Legal principle

Penalty under Section 116 of the Customs Act is leviable equally on dutiable and non-dutiable goods not properly accounted for, but where no limitation is prescribed the power must be exercised within a reasonable time, and an inordinate and unexplained delay in raising the demand vitiates it, the penalty itself being only a proportionate punishment rather than a revenue recovery.

Court decision

The court decided against the petitioner on the scope of Section 116 and the non-speaking order issue, but accepted the delay contention, holding the demand vitiated by unexplained delay of over six years. Taking overall circumstances (delay, nature of the goods prone to spillage and shrinkage, non-dutiable character, and proportionality), the Madras High Court partly allowed the writ petitions and reduced the penalty to Rs.20,000/- (Rupees twenty thousand only), in favour of the petitioner on quantum, with no order as to costs.

Facts

The petitioner, Wilco & Company, acted as authorised agent for the vessel m.v. Northland which arrived at Pondicherry on 20.7.1984 carrying manifested urea in bags of 14,784.250 MT consigned to Southern Petrochemical Industries Corporation Ltd., with a landing certificate showing 14,674.500 MT discharged and a short landing of 109.750 MT. Action was initiated against the agent under Section 148 (short landing) and Section 116 (penalty) of the Customs Act, but the show-cause notice was issued only in 1990, more than six years after arrival. A penalty of Rs.3,08,162/- (equal to the duty that would have been chargeable on the deficit but for the exemption on urea) was confirmed in appeal on 23.9.1993 and by the Central Government in revision on 20.12.1994, the revisional authority granting some condonations and fixing the duty-based penalty at Rs.2,94,123/-. The Assistant Commissioner then demanded this amount by order dated 14.6.1995, prompting the writ petitions.

Key provisions

• Section 116, Customs Act, 1962 — Penalty for not accounting for goods
• Section 148, Customs Act, 1962 — Liability of agent appointed by the person in charge of a conveyance