1986 (9) TMI 78 - SC - Customs

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

The Supreme Court clarified the interpretation of Section 111(m) of the Customs Act, 1962, focusing on the penalty imposed for discrepancies in declared ... Whether the term 'value' was not in Sec. 111(m) of the Act before the amendment but that will make no difference as according as even without the term 'value' a mis-description could be interpreted to be a mis-description on the basis of value stated and ultimately the goods found to be of a higher value? Held that:- It is not in dispute that a penal provision has to be strictly construed and reading Sec. 111(m) before the amendment is not possible to draw an inference that any difference in material particulars may be referable to 'value'. This argument therefore cannot be accepted. The scheme of Sec. 111(m) as* it stood then nowhere referred to the difference of value as one of the ingredients which may attract this provision. In such a situation therefore if it was not the specific intention of the provision, a difference in respect of value therefore could not be said to attract this provision and on that basis no penalty could be imposed. The appeal is allowed and the orders passed by the Collector, Board, Central Government and the High Court are hereby set aside. The penalty imposed on the appellants under Sec. 111(m) read with Sec. 111(d) is hereby quashed. The appellant shall be entitled to get refund of the penalty if already deposited. Issues: Interpretation of Section 111(m) of the Customs Act, 1962Analysis: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.