Penalty on prior DFRC licence holder for import misdeclaration and confiscation u/s111(m) struck down as unsustainable

Penalty for misdeclaration leading to confiscation under s.111(m) of the Customs Act, 1962 was challenged on the ground that the appellant, being a predecessor-in-title to a transferable DFRC licence, had no involvement in the impugned import. The HC held that penalty is unsustainable where the person penalised had admittedly no role in the import or the alleged misdeclaration, and mere linkage through prior ownership of a subsequently transferred licence does not establish culpability. Consequently, the question of law was answered in favour of the appellant and against the Revenue, and the penalty could not be sustained.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether confiscation under Section 111(m) of the Customs Act, 1962 and consequential denial of claimed exemption were sustainable on the Court's acceptance of the finding that the imported goods were misdeclared (Corduroy imported but declared as Cotton Griege/Grey fabric).

(ii) Whether penalty could be sustained against a person who was merely the predecessor/transferor of the DFRC licence, when it was an admitted position that such person had no role in the subject import.

(iii) Whether the appeal against a deceased appellant abated on record proof of death.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Misdeclaration-confiscation under Section 111(m) and related consequences

Legal framework: The Court proceeded on the applicability of Section 111(m) (confiscation for misdeclaration) as reflected in the orders under challenge, and treated the Tribunal's factual finding on the nature of goods as decisive for answering the substantial question on misdeclaration.

Interpretation and reasoning: The Court noted a categorical finding of fact by the Tribunal that the goods imported were Corduroy and not Grey fabric as declared, thereby establishing misdeclaration. Before the Court, counsel did not dispute the nature of the goods; the only attempt was to still characterize them as falling within "Grey Cotton fabric," which the Court found unsuccessful. On this basis, the Court found no merit in the challenge to the confiscation and allied action founded on misdeclaration.

Conclusions: The Court answered the substantial question on misdeclaration in favour of the Revenue and dismissed the appeals concerning that issue, thereby upholding the finding of misdeclaration and sustaining the confiscation and related outcomes premised on it.

Issue (ii): Sustainability of penalty against predecessor/transferor of DFRC licence without involvement in import

Legal framework: The Court confined itself to whether any factual basis existed to sustain penalty against the concerned appellant, given the admitted lack of involvement in the import.

Interpretation and reasoning: The Court recorded that the appellant concerned was the predecessor in title to the DFRC licence and that the licence had been transferred to the importer prior to the subject import. It was an admitted position that this appellant had no role to play in the import which led to the alleged misdeclaration. In the absence of any demonstrated participation or responsibility in the import, the Court held that no case was made out to sustain the penalty.

Conclusions: The Court answered the question in favour of the assessee and against the Revenue and allowed the appeal of the licence predecessor/transferor, setting aside the penalty as unsustainable on the admitted facts.

Issue (iii): Abatement upon death of an appellant

Legal framework: The Court applied the principle of abatement where the appellant had died and the fact of death was evidenced on record.

Interpretation and reasoning: On production of the death certificate and noting the date of death, the Court held that the appeal filed by the deceased appellant abated.

Conclusions: The appeal against the deceased appellant was treated as abated.

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