Customs penalty for non-genuine pre-shipment inspection certificate sustained, but reduced on the facts

A defective or non-genuine pre-shipment inspection certificate used for customs clearance of metal scrap can attract penalty under Section 112(a) of the Customs Act because compliance with the prescribed import procedure must be real and effective; later physical examination finding no prohibited goods does not cure the breach. A company can be proceeded against as a "person" under the inclusive statutory definition, so corporate liability is not excluded. Although the contravention justified penal action, the penalty amount was moderated on the facts because the consignments were physically examined and no prohibited material was found.

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Issues: (i) Whether the appellant was liable to penalty under Section 112(a) of the Customs Act, 1962 for producing a defective or non-genuine pre-shipment inspection certificate in relation to import of metal scrap; (ii) Whether the penalty required reduction on the facts and circumstances of the case.

Issue (i): Whether the appellant was liable to penalty under Section 112(a) of the Customs Act, 1962 for producing a defective or non-genuine pre-shipment inspection certificate in relation to import of metal scrap.

Analysis: The import procedure required a proper pre-shipment inspection certificate to ensure that scrap consignments did not contain arms, ammunition or other hazardous material. The defects in the certificate were not treated as a mere technical lapse, because the certificate was found to have been issued in a manner that made its genuineness doubtful and the appellant had procured and supplied it for customs clearance. The plea that absence of prohibited goods after physical examination cured the illegality was rejected, as compliance with the prescribed procedure had to be real and effective. The contention that a company could not be proceeded against as a "person" also failed because the inclusive definition of "person" covers a company.

Conclusion: The penalty under Section 112(a) was sustained and the appellant was held liable.

Issue (ii): Whether the penalty required reduction on the facts and circumstances of the case.

Analysis: Although the procedural breach justified action, the circumstances showed that the goods had been physically examined and no prohibited material was found. The extent of penal consequence therefore needed moderation. The valuation objection raised by the appellant was not accepted, but that did not alter the position on penalty quantum.

Conclusion: The penalty was reduced to a lower amount and the order was modified accordingly in favour of the appellant to that extent.

Final Conclusion: The appeal succeeded only to the limited extent of reduction in penalty, while the finding of contravention and liability to penal action was maintained.

Ratio Decidendi: Where a statutory import procedure requires a specified certificate as a condition for clearance, procurement and use of a non-genuine or defective certificate attracts penal consequence even if the goods are later found free from prohibited material, though the quantum of penalty may be moderated on the facts.

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