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Issues: (i) Whether the penalty imposed on Sujath Ali under Section 13(b) of the Drugs and Cosmetics Act, 1940 read with Section 114A of the Customs Act, 1962 was sustainable. (ii) Whether the penalty of Rs. 1 lakh imposed on K. Saravanan under Section 112(b) of the Customs Act, 1962 was liable to be upheld or reduced.
Issue (i): Whether the penalty imposed on Sujath Ali under Section 13(b) of the Drugs and Cosmetics Act, 1940 read with Section 114A of the Customs Act, 1962 was sustainable.
Analysis: The import was found to have been routed by declaring the chemical formula instead of the common chemical name in order to evade Anti-Dumping Duty. However, Section 13(b) of the Drugs and Cosmetics Act, 1940 concerns punishment by a criminal court and not a customs penalty. Further, Section 114A of the Customs Act, 1962 applies only to the person liable to pay duty or interest determined under the Act, and no such duty demand had been made against Sujath Ali in the impugned order. On that basis, the penalty imposed on him could not be sustained.
Conclusion: The penalty imposed on Sujath Ali was set aside.
Issue (ii): Whether the penalty of Rs. 1 lakh imposed on K. Saravanan under Section 112(b) of the Customs Act, 1962 was liable to be upheld or reduced.
Analysis: K. Saravanan had lent his IEC number and signed the import documents, but there was no material to show that he knew of the fraud before or during the imports. The adjudicating authority itself accepted that he did not appear to be directly involved in the fraudulent import activity. In those circumstances, the penalty was considered excessive and was reduced in the interests of justice.
Conclusion: The penalty on K. Saravanan was reduced from Rs. 1 lakh to Rs. 50,000.
Final Conclusion: The common order was sustained only in part, with the substantive penalty on Sujath Ali annulled and the penalty on K. Saravanan reduced, while the appeal of MSK International was treated as infructuous.
Ratio Decidendi: Penalty under Section 114A of the Customs Act, 1962 can be imposed only on the person from whom duty or interest has been determined as payable, and a customs penalty cannot be founded on a provision of the Drugs and Cosmetics Act, 1940 meant for criminal punishment by a court.
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