At, High Court of Judicature at Madras
By, THE HONOURABLE MR. JUSTICE K.P.SIVASUBRAMANIAM
For the Petitioner: Mr.A.S.Chandrasekaran, Advocate. For the Respondents: Mr.Vamana Ramalingam , Addl. Central Govt. Standing Counsel.
The petitioner seeks to quash the appellate order of the Government of India, Ministry of Finance, dated 20.12.1994 and also the consequential order dated 14.6.1995 of the Assistant Commissioner of Customs, Central Excise, Cuddalore, calling upon the petitioner to pay a penalty amount of Rs.2,94,123/- towards short landing of quantity of 104.750 Metric Tonnes of urea.
2. According to the petitioner, on 20.7.1984 the vessel m.v.Northland arrived at Pondicherry to unload the cargo viz., urea in bags weighing 14,784,250 Metric Tonnes. It was alleged that there was short landing of 109.750 Metric Tonnes. The consignees of the goods were Southern Petrochemical Industries Corporation Limited, Madras. Action was initiated against the petitioner as agents under Section 148 of the Customs Act. Proceedings were also initiated under Section 116 of the Customs Act for levy of penalty. Show-cause notice was however, issued only in the year 1990 after a period of six years. The authorities without appreciating the proper scope and effect of Sections 116 and 148 of the Customs Act levied a huge penalty of Rs.3,08,162/-. As against the said order, the petitioner filed an appeal to the fourth respondent and by order dated 23.9.1993, the fourth respondent confirmed the order
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f the third respondent. The petitioner thereupon filed a revision before the Central Government. The said revision was also dismissed by order dated 20.12.1994. This was followed by a demand dated 14.6.1995 from the fifth respondent for the payment of penalty amount. Hence, the above two writ petitions. The petitioner has contended in the affidavit that the second respondent had acted contrary to the provisions of the Act and failed to note the scope and effect of Sections 116 and 148 of the Customs Act. It is further stated that the respondents erred in invoking Section 116 of the Customs Act on the basis of the shortlanding recorded at the stage of the proceedings under Section 42 of the Act. It cannot be stated that there was deficiency which was not accounted for to the satisfaction of the Customs Department. It is further stated that the urea are exempted goods and hence no import duty was payable. There was no question of payment of any penalty on goods which were not dutiable. The penalty was linked with duty chargeable and when no duty was chargeable no penalty can be levied. The further contention is that the demand should have been raised within a reasonable time and the demand having been raised after seven years the penalty proceedings were totally beyond reasonable period of limitation. Hence, the above two writ petitions.3. In the counter filed by the respondents, it is contended that the petitioner Company acted as an authorised agent for unloading the cargo at Pondicherry Port. The vessel has discharged a total quantity of urea of 14674.500 M.Ts. As per the landing certificate as against the manifested quantity of 14784.250 M.Ts. With the result, there was a short landing of 109.750 M.Ts. Of urea. The import duty that would have been chargeable on the deficit goods but for the exemption was Rs.3,08,162/-. Therefore, the petitioner was called upon to show why a penalty not exceeding twice the amount of import duty could not be imposed as against the petitioner. The revisional authority in their order, allowed short landing of 0.5 per cent of the manifested quantity to be condoned due to inevitable loss during the transit and handling operations and accordingly granted relief in respect of 100 more bags in addition to 1395 bags, which was already condoned as lost over board, in the landing certificate itself. Accordingly, a duty of Rs.2,94,123/- was leviable and the penalty was also fixed on the said basis.4. There was no justifiable material or defence in favour of the petitioners to pray for quashing of the orders of the respondents. The petitioner's contention regarding the outcome of Sections 41,48 and 116 of the Act had no basis. The petitioner's obligation was to hand over the goods and the said handing over was completed as soon as it was delivered to the satisfaction of the proper officer. In the present case, the manifested quantity was not fully accounted for. Therefore, in terms of Section 148 of the Act, the petitioner Company was liable for penal action and hence the imposition of penalty under Section 116 of the Act was in order. There was no question of delay in the demand and the petitioner's interest was in no way affected by the delay in demanding penalty from the petitioner. It is further stated that the contention that as urea was exempted from duty, Section 116 of the Act cannot be invoked, was without any substance. Penalty under Section 116 of the Act was leviable in respect of dutiable and non-dutiable goods. The penalty imposed in the instant case was also not heavy and in fact the petitioner was given additional relief in the revision. 5. Mr.A.S.Chandrasekaran, learned counsel for the petitioner has raised the following points:-(i) Urea being an exempted commodity, no duty was leviable. Penalty was leviable only in respect of import of dutiable goods and therefore, urea not being dutiable, no penalty can be imposed.(ii) The import was completed on 20.7.1994 and the show-cause notice has been issued only on 23.10.1990, with the result of a delay of more than six years. Even though Section 116 of the Act does not provide any minimum period of limitation, the Courts have repeatedly interpreted the provision to the effect that the levy should be made within a reasonable period and in accordance with the rulings, a maximum period could be only five years and not more. (iii) The order of the revisional authority is not a speaking order.