ORDER
M. Gouri Sankara Murthy, Member (J)
1. The facts, in so far material in this appeal against an order of adjudication dated 1.4.1983 by the Collector of Customs and Central Excise, Ahmedabad are:-
(a) a contract for the supply of 1231.508 M/Tonnes of Refined Industrial Coconut Oil was concluded between the appellant and M/s. Patel Holdings, Singapore on 11.1.1982, who had duly exported them to India by the vessel “Aurora Glory” through three Bills. of Lading for 155.7933 M/Tons, 6.15.1337 M/Tons and 460.581, M/Tons respectively;
(b) The appellant filed, on 2.11.1982, three separate Bills of Entry Nos. 263, 264 and 265 in respect of the aforesaid shipments. The ship arrived on 4.11.1982;
(c) A notice dated 3.2.1983 was issued to the Appellant requiring them to show cause against confiscation of the goods under S.111(d) and a levy of penalty Under Section 112 of the Customs Act, 1962. This notice was adjudicated by the Collector who by his aforesaid order held that the import licences produced by the appellant did not cover the imports and directed confiscation of the coconut oil in question, subject to redemption on payment of a fine of Rs. 85,00,000/-, for import thereof in violation of the provisions of the Import Policy AM-80-81, 81-82, and 82-83 and S.3(1) of the Imports and Exports (Control) Act, 1947 as amended and read with S.11 of the Customs Act, 1962. No penalty was, however, imposed;
(d) The instant appeal was the sequel.
2. Before us, Shri Cooper, Learned Senior Counsel for the Appellant submitted straightaway that the judgments of the Tribunal in the Appeals preferred by ‘M/s Jayant Oil Mills M/s. Ailena Impex [Order No. 656/84-A in Appeal No. CD(SB)898/83-A and Order No. 503/85-A in Appeal No.CD(SB) 1410/83-A] govern the facts of this case both on the issue of liability for confiscation as well as the quantum of redemption fine and, accordingly, prayed for an order reducing the amount of such redemption fine to 35% of the landed cost as was held in the case of Jayant Oil Mills. In this context, he submitted inter alia, that –
(a) There are no features that distinguish the facts of this case from those of M/s. Jayanth;
(b) A redemption fine cannot be penal but only representative of the value of the confiscated goods to the importer;
(c) Even though the quantification of such fine may, in terms of Section 125 of the Customs Act be discretionary, subject however, to a ceiling of the market price thereof less the duty chargeable, the exercise of such discretion cannot, obviously, be arbitrary. Nor can the quantum of fine differ from case to case, notwithstanding that the circumstances are identical.
3. In effect therefore, the counsel requested for a reduction of the redemption fine of Rs. 85,00,000/- to 35% of the landed cost which according to him was Rs. 98,00,000/-. The reduced fine would in accord with his submission will work out to Rs. 34,30,000/T.
4. Shri Ajwani, for the Respondent, submitted on the contrary, that once the only grounds urged against the order under appeal – namely those relating to the determination of the assessable value in grounds (a) (f) and (a) (g) of the Memorandum of Appeal – are given up, the order under appeal has, necessarily, to be confirmed. There is nothing else that remains in the appeal. Further, in his submission, –
(a) A fine in lieu of confiscation being, admittedly, discretionary, need not, necessarily, conform in quantum to the one levied in another case, however much the facts and circumstances in both the cases are identical. Aggravating or extenuating circumstances, if any, are to be taken into account in any such determination. Nor does the exercise of such discretion by a quasi-judicial authority in adjudication call for any interference when there is no indication as to how exactly the discretion came to be exercised. [Reliance upon AIR 1966 Cal. 237 upheld in AIR 1.971 S.C. 293 – Sheikh Mohd. Omar v. Collector of Customs];
(b) In the case of Jayanth, there was, admittedly, no material whatsoever to help determine the quantum of fine and even the margin of profit was a mere “educated guess”. Accordingly, the decision therein cannot afford any ratio or basis for the computation of the redemption fine in this case;
(c) In both the cases of M/s. Jayanth and M/s. Allena, the assessable value as determined in adjudication had been reduced, thus, correspondingly, increasing the margin of profit. In any view, it is the increased margin of profit that has to be taken into account. Again, if the assessable value determined in adjudication is after all to maintain in this case – unlike the Jayanth and Allena cases – the ratio in the said cases cannot apply;
(d) The decision of the High Court of Delhi in the case of Jain Exports [C.Ws. Nos. 4037 and 4038 of 1982 – Jain Exports (P) Ltd. v. Union of India] laying down the guidelines for the determination of the quantification of the fine in lieu of confiscation had not been brought to the notice of the Bench of the Tribunal that decided the Allena case although it was available by then. Were it cited, it would, perhaps, have made for a difference in the judgment in the case;
(e) Pursuant to the direction of the High Court of Delhi in the aforesaid case of Jain Exports, the question of determination of the quantum of fine is now pending consideration before a Bench of three Members of this Tribunal specially constituted on a difference between the Members of the West Regional Bench. A decision in this appeal may pend till that decision is known.
