M-S. U.K. ENTERPRISES & ANR. v. COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE & ANR

Citation: [2007] 12 S.C.R. 436

Court: Supreme Court of India

Bench: ASHOK BHAN, V.S. SIRPURKAR

Case summary

M-S. U.K. ENTERPRISES & ANR. v. COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE & ANR.pdf

Judgment text

7-J M/S. U. K. ENTERPRISES & ANR. v. COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE & ANR. NOVEMBER 22, 2007 + [ASHOK BHAN AND V. S. SIRPURKAR, JJ. ] Customs Act, I962; Ss. 112, 114A & I25: Undervaluation-Import ofIntegrated circuits-Levy ofcustoms duty based upon actualprice-Differential amount ofduty-Demand of-Penalty & redemption fine-Imposition of-Appeal and crossappeals-Tribunal enhanced the penalty and the fine-On appeal, Held: Imposing ofenhancedpenalty by the Tribunal was against the express provisions oflaw-Hence, penalty reducedto the duty amount ).. in terms ofthe provision u/s. I I4A ofthe Act-In the facts and under the circumstances ofthe case, no interference in the order ofthe Tribunal enhancing thefine is calledfor. Appellants-assessee had imported Integrated Circuits (ICs) from a firm in Hong Kong. Directorate ofRevenue Intelligence (DRI) after examining the consignment found that ICs had been manufactured by foreign firm.

Based upon the information from the firm, theauthorities . ' came to the conclusion that the declared price of the goods was ~undervalued. Taking into consideration the actual price ofthe goods in question and after adding 10% towards profit of the dealer, the authorities fixed the value of the goods at Rs. 23. 4 Lac as against the declared value ofover2. 3 Lac (CIF Goa). Accordingly, the authorities demanded the differential amount ofduty ofRs. 4,91,000/-and imposed penalty ofRs. 50,000/-under Section 114A of the Customs Act on the ... _. , firm and Rs. 50,000/- on the proprietor ofthe firm underSection 112 of the Act. Redemption fine ofRs. 2,50. 000/- under Section 125 ofthe Act was also imposed on the firm. Both the assessee as well as the Revenue j , CUSTOMS AND CENTRAL EXCISE filed separate appeals before the Tribunal.

The Customs, Excise and Gold (Control) Appellate Tribunal dismissed the appeal filed by the assessee and accepted the appeal filed by the Revenue and enhanced the amount ofpenalty on the assessee to Rs. 10,00,000/-. However, the penalty imposed on the firm was set aside and the redemption fine was also enhanced to Rs. 10,00,000/-. Hence the present appeals. • -4 Appellants contended that the maximum penalty which could be imposed under Section 114A of the Act can be equal to the duty demanded which, in the present case, was Rs. 4,91,000/- whereas the Tribunal has enhanced it to Rs. 10,00,000/-; and that under Section 125 ofthe Act, Revenue could impose the fine in lieu ofconfiscation as may be deemed fit but it could not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. But the fine in the instant case has been increased to Rs. 10,00,000/- without ascertaining the market value of the goods confiscated. A_.

Disposing ofthe appeals, the Court HELD: 1. The amount of penalty could not be more than the amount equal to the duty chargeable. A bare perusal ofSection 114A ofthe Customs Act makes it clear that the liability to pay penalty can be equal to the amount ofduty and could not exceed the payable duty. Hence, the penalty imposed was against the express provisions oflaw. In these circumstances, the amount of penalty is reduced to Rs. _.... 4,91,000/-. [Para 9] [442-D, E, F] ' 2. Though the Tribunal had enhanced the amount offine in lieu of confiscation to Rs. 10,00,000/-without determining the market price of the goods in question on the date ofimposing the fine, but, in the facts and circumstances ofthe case, this Court is not inclined to interferewith the order of the Tribunal insofar as the enhancement of the fine is concerned, as it is evident from the facts placed before this Court that the market price of the goods could not be less than Rs. 10,00,000/-.

