2021 (10) TMI 129 - HC - Customs

Appeal Upheld: Customs Act Redemption Fine Reduction Decision Sustained

The appeal challenging the reduction of the redemption fine imposed under Section 125 of the Customs Act, 1962 was dismissed. The Tribunal's decision to ... Quantum of redemption fine - unauthorised import of restricted item - rough marble blocks imported without an import licence - HELD THAT:- COC (I) has not given any basis as to how he decided a redemption fine of ₹ 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. The Apex Court in the case of CC VERSUS MANSI IMPEX [2011 (8) TMI 470 - SUPREME COURT] 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 - Also, COC (I) has not even observed in his order that respondent was a repeat offender or that was the reason why he imposed the penalty of almost 80% on respondent. 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% - Appeal is dismissed. Issues Involved:1. Legality of reducing the redemption fine imposed under Section 125 of the Customs Act, 1962.2. Justification for the Tribunal's intervention in the amount of redemption fine.3. Impact of reducing redemption fine on incentivizing unauthorized imports.Detailed Analysis:1. Legality of Reducing the Redemption Fine Imposed Under Section 125 of the Customs Act, 1962:The appeal was filed against the Tribunal's order reducing the redemption fine for unauthorized import of restricted items without an import license. The Tribunal reduced the fine from approximately 72-80% to 35% of the value determined. The Customs Officer (COC (I)) had initially imposed a redemption fine of Rs. 37 lakhs on goods valued at Rs. 44,46,247.63, along with a penalty of Rs. 1 lakh under Section 112(a) of the Customs Act, 1962. The Tribunal, however, found no discussion in the COC (I)'s order about how the quantum of fine was determined or the margin of profit considered. The Tribunal's decision was based on consistent previous orders where fines were reduced to about 20-30% of the assessable value for similar unauthorized imports.2. Justification for the Tribunal's Intervention in the Amount of Redemption Fine:The Tribunal justified its intervention by noting the lack of rationale in the COC (I)'s order for the high redemption fine. The Tribunal referenced previous cases where fines were set at 20-30% of the assessable value for similar imports. The Tribunal's approach was supported by the Supreme Court's decision in Commissioner of Customs, Mumbai Vs. Mansi IMPEX, which emphasized that the quantum of redemption fine must be based on the market price of the confiscated goods. The COC (I) had not conducted a market survey to determine the market price, making the fine imposed arbitrary and unjustified.3. Impact of Reducing Redemption Fine on Incentivizing Unauthorized Imports:The appeal also questioned whether reducing the redemption fine incentivizes continued unauthorized imports. The Tribunal's reduction of the fine was challenged on the grounds that it might allow importers to profit even after paying the fine and penalty, thus encouraging further violations. However, the Tribunal's decision was upheld by referencing the Supreme Court's stance in Commissioner of Customs (Import) Vs. Stoneman Marble Industries, which held that reduction in fines and penalties is a finding of fact and not a question of law. The High Court agreed that each case should be examined on its own facts, and the Tribunal's consistent approach in similar cases was not arbitrary or perverse.Conclusion:The appeal was dismissed, and the questions of law framed were answered in the affirmative. The High Court found that the Tribunal had correctly reduced the redemption fine to 35% based on consistent previous decisions and the lack of a justified basis in the COC (I)'s order for the higher fine. The Tribunal's decision was supported by Supreme Court precedents, emphasizing the need for a market survey to determine the appropriate fine. The High Court also noted that the Tribunal's reduction of fines in similar cases did not constitute an absolute formula but was a consistent finding of fact.