Case law

Madras High Court · 9 Mar 2020

M/S.South India Corporation… vs The Government Of India

Legal principle

Penalty for short landing under Section 116 of the Customs Act, 1962 cannot be sustained where adjudication is unduly delayed—the liability cannot be kept alive beyond five years from discharge per Parekh Shipping—or where Customs failed to conduct and sign the prescribed ullage surveys establishing the short landed quantity.

Court decision

The writ petition was partly allowed with no costs: the imposition of penalty on the cargo covered by show cause notices at Serial Nos. 2, 5, 6, 8, 10 & 11 was held unsustainable (quashed) owing to considerable delay in issuing notices and completing adjudication, while for the remaining show cause notices (Serial Nos. 1, 3, 4, 7, 9) the court declined to interfere since notices were issued within a reasonable time and penalty had already been reduced by 50%; the petitioner was directed to remit the penalty re-determined by the 3rd respondent for those cases within thirty days. The decision was thus partly in favour of the petitioner.

Facts

M/s. South India Corporation (Agencies) Ltd., a steamer agent, was issued 11 show cause notices under Section 116 of the Customs Act, 1962 for short landing of consignments—ten of propane and one of acid grade fluorspar—discharged at port by various vessels. The Deputy Commissioner (original authority) confirmed penalties under Section 116, which were upheld by the Commissioner (Appeals). On revision under Section 129DD, the Government of India by order dated 18.03.2004 upheld the penalty finding but reduced it to the duty chargeable on the short landed goods, and the Joint Commissioner passed 11 consequential orders on 03.06.2005/06.06.2005 giving effect (reducing penalty by 50%). The petitioner challenged the revision order and the consequential demands in a writ petition under Article 226.

Key provisions