Canalised import contracts and penalty: absence of mala fides justified deletion, while confiscation fine remained discretionary.

Penalty was not justified for import of cloves where the contracts were concluded before the goods became canalised and the imports were arranged while OGL imports were still permissible. On those facts, no mala fides or intention to evade import control restrictions was shown, so the penalty was set aside. The quantum of confiscation fine remained a matter of judicial discretion, to be fixed with reference to relevant considerations such as profit margin. A marginal difference in percentage across orders did not, by itself, make the fine arbitrary or require a uniform reduction, so the fine was maintained.

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Issues: (i) Whether penalty was leviable for import of cloves which had become canalised after the contracts for import were entered into; (ii) Whether the fine imposed in the impugned orders required reduction.

Issue (i): Whether penalty was leviable for import of cloves which had become canalised after the contracts for import were entered into.

Analysis: The imports were arranged when the goods were still permissible for import under OGL and the contracts had been concluded before the goods were canalised. On those facts, the imports were not attended by mala fides or any intention to evade the import control restrictions. In such circumstances, penalty was not warranted.

Conclusion: Penalty was not leviable and was set aside.

Issue (ii): Whether the fine imposed in the impugned orders required reduction.

Analysis: The quantum of fine in confiscation matters lies within judicial discretion and must be fixed with regard to relevant considerations such as profit margin. Marginal variation in percentage between different orders does not by itself make the fine arbitrary or perverse, and the existence of some cases where a lower percentage had been adopted did not justify a uniform reduction in all appeals.

Conclusion: The fine was confirmed and no reduction was granted.

Final Conclusion: The appeals succeeded only to the extent that the penalties were quashed, while the confiscation fines were maintained.

Ratio Decidendi: Where import contracts were concluded before the goods became canalised and no mala fides are shown, penalty is not justified; the quantum of fine is a matter of discretion guided by relevant factors such as profit margin and need not follow a rigid percentage formula.

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