Duty-free import scheme breach sustained penalty, while excess payment and mitigating circumstances justified reduction in quantum.

Contravention of a duty-free import scheme by selling duty-free imported goods in the open market justified penal action, and subsequent payment of duty on detection did not warrant deletion of the penalty. The penalty was therefore sustained, but the surrounding circumstances and the excess amount paid over the duty demand were relevant to quantifying the sanction, resulting in reduction of the penalty to Rs. 3 lakhs.

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Issues: Whether payment of duty after detection of contravention of the duty-free import scheme warranted setting aside the penalty, and whether the penalty imposed was excessive.

Analysis: The appellant had sold duty-free imported goods in the open market contrary to the scheme conditions. Payment of duty on detection was held not to be a ground for deleting penal action. However, the record showed payment of an amount in excess of the duty demand and the circumstances relied upon by the appellant were taken into account for determining the appropriate penalty.

Conclusion: Penalty was held to be sustainable, but its quantum was reduced to Rs. 3 lakhs.

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