Admittedly, thevalue ofthe goods has been fixed atRs. 23. 4 Lac,which includes the profit ofthe dealer, as against the declared value ofmore ~·' than Rs. 2. 3 Lac (CIF Goa). The purchase price would be deemed to be Rs. 23. 4 Lac minus 10% which was added as profit ofthe dealerwhich comes to Rs. 21,06,000/-approx. Under the circumstances,it cannot be said that the market price ofthe goods, on the date ofimpositionoffine, could not be less than the purchase price thereof. Even ifit is assumed that the appellants sold the goods at a loss, it could not be less than half of the purchase price. The Revenue shall now proceed with the ~ computation of the amount due towards penalty and fine in lieu of confiscation in terms ofthis order. [Paras 10 and 11) CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1389- 1392 of 2002. From the final Order No. 392 to 395/2001-Adated 6. 11. 2001 of the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi in Appeal No. 39-41/2001-A and C/372/2001-A.

L. P. Asthana and Praveena Gautam (for Pramod B. Agarwala) for ). the Appellants. V. Shekhar, T. V. Ratnam and Abhigya, Pradeep K. Dubey (for B. Krishna Prasad) for the Respondents. The Judgment ofthe Court was delivered by ASHOK BHAN, J. I. TI1ese appeals are directed against the order dated 06th December 2001 passed by the Customs, Excise & Gold (Control) Appellate Tribunal (Now known as Customs, Excise & Service Tax Appellate Tribunal) [for short, 'the Tribunal'] in Appeal No. C/39- 41/2001-A filed by the appellants and No. C/372/2001-A filed by the Revenue whereby and whereunder the Tribunal, while dismissing the appeal filed by the appellants, accepted the appeal filed by the Revenue and enhanced the amount ofpenalty under Section 114A ofthe Customs Act, 1962 (for short 'the Act') from Rs. 50,000/- as imposed by the Commissioner of Customs, Goa to Rs. l0,00,000/- and the redemption """' fine under Section 125 of the Act from Rs. 2,50,000/- to Rs. 10,00,000/-. 2.

The assessee-appellants herein had imported Integrated Circuits (ICs) from a finn in Hong Kong by declaring the value ofthe consignment at HK $40,492. 49. Directorate ofRevenue Intelligence (DRI) authorities at Goa examined the consignment and upon examination thereof, found certain stickers and labels indicative ofthe particulars ofthe manufacture and transport ofthe goods by air etc. inside the cartons in which ICs were packed. After investigation, the authorities found that ICs had been manufactured by Mis. Philips Ltd. , Mis. Motorola (1) Ltd. and Mis. NEC. They sought infonnation from the concerned manufacturers as to the cost ofthe ICs. Manufacturers ofsix out ofthe seven varieties ofICs furnished the said information to the authorities. Based upon the said information, the authorities came to the conclusion that the declared price ofthe goods was undervalued. Hence, after adding 10% towards profit ofthe dealer in Hong Kong, the authorities fixed the value ofthe goods at Rs. 23.

4 Lac as against the declared value of over 2. 3 Lac (CIF Goa). On the said value fixed by the authorities, the differential duty ofRs. 4,91,000/- was demanded and paid by the appellant. 3. While framing the assessment, the authority in original levied penalty of Rs. 50,000/- under Section l l 4A ofthe Act on the firm and Rs. 50,000/- on the proprietor ofthe firm under Section 112 ofthe Act. Redemption fine ofRs. 2,50,000/- under Section 125 ofthe Act was also imposed on the firm. 4. The assessee as well as the Revenue filed separate appeals before the Tribunal. The Tribunal dismissed the appeal filed by the assessee and accepted the appeal filed by the Revenue and enhanced the amount of penalty on the proprietor of the firm to Rs. 10,00,000/-. The penalty imposed on the firm was set aside. Insofar as the redemption fine is concerned, the same was enhanced to Rs. l0,00,000/-. 5. Being aggrieved by the order ofthe Tribunal, the assessee has come up in appeal before us. . __,. 6.

Shri L. P. Asthana, learned counsel appearing for the appellants did not either dispute the value of the goods which was fixed by the authorities at Rs. 23. 4 Lac or the amount of differential duty. He has not disputed the culpability ofthe appellants as well. The only point raised - ,. __/ ' by him is regarding the enhancement ofthe amount ofpenalty as well. as the redemption fine. I- 7. In this context it would be appropriate to refer to the relevant sections, viz. , Section 114A and Section 125 of the Act which read as under: "l14A. Penalty for short-lev)i or non-levy ofduty in certain cases.

