Legal principle

Penalty proceedings under the Customs Act must be initiated and concluded within a reasonable time, and an inordinate, unexplained delay in taking such action—beyond even the five-year period prescribed for demand of duty—vitiates the imposition of penalty under Section 112(a).

Court decision

The Tribunal (M.M. Parthiban, Member (Technical)) upheld the confiscation of the goods under Sections 111(d) and 111(o) and the redemption fine under Section 125, since the Special Import Licences stood proved as forged; but it set aside the penalties of Rs.5,00,000 and Rs.3,00,000 imposed under Section 112(a) on the importer and the Customs Broker respectively, holding the impugned order not legally sustainable to that extent. The appeals were partly allowed in favour of the appellants.

Facts

San International (importer) imported five consignments of 'Nylon Tafeta' through Mumbai Sea Port under five Bills of Entry filed between May and October 1997, cleared against three Special Import Licences bought from open-market licence brokers (S/Shri Naresh Seth and Mahendrabhai). DRI investigation revealed the Special Import Licences were forged (forged seals/signatures, duplicate and photocopy licences), as confirmed by DGFT/licensing authorities by letters of 1998. Following a Show Cause Notice, the Commissioner of Customs (Import), Mumbai, by Order-in-Original dated 24.12.2007, confiscated the goods under Sections 111(d) and 111(o) with a redemption fine of Rs.10,00,000 under Section 125, and imposed penalties of Rs.5,00,000 on the importer and Rs.3,00,000 on the Customs Broker Varun Freight Forwarders under Section 112(a). Both appellants appealed to the CESTAT, Mumbai.

Key provisions

• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 116, Customs Act, 1962 — Penalty for not accounting for goods