(iv) The very nature of the goods is that loss due to spillage and shrinkage is inevitable and therefore, the marginal short landing could not be made a subject matter of levy of penalty. Penalty implies intentional misconduct on the part of the aggrieved party and no such ingredient of intentional misconduct has been proved against the petitioner.6. I have also heard learned Additional Central Government Standing Counsel, who had reiterated the reasonings of the Appellate Authority in rejecting the claim to waive the penalty. She would also submit that so-called delay has not caused any prejudice to the petitioner. Reliance is also placed on the judgment of the Supreme Court in BRITISH AIRWAYS PLC. v. UNION OF INDIA (2002 (2) S.C.C., 95) in support of the contention that all the authorities having found that the shortage has not been accounted for, the findings of fact arrived at under the Act could not be disturbed in exercise of the writ jurisdiction under Article 226 of the Constitution of India. 7. In the context of the delay in making the demand for penalty, reliance is placed on the decision of the CEGAT, West Regional Bench, Bombay in TURNER MORRISON & CO. v. COLLECTOR (1986 (25) E.L.T., 741) holding that though the demand was made after a long delay, the appellants were also guilty of laches and making false pleas regarding the accounting and hence penalty was reduced. Therefore, according to learned counsel for the respondents the objection regarding delay cannot result in setting aside the entire levy of penalty unless the petitioner has shown any prejudice as a result of the delay. 8. I have considered the submissions of both sides. 9. In the context of the levy of penalty in case of non-dutiable goods, a perusal of Section 116 of the Act shows that no distinction is made between dutiable goods and non-dutiable goods. Reference to the rate of duty is made only in the Sub-sections (a) and (b) only for the limited purpose of assessment of penalty. Such a guideline for assessment of penalty cannot be construed as imposing a principal condition that penalty could be levied only over dutiable goods. A perusal of the various provisions under Chapter 14 discloses that the various actions contemplated thereunder, confiscation, levy of duty, levy of penalty, etc., are contemplated not only against the dutiable goods, but also against non-dutiable goods if they have been imported or exported without proper authority of law and not properly accounted for as contemplated under Section 116 of the Act. Therefore, I am inclined to find this point against the petitioner.10. As regards the contention that the order is a non-speaking order, I have gone through the Appellate as well as Revisional orders and the points as raised by the petitioner had been dealt with and therefore, no prejudice is caused to the petitioner. However, on the question of delay I am inclined to agree with the contention of learned counsel for the petitioner. In this case, no explanation at all is offered by the Department. Neither in the order of the original authority, Appellate or Revisional Authority, any reason had been stated for the unreasonable delay of more than six years. Even in the present counter filed by the respondents before this Court, there is absolutely no reason as to why there was such a long delay except for contending that delay was not a bar for levy of penalty under Section 116 of the Act. It is further stated that the petitioner was aware of the report of the short landed quantity immediately after departure of the vessel. I am unable to appreciate as to how the said contention could provide any explanation for the delay beyond six years.11. In this context, in GOVERNMENT OF INDIA v. CITEDAL FINE PHARMACEUTICALS (1989 (42) E.L.T., 515 (S.C.), the Supreme Court held that in the absence of any period of limitation, it is settled that the authority has to exercise powers within a reasonable period and what would be the reasonable would depend upon the facts of each case and whenever question regarding the inordinate delay was in issue, it would be open to the assessee to contend that it was bad on the ground of delay. 12. In E.C.BOSE AND COMPANY PVT. LTD. v. UNION OF INDIA (1992 (58) E.L.T., 432 (Cal.) the learned Judge of Calcutta High Court held that in the instant case, the demand having been raised with a delay of more than seven years, it was held that there was inordinate and unexplained delay in issuance of show-cause notice. No proper explanation was also forthcoming from the Customs Department.13. In PAREKH SHIPPING COPRN. v. ASTT.COLLECTOR OF CUS., BOMBAY,(1995 (80)E.L.T., 781), it was held that powers under Section 116 of the Act should be exercised within a reasonable time which is five years. Learned counsel for the respondents however, relied on the decision of CEGAT, West Regional Bench, Bombay, in TURNER MORRISON & CO. v. COLLECTOR (1986 (25) E.L.T., 741), where the Tribunal only reduced the quantum of penalty. Even though in that case, the delay exceeded by five years, that was a case in which the Tribunal found the aggrieved party was also guilty of laches and they were taking false pleas regarding accounting. It was only in those circumstances having regard to the conduct of the party, the Tribunal merely reduced the quantum of penalty without setting aside the same. As stated earlier, no explanation is afforded on behalf of the Customs Department as to why there was so much delay namely, more than six years in raising the demand for levy of penalty. Therefore, in view of the unexplained delay, I am inclined to hold that the demand is liable to held as vitiated.14. It is also seen that the nature of the goods is such that it is subject to spillage and shrinkage. In fact even the Revisional Authority condoned a further quantity of 83 bags. That itself signifies the arbitrary manner of fixing the levy of penalty. I am also inclined to take note of the fact that the imported material is not a dutiable material, though not exempted from the levy of penalty. 15. Therefore, taking the over all circumstances into consideration, and the unexplained delay in making the demand, ends of justice would be met by reducing the penalty to Rs.20,000/-( Rupees twenty thousands only). Penalty in this case does not relate to any loss of revenue to the State. It is intended only to be a punishment for violation of the provisions of the Customs Act. It is just and proper to impose a reasonable punishment and not a punishment disproportionate to the nature of the violation. 16. In the result, the writ petitions stand partly allowed modifying the penalty to Rs.20,000/-(Rupees twenty thousands only). The writ petitions are ordered accordingly. No costs. Connected miscellaneous petitions are closed as unnecessary.