Supreme Court clarifies Customs Act penalty provision, emphasizing 'value' significance

RIB TAPES (INDIA) PVT. LTD. AND ANOTHER Versus UNION OF INDIA AND OTHERS

RIB TAPES (INDIA) PVT. LTD. AND ANOTHER Versus UNION OF INDIA AND OTHERS - 1986 (26) E.L.T. 193 (SC) Issues: Interpretation of Section 111(m) of the Customs Act, 1962

Analysis:
1. The case involved a dispute regarding the interpretation of sub-clause (m) of Section 111 of the Customs Act, 1962. The appellants imported knitting machines in 1972, and Customs authorities alleged that the machinery was old and reconditioned, with a price discrepancy between the invoice and actual value.

2. The Collector of Customs imposed penalties under Section 111(d) and Section 111(m) of the Act, which were upheld by the Board and later reduced by the Central Government. The appellants then filed a writ petition before the Delhi High Court, which dismissed the appeal, leading to the present appeal before the Supreme Court.

3. The main issue before the Supreme Court was the penalty imposed under Section 111(m) of the Act. The Court clarified the pre-amendment and post-amendment versions of Section 111(m), highlighting the insertion of the word 'value' in the amended provision. The pre-amendment version focused on discrepancies in material particulars other than value.

4. The Court referred to Section 46 of the Act, emphasizing that Section 111(m) pertained to discrepancies between goods imported and those declared in the bill of entry. The judgment discussed the significance of the term 'value' in determining misdescriptions under Section 111(m).

5. The appellants argued that penal provisions must be strictly construed, citing a previous Supreme Court decision. The Court analyzed the legislative intent behind the 1973 amendment, which aimed to address misdeclarations of value in imported goods, leading to the insertion of 'value' in Section 111(m).

6. The Court examined the Objects and Reasons for the amendment, emphasizing the intention to enhance enforcement effectiveness by covering cases of over-invoiced imports. The judgment highlighted the importance of legislative intent in interpreting statutory provisions.

7. Ultimately, the Court held that the penalty imposed solely based on a discrepancy in the declared price was not sustainable under the pre-amendment Section 111(m), as 'value' was not a relevant factor. The Court allowed the appeal, setting aside the previous orders and quashing the penalty imposed under Section 111(m) read with Section 111(d).

8. The judgment concluded by granting the appellant entitlement to a refund of the penalty if already paid, with no order as to costs.