- Where the duty has not been levied or has not been short- levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason ofcollusion or any wilful mis-statement or suppression offacts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (2) ofsection 28 shall, also be liable to pay a penalty equal to the duty or interest so determined: Provided that where such duty or interest, as the case may be, as determined under sub-section (2) ofsection 28, and the interest payable thereon under section 28AB, is paid within thirty days from the date ofthe communication ofthe order of the proper officer determining such duty, the amount ofpenalty liable to be paid by such person under this section shall be twenty-five per cent ofthe duty or interest, as the case may be, so determined: Provided further that the benefit ofreduced penalty under the first proviso shall be available subject to the condition that the amount of penalty so determined has also been paid within the period ofthirty days referred to in that proviso: Provided also that where the duty or interest determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty or interest as reduced or increased, as the case may be, shall be taken into account: Provided also that where the duty or interest determined to be payable is increased by the Commissioner (Appeals), the Appellate M/S.

U. K. ENTERPRISES v. COMMISSIONER OF 441 Tribunal or, as the case may be, the court, then, the benefit of A reduced penalty under the first proviso shall be available if the amount of the duty or the interest so increased, along with the interest payable thereon under section 28AB, and twenty-five per cent ofthe consequential increase in penalty have also been paid within thirty days ofthe communication ofthe order by which such \ -I increase in the duty or interest takes effect: Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114. Explanation.

-For the removal of doubts, it is hereby declared that- (i) the provisions ofthis section shall also apply to cases in which the order determining the duty or interest under sub-section j '· (2) ofsection 28 relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (ii) any amount paid to the credit ofthe Central Government prior to the date of communication ofthe order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person. " 125. Option to pay fine in lieu of confiscation.

-(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 whereofis prohibited under this Act or under any other law for the time being in force, and shall, in the case ofany other goods, give to the owner of the goods 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 ofconfiscation such fine as the said officer thinks fit: Provided that, without prejudice to the provisions ofthe proviso to sub-section(2) of section 115, such fine shall not exceed the market price ofthe goods confiscated, less in the case ofimported goods the duty chargeable thereon. (2) Where any fine in lieu ofconfiscation ofgoods is imposed under sub-section (1) the owner such goods or the person referred to in sub-section(I) shall, in addition, be liable to any duty and charges payable in respect of such goods. " 8.

According to the learned counsel for the appellants, the maximum penalty which could be imposed under Section 114A of the Act can be equal to the duty demanded which, in the present case, was Rs. 4,91,000/-whereas the Tribunal has enhanced it to Rs. 10,00,000/-. It is further submitted by him that under Section 125 of the Act the Commissioner could impose the fine in lieu ofconfiscation as he deemed fit but it could not exceed the market price ofthe goods confiscated, less in the case ofimported goods the duty chargeable thereon. According to him, the fine under the said Section has been increased to Rs. 10,00,000/ - without ascertaining the market value ofthe goods confiscated. 9. After hearing learned counsel for the parties, we find substance in the first submission ofthe learned counsel for the appellants, that the amount of penalty could not be more than the amount equal to the duty chargeable.

A bare perusal ofSection 114A makes it clear that the liability to pay penalty can be equal to the amount ofduty and could not exceed the payable duty. Hence, the penalty imposed was against the express provisions oflaw. In these circumstances, we reduce the amount ofpenalty under Section 114A to Rs. 4. 91,000/-. I0. Although we agree with the learned counsel for the appellants that the Tribunal had enhanced the amount offine in lieu ofconfiscation to Rs. I0,00,000/- without determining the market price ofthe goods in question on the date of imposing the fine, but, in the facts and circumstances ofthe case, we are not inclined to interfere with the order ofthe Tribunal insofar as the enhancement ofthe said fine is concerned, as it is evident from the facts placed before us that the market price of the goods could not be less than Rs. I0,00,000/-. Admittedly, the value ofthe goods has been fixed at Rs. 23.

4 Lac, which includes the profit of the dealer, as against the declared value of more than Rs. 2. 3 Lac (CIF Goa). The purchase price would be deemed to be Rs. 23. 4 Lac minus 10% which was added as profit of the dealer which comes to Rs. 21,06,000/- approx. Under the circumstances, it cannot be said that the market price of the goods was not known or determinable. Even otherwise, taking a common sense view, we conclude that the market price ofthe goods, on the date ofimposition offine, could not be less than the purchase price thereof. Even ifit is assumed that the appellants sold the goods at a loss, it could not be less than half ofthe purchase price. 11. For the reasons stated above, the appeals are disposed of in the above terms. The Department shall now proceed with the computation ofthe amount due towards penalty and fine in lieu ofconfiscation in terms ofthis order. S. K. S. Appeals disposed of.