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Archana International Vs. Commissioner of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Judge
Reported in(2004)(163)ELT209Tri(Mum.)bai
AppellantArchana International
RespondentCommissioner of Customs
Excerpt:
.....says that the margin of profit has to be arrived at by taking into account declared value and the market value of the engines. this methodology, in our view, correct. however, the order passed on 14-5-1997 passed by his predecessor, dealing with 14 consignments has determined the redemption fine, on the basis of the value either declared or enhanced according to the norms set out by the commissioner at levels ranging between 85% and 137%. the appellant has furnished a chart in which the percentage of the redemption fine has been worked out. they range between the two extremes indicated in the preceding sentence. the commissioner has not indicated any reason for the reason in the difference in the redemption fine. we are unable to perceive any reason on reading his order. the department.....
Judgment:
1. The appeal is against the order of the Commissioner of Customs holding that used diesel engines imported by the appellants are liable for confiscation for the reason that they are second-hand goods and ordering their confiscation, permitting them to be redeemed on a fine of Rs. 40,00,000/- and imposing a penalty on the importer of Rs. 10,00,000/- under Section 111(d) of the Customs Act. Advocate for the appellant say that he does not question the liability to confiscation of the engines in question on the ground that they are second-hand engines and that an import licence, which was required for importation was not produced. He says however, the quantum of redemption fine and the penalty determined by the Commissioner are excessive.

2. The challenge to the redemption fine is on the ground that it is excessive and that there is no basis indicated in the order of the Commissioner. The Advocate contends that the Commissioner has not indicated any report of market enquiry on the basis of which he has arrived at the redemption fine which is approximately 175% of the declared value. He says that the Commissioner's statement that the market price of the engine is from Rs. 55,000/- to 65,000/- is not substantiated by evidence. He says that the Commissioner has emphasised that the reason for the high fine is that there is under invoicing of the goods which he is not able to establish.

3. Appellant relies upon an earlier order of the Commissioner of Customs No. 70/97 where fines in respect of 14 consignments of similar goods and range between 85% and 135%. Similarly he said that the penalty imposed is Rs. 10 lakhs which amounts to about 40% declared value. There is no basis indicated for imposing such a high penalty.

The advocate contends that penalty in the order of the Commissioner referred to earlier ranges between 5.5% and 15%. This order was passed in May, 1997 two months prior to the order under appeal. There is no reason why that is not to be accepted. He also derives support from an orders 227, 228/1997 passed in Appeals C/698 and 699/97 by the Madras Bench. In that order a redemption fine of 100% has been accepted as reasonable, going on the basis of other orders of the Commissioners.

The penalty has also been determined at Rs. 70,000/- for the value of Rs. 7.5 lakhs i.e. about 10%.

4. The departmental representative contends that the Commissioner has determined redemption fine on the basis of market enquiry. Penalty is imposable for unauthorised importation and is reasonable.

5. These arguments were advanced when the matter was heard on 22-7-1997 we had asked the departmental representative whether the order of the Commissioner dated 14-5-1997 which was cited by the appellant was accepted by the Department, or whether the department had gone in appeal against that. Some time had been given for that purpose.

Departmental representative stated that the 6rder of the Commissioner has been accepted as legal and proper. He also produced a letter to this effect from the office of the Chief Commissioner.

5. Confiscation of the engines has not been questioned, and the only issue before us is determination of redemption fine and the penalty imposed. The Commissioner has not given details, or reproduced in his order the report of the market enquiry on the basis of which the goods are said to have a price in the market of Rs. 55,000/- and 65,000/-, depending upon make and capacity of the engines. The contention raised for the appellant that the Commissioner has determined the redemption fine because he feels that the engines are under-valued is not correct.

A reading of the Commissioner's order shows that he has accepted the value declared in the invoice because he has nothing else to which contradieted. Thereafter he says that the margin of profit has to be arrived at by taking into account declared Value and the market value of the engines. This methodology, in our view, correct. However, the order passed on 14-5-1997 passed by his predecessor, dealing with 14 consignments has determined the redemption fine, on the basis of the value either declared or enhanced according to the norms set out by the Commissioner at levels ranging between 85% and 137%. The appellant has furnished a chart in which the percentage of the redemption fine has been worked out. They range between the two extremes indicated in the preceding sentence. The Commissioner has not indicated any reason for the reason in the difference in the redemption fine. We are unable to perceive any reason on reading his order. The department has accepted that this order of the Commissioner is legal and proper. It would follow from this the margin of profit in May, 1997 ranged between 85% to 137%. The minimum average works out about 110%. The order impugned in this appeal was passed on 24th July, 1997 month and half after the issue of earlier order of the Commissioner. The value of the engines in the order passed in May ranges as accepted or enhanced by the Commissioner ranges between Rs. 7531/- minimum and Rs. 10,138/- maximum. The value declared by the appellant and accepted by the Commissioner works out to Rs. 9,197/- per engine. This corresponds to the average value of the consignments which was subject matter of the earlier adjudication.

5. Once the department has accepted the earlier order as legal and correct it would follow that the margin of profit determined in that order has also been accepted. There is nothing to show that the local price has substantially shot up because of any reason. In this context, the absence of details or evidence in the Commissioner's order under appeal of the detailed enquiry on the basis of which he arrives at the market price is significant. The earlier order of the Commissioner dealt with a total of 2796 engines. It is not unreasonable to accept that by the time the second order was passed or most of the engines have been on market. The arrival in the market of such large number of engines could have the effect of reducing the wholesome price and hence the margin of profit. Even if we assume that this did not happen, it would help to contradict any suggestion that the market price had increased. There is in fact no such suggestion in the order of the Commissioner. The appellants point that the margin of profit applied by the earlier orders of the Commissioner approved by the department has to be applied, therefore has to be accepted. Besides this margin of profit also corresponds with the margin that the Chennai Bench of the Tribunal has to be appropriate after considering three orders of the Commissioner. We are, therefore, of the view that fine of 100% would be appropriate. We, therefore, reduce the fine to Rs. 24 lakhs.

6. The Commissioner has imposed penalty of Rs. 10 lakhs. He has not indicated any reason as to why penalty has been imposed or determining the quantum of penalty. It would appear the penalty has been imposed for importation without a licence. Since the import was without licence the liability to penalty cannot be disputed. There is however, no allegation that there has been any misdeclaration of value or quantity.

On the contrary declared value has been accepted. As we have seen the value compares favourably with the value determined before the Customs.

Taking this into account we reduce the penalty on the appellants to Rs. 2.5 lakhs.


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