2011 (3) TMI 1315 - HC - Customs

Penalty u/s 28 - Time limitation - notice imposing penalty is issued immediately after 5-6 years - short landing of the cargo since there is a Form/Declaration field by the petitioner himself - Held that - As there is loss of revenue to the state in not initiating action at the inception - The petitioner has undertaken under clause (7) of the Agreement that for any contravention of the provision of the Customs Act petitioner is responsible - Petitioner is directed to deposit the balance amount after the reduction of Rs. 5 lakh from the total amount.

Summary

Issues Involved:
1. Quashing of orders by various respondents.
2. Demand for penalty due to short landing of cargo.
3. Legality of delayed initiation of proceedings.
4. Liability of agent versus principal for penalty.

Detailed Analysis:

1. Quashing of Orders by Various Respondents:
The petitioner sought to quash the orders passed by the 3rd respondent at Annexures C, C1 to C5, the 2nd respondent at Annexures D, D1 to D5, and the orders on the revision applications filed before the 1st respondent at Annexures M, M1 to M5. Additionally, the petitioner aimed to quash letters dated 15-6-2004 (Annexure G) and 28-6-2004 (Annexure H) from respondents 4 and 5, which demanded penalty.

2. Demand for Penalty Due to Short Landing of Cargo:
The petitioner, a company incorporated under the Companies Act of 1956, entered into an agreement with the Indian Oil Corporation Ltd. in 1993 and 1994. The petitioner claimed that as an agent, they were not liable to pay any duty, which should be borne by the principal, the owner of the vessel. However, during 1994 and 1995, there were instances of short landing of cargo, and the petitioner sought amendments to the cargo declarations. Duty was calculated and levied based on the amended quantities. After 5-6 years, the petitioner received a notice proposing to levy a penalty under Section 116 of the Customs Act of 1962 for the short landing of cargo. The petitioner contested the penalty, but it was confirmed at various levels.

3. Legality of Delayed Initiation of Proceedings:
The petitioner argued that the levy of penalty after a significant delay was illegal and arbitrary. The Revenue countered that there was no limitation period prescribed under Section 116 of the Customs Act for initiating penal action, unlike Section 28 which covers demands related to duties and customs. The Apex Court in CCE., Jaipur v. Raghuvar (India) Ltd. held that courts should not import a specific period of limitation where none exists. The petitioner relied on several decisions to argue that the delay in initiating proceedings was unreasonable and that the penalty should not have been imposed on the petitioner but on the principal, Indian Oil Corporation.

4. Liability of Agent Versus Principal for Penalty:
The Revenue argued that as per Section 30 of the Customs Act, the person in charge of the conveyance must deliver the import manifest and make a declaration as to its truth. The petitioner, acting as an agent, was liable for accounting for the cargo shortage under Section 148 of the Act. The petitioner could not justify the short landing of the cargo. The court noted that the penalty was imposed after sufficient opportunity and due application of mind.

Judgment:
The court acknowledged the short landing of cargo and the petitioner's role as an agent. It considered whether the delayed imposition of penalty was maintainable. The court referred to the absence of a specific limitation period under Section 116 but emphasized that proceedings should be initiated within a reasonable time. The court noted that the initial delay of six years was explained, and the penalty was confirmed at various levels. The petitioner had already paid a substantial amount towards the penalty. The court concluded that the penalty imposed was reasonable, considering the facts and circumstances, and directed the petitioner to pay the balance amount within three months. The petition was disposed of accordingly.