While adjudicating the appeal, the Customs, Excise, and Service Tax Appellate Tribunal noted that under section 11 or 112 of the Customs Act, mens rea is not a pre-condition for the imposition of penalty and the commission or omission of the act on the part of the importer is sufficient for confiscation. Further, the Court observed that section 114-A penalty is linked with the quantum of duty evaded and cannot be imposed in isolation.
Brief Facts:
The first appeal arises out of C/736/2007-DB, wherein M/s Vanick Oils & Fats Ltd. Had imported around 2,26,800 kgs of Hydrogenated Vegetable Oils (Vanaspati Ghee) and then filed the bill of entry. Based on the test report dated 02.08.2007, it was found by the central food laboratory that a quantity of 45,120 Kg was adulterated and unfit for human consumption as it was not confining with the standards laid down under No. A-19 of Appendix B of the PFA Rules, 1955.
The show cause notice was waived and then the impugned quantity of Vanaspati was confiscated and a penalty of Rs 18,10,851/-, then under section 114 A of the Customs Act, 1962 an appeal was filed by the appellant, whereby through the order dated 27.03.2012, the fine and penalty was set aside. This order was then challenged in the High Court of Punjab and Haryana, where the order of the tribunal was dismissed and the matter was referred back to the tribunal. Then the application for restoration was dismissed by the tribunal and then the high court again remanded the matter back to the tribunal to decide the same afresh by the law.
In the second case of appeal, the importer had imported 323.55 MTs of Bakery Shortening and filed the bill. Then, based on the test by the central food laboratory, it was found that the same was not conforming to the standards laid down under the PFA Act, 1954. Here also the show cause notice was waived and an order for confiscation was passed, allowing it to be re-exported on payment of a redemption fine of Rs. 10,00,000/- and imposing a penalty of Rs. 5,00,000/- under section 112(a)(i) of Customs Act, 1962. Then on appeal, the CESTAT, reduced the redemption fine to Rs 3.5 lakhs, and the penalty of Rs. 5,00,000/- was set aside.
Then on the appeal filed by the revenue, the Punjab and Haryana high court through an order dated 21.03.2013 the matter was remanded to CESTAT to examine the question as to whether the consignment in question was stray import warranting concession in redemption fine and penalty or not. CESTAT rejected this appeal and upheld its previous order. Then the importer filed an appeal and the High Court remanded the matter back to CESTAT to decide the same afresh by law after affording an opportunity to the concerned parties.
Now both appeals have been restored.
Contentions of the Appellants:
The learned counsel for the appellants has submitted that the appellant is a regular importer and the impugned consignments are not stray consignments. It has also been contended that the consignments in the items that are found to be nonconforming are very low compared with the total imports. Then with regard to the question of confiscation and imposition of penalty, it was seen that as per the report, some consignments have been declared unfit because they marginally vary in some parameters and the same can be attributed to the temperature in the importing country, storage, samples taken and the methodology of testing. Further, it has been contended that if in case any goods do not conform to the PFA rules, then there is no reason to impose a penalty or redemption fine, instead they are required to be re-exported. And the penalty was imposed under section 114 A of the Customs Act, 1962 and such penalty can only be imposed where there is evasion of duty, which is not the case in the current scenario, hence the penalty is not maintainable.
The Contentions of the Respondent:
The Learned Authorised representative for the department submitted that the appellants violated the conditions of the PFA Act and that is why the goods have been confiscated and that when the goods are held liable for confiscation no mens rea is required to be established under section 112 of the Customs Act, 1962.
Observations of the Court:
The Hon’ble Court noted that before the shipment from the foreign country, the authorities had issued certificates that prove the bona fides of the appellant, and the appellants cannot be said to have mens rea. it was then noted that the customs authorities have detained the consignments and imposed penalties following due process of law, but as per the board circular, it was directed that if the products fail the test, the customs authorities will ensure that the goods are re-exported out of the country by following the usual adjudication procedure or destroyed as required under the relevant rules.
The court concluded that the department's action in proposing confiscating the goods and imposing fines and penalties is legally tenable. However, the court noted that the quantum of the penalty and fine must be commensurate with the offense committed. And it was also noted that the appellant has not violated the provisions intentionally and there was no mens rea. Although the court noted that mens rea is not a pre-condition under section 111 or section 112 of the customs act and it is sufficient if, by the acts of commission or omission on the part of the importer, goods are rendered liable for confiscation. In the current case, the confiscation and imposition of penalty under section 112 was legal and proven. However, the court noted that the ends of justice could be met if the redemption fine and penalty are suitably imposed in respect of the appeal.
With regards to the penalty imposed under section 114 A for re-exporting the goods, it was noted that the same cannot be imposed in isolation and it cannot be sustained in the current case.
The Decision of the Court:
The Appeal was partially allowed and the redemption fine was restricted to Rs 3 lakhs and the penalty under section 112 to Rs. 1 lakhs
Case Title: M/s Vanick Oils and Fats Pvt. Ltd v. Commissioner of Central Excise, Delhi - III, Gurgaon
Coram:
Hon’ble Mr. S.S. Garg, Member (Judicial)
Hon’ble Mr. P. Anjani Kumar, Member (Technical)
Case No.: FINAL ORDER NO. 60113-60114/2023
(Customs Appeal No. 736 of 2007-DB and Customs Appeal No. 192 of 2008-DB )
Advocates for the Petitioners: Shri Naveen Bindal, Advocate
Advocate for the Respondents: Ms. Swati Chopra, Authorized Representative
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