2025 (5) TMI 1377 - AT - Customs

Imposition of redemption fine and penalties under sections 112(a) and 114AA of the under section 125 of the Customs Act 1962 (the Act) - recovery of differential duty - confiscation of goods - HELD THAT - As far as the redemption fine is concerned this Tribunal had not altered it or passed any order regarding it in the Final Order while remanding the matter. The appellant s appeal against the Final Order has been dismissed by the Supreme Court and thus the Final Order attained finality. The redemption fine was Rs. 10, 00, 000/- in the first OIO and it is the same in the impugned order. We find no reason to interfere with it. As far as the penalty under section 112(a) is concerned we find that the Commissioner has in the impugned order reduced it to Rs. 10, 00, 000/- considering the reduced duty. Taking a liberal view we reduce it further to Rs. 5, 00, 000/- Section 114AA was introduced effective from 13.7.2006. Evidently if any person knowingly made or used any false material in any document after this date it would attract this section. The Bill of Entry and all the documents with it were filed on 26.6.2003 when this section was not in the statute. There is nothing in this section which suggests that it has retrospective effect. Unless otherwise indicated all laws will only apply prospectively. Therefore Section 114AA would not apply to this case. Although this plea was not taken before at any stage this being a legal ground must be allowed. Therefore penalty imposed under section 114AA is set aside; Thus we partly allow the appeal and modify the impugned order. Rest of the impugned order is upheld. The appeal is allowed.

Summary

The core legal questions considered in this appeal pertain to the validity and quantum of penalties and fines imposed under the Customs Act, 1962, specifically: (1) Whether the redemption fine imposed under section 125 is justified and proportionate in light of the differential duty confirmed; (2) Whether the penalty under section 112(a) should be further reduced considering the reduction in differential duty; and (3) Whether penalty under section 114AA can be sustained given that the Bill of Entry was filed prior to the introduction of this section, raising the issue of retrospective application of law.

Regarding the redemption fine under section 125, the legal framework involves the Commissioner's authority to impose a redemption fine alongside recovery of differential duty and penalties for contraventions under the Customs Act. The Tribunal's earlier Final Order remanded the matter for re-quantification of differential duty and consequent penalty decisions but did not alter the redemption fine. The Supreme Court affirmed the Tribunal's Final Order, rendering it final and binding. The Court noted that the redemption fine remained unchanged at Rs. 10,00,000 in the impugned order despite the reduction in differential duty from Rs. 54,19,475 to Rs. 33,44,077. The appellant argued that the redemption fine was disproportionately large relative to the reduced duty. However, the Court found no reason to interfere with the redemption fine, emphasizing the finality of the earlier orders and the absence of any direction to modify this fine. Thus, the redemption fine was upheld.

In relation to the penalty under section 112(a), which deals with penalties for certain offences under the Customs Act, the Commissioner reduced the penalty from Rs. 15,00,000 to Rs. 10,00,000 in the impugned order, reflecting the reduced differential duty. The appellant contended that this penalty remained excessive and sought further reduction. The Court applied a liberal view and exercised its discretion to reduce the penalty further to Rs. 5,00,000. This decision balanced the need to penalize contraventions while considering the reduced quantum of differential duty, thereby aligning penalty quantum proportionately with the confirmed duty differential.

The penalty under section 114AA, introduced effective 13.7.2006, penalizes knowingly making or using false or incorrect material in documents related to customs transactions, with a penalty up to five times the value of goods. The Bill of Entry in this case was filed on 26.6.2003, before the enactment of section 114AA. The Court examined the principle of prospective application of statutes, noting the absence of any express retrospective provision in section 114AA. Consequently, the Court held that section 114AA could not apply to acts occurring prior to its commencement. Although the appellant had not raised this ground earlier, the Court allowed it as a pure legal question. The penalty under section 114AA was therefore set aside.

The Court's reasoning on the retrospective application of section 114AA is significant, reaffirming the principle that penal statutes are presumed to operate prospectively unless explicitly stated otherwise. This protects parties from being penalized under laws that were not in force at the time of the alleged contravention.

The Court considered the appellant's submissions and the authorized representative's support for the impugned order. It carefully balanced adherence to prior final orders, statutory provisions, and principles of natural justice and proportionality in penalty imposition. The Court's modification of penalties reflects a nuanced approach to enforcement of customs laws, ensuring penalties correspond reasonably to the confirmed duty differentials and legal standards.

In conclusion, the Court partly allowed the appeal by: (a) setting aside the penalty under section 114AA on grounds of non-retrospectivity; (b) reducing the penalty under section 112(a) to Rs. 5,00,000; and (c) upholding the redemption fine of Rs. 10,00,000 and the rest of the impugned order. The appellant was granted consequential relief accordingly.

Significant holdings include the following verbatim legal reasoning on section 114AA:

"This section was introduced effective from 13.7.2006. Evidently, if any person knowingly made or used any false material in any document after this date, it would attract this section. The Bill of Entry and all the documents with it were filed on 26.6.2003 when this section was not in the statute. There is nothing in this section which suggests that it has retrospective effect. Unless otherwise indicated, all laws will only apply prospectively. Therefore, Section 114AA would not apply to this case."

Core principles established include the prospective operation of penal statutes, the binding nature of final orders affirmed by the Supreme Court, and the proportionality principle in penalty imposition relative to the quantum of differential duty. The Court's final determinations clarified that penalties must be assessed in light of confirmed duty differentials, and that new penal provisions cannot be applied retroactively to acts predating their enactment.