2023 (12) TMI 323 - AT - Customs

Kiwi fruit importer gets redemption fine waived but penalties reduced for document forgery under Sections 112(a) and 114AA

M/s. Ram Prasath Versus Commissioner of Customs, Trichy

M/s. Ram Prasath Versus Commissioner of Customs, Trichy - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether delay in passing the appellate order by the Commissioner (Appeals) rendered the order non-est or invalid and justified relief to the importer. 2. Whether redemption fine under Section 125 of the Customs Act is exigible where confiscation is converted to re-export and goods are perishable and have deteriorated. 3. Whether penalties under Section 112(a)(i) and Section 114AA of the Customs Act are sustainable where forged/manipulated phytosanitary certificates accompanied the import and the importer purchased goods on high-sea sale basis alleging lack of knowledge of forgery. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Delay in passing appellate order: Legal framework Relevant legal principle: An appellate authority must pass orders within a reasonable time; procedural delay may, in extreme cases, render an order non-est if prejudice to party or illegality in exercise of power is shown. Precedent Treatment (as applied): The Tribunal accepted that slight delay in despatch of the appellate order does not automatically invalidate the order; requirement is of reasonable dispatch and absence of material prejudice owing to delay. Interpretation and reasoning: The appellant was granted personal hearing on two dates, failed to appear on the first, and was heard on the second; the appellate order was passed about two months after the hearing. The Tribunal found no material or undue delay by the Commissioner (Appeals) that would render the order non-est, and noted that any delay in receipt by the appellant (despatch delay) was not sufficient to invalidate the order. Ratio vs. Obiter: Ratio - Delay in passing appellate order does not invalidate the order where hearing was conducted and order passed within reasonable time after hearing; mere late receipt does not annul order absent prejudice. Obiter - None beyond application to facts. Conclusion: The contention that the impugned order is non-est for delay is rejected and decided in favour of the Department. Issue 2 - Redemption fine where goods ordered for re-export and are perishable Legal framework: Section 125 empowers imposition of redemption fine for redeeming goods in certain cases where confiscation would otherwise apply; appellate authorities may mitigate or set aside such fines depending on circumstances like order for re-export. Precedent Treatment (followed/distinguished): The Tribunal relied on earlier finding that where goods are allowed to be re-exported, redemption fine may be set aside, particularly for perishable goods and where re-export order is in force. Interpretation and reasoning: The Commissioner (Appeals) had reduced the redemption fine to Rs.5 lakhs from Rs.20 lakhs. The Tribunal noted (a) the goods are perishable, (b) they were ordered to be re-exported, (c) appellant incurred demurrage and losses, and (d) there was no margin of profit because re-export was directed. Given these factors and the precedent that redemption fines are inappropriate where re-export is allowed, the Tribunal concluded redemption fine should be set aside. Ratio vs. Obiter: Ratio - Redemption fine under Section 125 is not justified and should be set aside where goods are ordered for re-export, are perishable, and the importer has no profit margin or has suffered loss. Obiter - Emphasis on perishable nature and demurrage as material considerations. Conclusion: Redemption fine of Rs.5 lakhs imposed for re-export was set aside while maintaining the re-export direction. Issue 3 - Penalties under Section 112(a)(i) and Section 114AA where forged phytosanitary certificates were produced and importer claims high-sea sale ignorance Legal framework: Section 112(a)(i) penalizes knowingly making false declarations or producing forged documents in respect of imported goods; Section 114AA penalizes collusion/intentional wrongdoing in clearance processes. Importers bear responsibility to furnish genuine documents; bona fide ignorance is a potential mitigation but not an absolute defence. Precedent Treatment (followed/distinguished): The Tribunal acknowledged precedent where penalties were set aside when goods were re-exported, but distinguished present facts due to explicit, documented forgery and manipulation of certificates and detailed findings in the Order-in-Original. Interpretation and reasoning: The adjudicating authority documented specific manipulations - additions to 'additional declaration' fields and mismatches between original certificates (downloaded from official Chile Government site) and submitted certificates - showing explicit forgery. The Tribunal emphasized the importer's duty to verify documents even on high-sea sale purchases and found the plea of ignorance unpersuasive in light of the manipulations and documentary proof. However, in mitigation the Tribunal considered the re-export direction and losses (demurrage), and reduced the penalties rather than confirming them at original or higher levels. Ratio vs. Obiter: Ratio - Where forged/manipulated import documents are produced, penalties under Sections 112(a)(i) and 114AA are justified; purchase on high-sea sale does not absolve the importer of duty to verify genuineness. Obiter - Mitigatory considerations such as re-export order and consequential losses may warrant reduction (but not total cancellation) of penalties. Conclusions: Penalty under Section 112(a)(i) reduced from Rs.5,00,000 to Rs.4,00,000; penalty under Section 114AA reduced from Rs.10,00,000 to Rs.8,00,000. The Tribunal upheld the finding of forgery and responsibility of the importer but exercised discretion to mitigate fines considering re-export and incurred losses. Cross-references and Outcome Interrelation of issues: The Tribunal treated the redemption fine and penalties as related remedies arising from the same misconduct (forgery and undervaluation). While rejecting delay argument (Issue 1), the Tribunal set aside the redemption fine (Issue 2) based on re-export and perishability, and adjusted penalties (Issue 3) recognizing culpability but allowing mitigation for re-export and losses. Final disposition: Appeal partly allowed - redemption fine set aside; penalties under Sections 112(a)(i) and 114AA reduced as specified; order for re-export of goods left undisturbed.