Commr. Of Cus. (AIR) vs A.P. Pinherio

T.S. Sivagnanam, J.

The above Civil Miscellaneous Appeals filed by the Revenue is directed against the order dated 14-6-2007 made in Final Order No. 733 of 2007 on the file of the Customs, Excise and Service Tax Appellate Tribunal (2007 (217) E.L.T. 70 (Tri.-Chen.)]. By the said order, the Tribunal reduced the fine amount to Rs. 50,000/- and penalty to Rs. 10.00 lakhs. Challenging the said order, the Revenue has preferred the above appeals, which has been admitted by this court on the following substantial questions of law :

"1. Whether the CESTAT was correct in reducing the penalty amount which was imposed as an equivalent amount of duty under Section 114A of the Customs Act?

Whether the Tribunal is correct in holding the penalty equal to duty imposable under Section 114A of the Customs Act, 1962 as the Maximum penalty which can be reduced by discretion?

Whether the Tribunal is correct in setting aside the penalty imposed on the Managing Director of the company which is contrary to Section 112(a) of the Customs Act, 1962?"

Learned Standing Counsel appearing for the Revenue submitted that there is no discretion for the Tribunal to reduce the penalty and fine imposed by the Original Authority under Section 114A and Section 112(a) of the Customs Act, 1962 and therefore, the impugned order calls for interference.

We have heard learned counsel appearing for the respondent on the above submission.

The facts that are necessary for disposal of the appeals are that the respondent imported 8 sea lions in January, 1995 and 3 Dolphins in May, 1998 and filed Bills of Entry dated 27-1-1995 and 29-5-1998 respectively, declaring themselves to be "Zoo" and classifying the animals under CTH 9908.00 for the purpose of duty-free clearance. The imports were from Bulgaria and the sea mammals were used for performance shows by the importers in their amusement park. The Department issued a show cause notice to the respondent dated 16-11-1998 calling upon them to show cause as to why the classification for Sea Lions and Dolphins under CTH 9908.00 should not be denied and instead they be classified under CTH 0106.00; why the duty leviable, under CTH 01.06.00 at 65% for the Sea Lions and at 40% + 5% for the Dolphins be not imposed and why the same should be demanded with interest at 24% per annum under Section 28(1) of the Customs Act; why the Sea Lions should not be held liable for confiscation under Section 111(m) and (o) of the Customs Act; why the importer should not be penalised under Section 112(a) and 114(A) of the Customs Act and why penalty should not be imposed on the Managing Director of the Company under Section 112 of the Customs Act.

The respondent has filed his reply to the show cause notice and on adjudication, the Original Authority, by order dated 14-10-1999, confirmed the proposal in the show cause notice and held that the imported sea mammals were classifiable under CTH 0106 and demanded duty of Rs. 45,71,951/- under Section 28(2) of the Customs Act read with proviso to Section 28(1) along with interest Further, the imported sea mammals were confiscated under Section 111(m) and (o) of the Customs Act and were allowed to be redeemed on payment of fine of Rs. 1,50,000/-. Penalty of Rs. 45,71,951/-, i.e., equivalent to the amount of duty, was also imposed under Section 114A of the Customs Act on the company and Rs. 50,000/- on the Managing Director of the company.

Aggrieved by the said order, the respondent, preferred appeal before the CESTAT. The Tribunal, after considering the contentions raised by both parties, reduced the redemption fine to Rs. 50,000/- and the penalty to Rs. 10.00 lakhs.

The short question which falls for consideration in these appeals is as to whether there is discretion vested with the Tribunal to reduce the penalty imposed by the Original Authority under Section 114A of the Customs Act. The said provision deals with penalty for short-levy or non-levy of duty in certain cases where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person, who is liable to pay the duty or interest, shall also be liable to pay penalty equal to the duty or interest so determined. In order to impose penalty under Section 114A of the Customs Act, there should be a clear finding that the importer has made a wilful statement or suppressed the fact, so as to attract levy of penalty.

In the instant case, we notice that the importer had produced a letter dated 23-1-1995 from the Regional Deputy Director (WLP) SR, Madras certifying that the importer was a "zoo" as defined under the Wild Life (Protection) Act, 1972 and also produced a copy of the challan dated 27-10-1993 for remittance of the registration fee issued by the Central Zoo Authority (CAZ), New Delhi. Further, it is seen that the import licence issued by the Directorate General of Foreign Trade dated 20-6-1994 was re-validated up to 31-5-1998. During the course of investigation by the Department, clarification was sought for from the Additional Inspector General (Wild Life) in the Ministry of Environment and Forest. In pursuance to such request, the said Authority, by communication dated 21-7-1998, clarified that the respondent/importer was a "Zoo" and the certificate issued by the Deputy Director Wild Life (Protection) was valid. Once again the Department addressed the Member Secretary, Central Zoo Authority on 24-8-1998 to re-examine and clarify whether the importers have been accorded recognition as "zoo" in terms of provisions of Wild Life (Protection) Act, 1972 and the Recognition of Zoo Rules, 1992. It is only thereafter, the Ministry of Environment and Forest, during October, 1998, informed the appellant - Department that after examining the matter in detail, it was decided that the importer was not officially accorded "Zoo Operation Status" and directed that the import may be treated as "Other Live Animals".

Analysing all these facts, the Tribunal interfered with the order of the Original Authority and reduced the penalty to Rs. 10.00 lakhs.

As pointed out earlier, in order to attract penalty equal to the duty determined, there should be a clear finding that the importer had colluded or made a wilful mis-statement or suppressed the facts. Thus, in the absence of any such specific finding rendered by the Original Authority nor any such proposal in the show cause notice, we are inclined to confirm the order passed by the Tribunal reducing the penalty of Rs. 10.00 lakhs.

In so far as the penalty imposed on the Managing Director under Section 112(a) of the Customs Act, the Tribunal set aside the penalty on the ground that the order does not specify any omission or commission on part of the Managing Director of the company.

We have perused the show cause notice as well as the order of the Original Authority. It has been pointed out by the Department that the entire importation has been handled by the Managing Director of the company and all the correspondences between various Authorities were personally handled by the Managing Director and therefore, he was fully aware that the firm had imported the subject goods. Therefore, he cannot plead ignorance of the facts. Further more, the respondent had not questioned the order of confiscation or the imposition of duty. Thus, the order of confiscation has attained finality and there is no discretion vested under Section 112(a) of the Customs Act and there is no requirement to record a finding that there has been any wilful mis-statement or concealment or suppression of facts, as is found under Section 114A of the Customs Act.

In such view of the matter, the Tribunal was not right in setting aside the penalty imposed on the Managing Director under Section 112(a) of the Customs Act. Further, it has to be pointed out that under Section 112(a), any person, who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, shall be liable to pay penalty not exceeding the duty sought, to be evaded on such goods or five thousand rupees, whichever is greater. Thus, considering the facts, the Managing Director is liable to pay penalty, which is fixed at Rs. 5,000/-. In the result, both the Civil Miscellaneous Appeals are partly allowed and the penalty imposed by the Tribunal at Rs. 10.00 lakhs is confirmed and the Managing Director/importer is liable to pay penalty of Rs. 5,000/- under Section 112(a) of the Customs Act. No costs.