determined, the question
that arose was as to what would be the redemption fine
payable, if any. The said issue was considered by the
Commissioner and thereafter he had imposed redemption fine
in lieu of confiscation and also penalty in terms of the
provisions of Sections 125 and 112 of the Act respectively.
However, the aforesaid orders passed by the Commissioner
came to be interfered with by the Tribunal whereby the
Tribunal reduced the quantum of redemption fine as also the
penalty.

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14. We have considered the submissions of the counsel
appearing for the appellant that the aforesaid reduction in case
of redemption fine as also the penalty is illegal and without
jurisdiction. However, the records disclose that the
Commissioner had imposed the redemption fine in lieu of
confiscation without making any market enquiry and survey
regarding the market price of the goods confiscated at the
relevant point of time. The quantum of redemption fine which
could be imposed is always dependent on the determination of
the market price of the goods confiscated. This is one of the
pre-requisites prescribed in the statute itself. In the present
cases where not even a sample market survey was done for
determining the market price of the goods, it could not have
been possible for the Commissioner to arrive at a legally
justified and correct quantum of redemption fine to be
imposed. Any such determination would also be without
following the procedure prescribed under the Act.

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15. We also feel that as of now also, no useful direction could
also be given to the Commissioner to get a market survey made
even at this stage due to lapse of number of years in the
meantime and also because of the fact that no sample of the
goods imported by the respondents has been retained or kept
by the Department. Therefore in our considered opinion, in the
aforesaid appeals, no useful purpose would be served by
interfering with the orders passed by the Tribunal, particularly
in view of the fact that even the Department is unable at this
time to ascertain and determine the market price of the goods
confiscated so as to enable the authorities to levy appropriate
redemption fine. In that view of the matter, we dismiss these
appeals on the aforesaid grounds leaving the parties to bear
their own costs."

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CUAPP 5.07.doc

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9. In 2 Commissioner of Customs (Import) Vs. Stoneman

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Marble Industries, the Apex Court concurred with the view expressed
by a Division Bench of this Court while dismissing the appeal filed by
the department, and in that case also subject matter was illegal
importation of marble, where High Court held that whether the
reduction in redemption fine and penalty is justified or not, is
essentially a finding of fact. We also respectfully agree with the view
expressed by the Division Bench. Paragraphs 7 and 15 of Stoneman
Marble Industries(supra) read as under :

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7. As afore-mentioned, the High Court has, vide the impugned
orders, rejected the applications filed by the Revenue on the
ground that no question of law arose from the orders of the
Tribunal. It has held as follows :

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 “Having heard the counsel on both sides, we are of the opinion
that there are no questions of law which can be said to arise out
of the order of the Tribunal. It is not disputed by the Revenue that
the facts in the case of Respondents i.e. Marmo Classic and the
facts in the case of Stonemann Marble Industries and Jai
Bhagwati Impex Pvt. Ltd. are similar. On perusal of the orders
passed by the Tribunal in the case of Stonemann Marble
Industries and Jai Bhagwati Impex Pvt. Ltd. it is seen (sic). that
the Tribunal has reduced the redemption fine and penalty by
taking into account the margin of profits and the demurrage
incurred by the importers of the said consignments. It is pertinent
to note that the Tribunal in similar circumstances, have taken a
uniform view to restrict the redemption fine to 20% of the CIF
value and penalty to 5% of the CIF value. Under these
circumstances, it is evident that the decision of the Tribunal is
essentially based on finding of fact. The Tribunal has reduced the
redemption fine and penalty by taking into account its earlier
decision as well as the margin profit and the amount of
demurrage incurred on the goods. It is not disputed by the
Revenue that the CEGAT has power to reduce the redemption fine
and penalty. Therefore, in the facts of the case whether the

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2 2011 (264) E.L.T.3 (S.C.)

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reduction in redemption fine and penalty is justified or not, it is
essentially a finding of fact and no material has been adduced by
the revenue to establish that the order of the Tribunal is ex facie
perverse, arbitrary & contrary to the facts on record.

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15. Thus tested, we are in complete agreement with the High
Court that the questions raised by the Revenue for reference could
not be said to be questions of law. It bears repetition that the
Revenue did not specifically challenge the finding of the Tribunal
that the facts in the instant cases were similar to those in M/s.
Stonemann Marble Industries (supra), which was essentially a
finding of fact. Although, we do find some substance in the
submission of learned counsel for the Revenue that a standard
formula cannot be laid down for imposition of redemption fine
and penalty under the aforenoted provisions of the Act and each
case has to be examined on its own facts but when a final fact
finding body returns a finding that the facts obtaining in each of
the cases before it are similar, and such finding is not questioned,
levy of redemption fine or penalty uniformly in all such cases
cannot be construed as laying down an absolute formula, which is
the case here. We are convinced that the Revenue did not
discharge its burden under Section 130A of the Act in as much as
it did not specifically challenge the Revenue’s aforestated finding
as being perverse. In this view of the matter, the High Court was
justified in declining to issue direction to the Tribunal to make a
reference under Section 130A of the Act.

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10.Mr.Jetly submitted that respondent was a repeat offender
and relied upon the judgment of this Court in the case of
3Sophisticated Marbles & Granite Industries Vs. Union of India to
submit that this Court should not be lenient to respondent because
respondent was a repeat offender and the Court should sustain the
order passed by the COC (I).

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11.We have to note that COC (I) has not even observed in

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3 2004 (166) E.L.T. 318 (Bom.)

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his order that respondent was a repeat offender or that was the
reason why he imposed the penalty of almost 80% on respondent.

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12.In our view the Tribunal has correctly observed that
there was no discussion in the order of the COC (I) as to how the
quantum of fine has been arrived at and what would be the margin of
profit in order to arrive at the quantum of fine. The Tribunal has at
least given the basis as to why they have reduced redemption fine to
35%.

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13.In the circumstances, in our view, appeal requires to be
dismissed. The questions of law framed as above, though we have
observed whether reduction in redemption fine and penalty is
justified is essentially a finding of fact, are still answered in
affirmative.

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14. Appeal dismissed.

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(M.S. KARNIK, J.)

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 (K.R.SHRIRAM, J.)

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the commissioner ocustoms-raigad v. kargawal corporation

Case brief

What is this about?

What did the court decide?

the commissioner ocustoms-raigad v. kargawal corporation

Case brief

What is this about?

What did the court decide?

What the court decided

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