Tariff rate governs Section 116 penalty, and appellate leniency stands absent perversity or legal unsustainability.

Penalty under Section 116 of the Customs Act, 1962 is to be computed by reference to the tariff rate, not the effective rate, and the contention that a nil effective rate should govern was rejected. The reduction of penalty by the appellate authority was upheld because it was based on the attendant circumstances and the extent of shortage, and a lenient quantification was treated as a matter of subjective satisfaction. Mere disagreement with the quantum was held insufficient to show perversity or arbitrariness, so no interference was warranted in review and the review proceedings were dropped.

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Issues: (i) Whether, for determining penalty under Section 116 of the Customs Act, 1962, the applicable rate is the tariff rate or the effective rate; (ii) whether the reduction of penalty by the appellate authority was arbitrary or perverse.

Issue (i): Whether, for determining penalty under Section 116 of the Customs Act, 1962, the applicable rate is the tariff rate or the effective rate.

Analysis: The rate for the purpose of Section 116 was held to be the tariff rate. The contention that the effective rate, being nil, should apply was rejected. The plea could not be raised in the review proceedings, and the question had already been settled in earlier decision-making by the Government.

Conclusion: The tariff rate applies, not the effective rate.

Issue (ii): Whether the reduction of penalty by the appellate authority was arbitrary or perverse.

Analysis: The appellate authority had considered the attendant circumstances and the extent of shortage while quantifying penalty. The decision to take a lenient view and reduce the penalty was treated as a matter of subjective satisfaction. Mere disagreement on quantum was held insufficient to justify interference.

Conclusion: The reduction of penalty was not arbitrary or perverse.

Final Conclusion: No interference was warranted with the appellate order, and the review proceedings were dropped.

Ratio Decidendi: Penalty under Section 116 of the Customs Act, 1962 is to be computed with reference to the tariff rate, and the quantum of penalty will not be interfered with in review unless the appellate assessment is shown to be perverse or legally unsustainable.

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