Customs penalty proportionality: liability for false shipping documents upheld, but quantum reduced for limited participation.

Liability under sections 112(a) and 114AA of the Customs Act was upheld where the appellant admitted arranging third-party shipping bills to ed EPCG export compliance and the cancelled licences supported a finding of fraud. On those facts, the goods were liable to confiscation under section 112(a), and the knowing use of false or incorrect shipping documents attracted section 114AA. Even so, the penalty was moderated on proportionality grounds, taking into account the appellant's limited role and the penalty already imposed on the main noticee, resulting in reduced penalties.

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Issues: Whether the penalties imposed under sections 112(a) and 114AA of the Customs Act, 1962, called for interference on merits and whether the quantum of penalty required reduction on proportionality grounds.

Analysis: The appellant admitted participation in arranging third-party shipping bills to project fulfilment of EPCG export obligations, and the relevant EPCG licences were later cancelled, supporting the finding of fraud. On these facts, the act of the appellant rendered the goods liable to confiscation and attracted section 112(a), while knowingly using false or incorrect shipping documents attracted section 114AA. However, in fixing the amount of penalty, the extent of the appellant's role and the penalty already imposed on the main noticee before the Settlement Commission were relevant circumstances. The penalty was therefore examined on the touchstone of proportionality.

Conclusion: The finding of liability under sections 112(a) and 114AA was upheld, but the penalties were reduced to Rs. 50,000 each, resulting in an aggregate penalty of Rs. 1,00,000.

Ratio Decidendi: Where liability under the Customs Act is established, the quantum of penalty may still be moderated to maintain proportionality having regard to the nature of participation and comparative culpability.

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