5. On a persual of the records and on the submissions made, it would appear to us that –
(a) It is not as if the appeal merely calls in question the determination of the assessable value only, so that, if it is not agitated and given up during the course of the hearing, nothing else in the appeal survives for decision. The Appellant had definitely impugned the imposition of a fine in lieu of confiscation in a sum of Rs. 85,00,000/- in the adjudication order. Ground (b) and the prayer in para 8 of the Memorandum of Grounds of Appeal are quite clear. It is implicit in the prayer on behalf of the Appellant for a judgment on the lines of the previous decisions of the Tribunal in M/s. Jayant and Allena cases aforesaid, that the question of quantification of the fine in lieu of confiscation be also decided in the manner it was in those cases. It is not, therefore, correct to say that the said question was a non-issue or ceased to be an issue at any time;
(b) Section 125 of the Customs Act, in so far material, lays it down that whenever confiscation is authorised, the Officer adjudging such confiscation “may”, in the case of an import of prohibited goods, and “shall” in the case of other goods, give the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit, provided that such fine “shall not exceed the market price of the goods confiscated less, in the case of imported goods, the duty chargeable thereon”;
(c) It would thus appear that it is in according the option of release from confiscation [the contra distinction in the use of the words “may” and “shall” in the two specified cases of prohibited goods and other goods is significant] as well as the quantification of the amount of fine [“as the officer thinks fit”] that is to be paid for such release that the adjudicating officer is vested with a discretion, subject to a fetter or ceiling, namely the market price of the “goods confiscated” themselves and not curiously enough “such or like goods as those confiscated”;
(d) (i) In a consideration of the various questions that arise in the construction and application of the aforesaid provision, it would be material to remember all the time that while a proceeding for confiscation is, undoubtedly, one in rem rather than in personum like, e.g. penalty under S.112 of the Customs Act, 1962, – one in relation to the offending goods rather than in relation to the person in any way concerned with them – nevertheless, it is no less penal in nature or quasi-criminal in character, even though such proceedings are under a fiscal enactment [AIR 1974 S.C. 859, Collector of Customs v. Boormal – Para 22 of the report where confiscation is referred to as a penalty]. The test to adjudge if an action is penal or quasi-criminal is not in the mens rea prescribed. If that were the true test, a proceeding for the levy of penalty is also not penal or quasi-criminal, seeing that no mens rea is prescribed at all in Section 112(a) although penalty is, indisputably, penal. On the contrary, confiscation as an act of appropriating private property for State or Soverign use was known since the Roman Empire and “usually been the result of the doing by the owner of some prohibited Act…. It is also the penalty for trying to carry contraband…. In criminal law, confiscation of smuggled property… is part of the penalty for certain offences [P.270 of David M. Walker’s “The Oxford Companion”]. The. seizure and appropriation of property as a punishment for breach of the law whether municipal or international was held to be confiscation in (1947) Ch.629 – [ Frankfurter v. W.L. Exner – cited in Osborn’s Concise Law Dictionary – Sixth Edition – P.87]. So also “property confiscated” was construed to mean in its ordinary sense, property taken by the crown by way of penalty in Re Burnett [(1902) 1 Ch.858 cited in Stroud’s Judicial Dictionary, Fourth Edition, P.549],
(ii) Once this is so, two consequences follow. First, the provision has strictly to be construed and second, any proceeding in which either the confiscation or the fine in lieu thereof are to be adjudged are judicial or quasi-judicial, as the case may be, such a proceeding or the determination of any question therein including the quantification of the fine can hardly be arbitrary. It has to conform to some well settled rationale or principles including the principles of natural justice. The exercise of the discretion in the fixation of the fine in lieu of confiscation has, necessarily therefore, to be interfered with if it did not so conform or was otherwise arbitrary;
(iii) In A.I.R. 1966 Cal.237, it was a case of a confiscation of a mare imported as baggage. The Collector in adjudication did not, in his discretion, order redemption of the confiscated animal on payment of a fine. He ordered an absolute confiscation. The order was assailed in the Hon’ble High Court of Calcutta on the ground that no reason was given as to why the assessee was not given an option to redeem on payment of a fine in lieu of confiscation. It was in this context that it was observed that –
“(28) It is now beyond doubt that imposition of a fine in lieu of confiscation is discretionary with the authorities. But must there, be given specific reason in every case as to why a particular penalty, may be the more onerous of the two, was imposed? In my opinion, there is no authority for such a proposition. If there be indications that an inferior tribunal felt that its discretion was fettered, although there was by law no limitation imposed, or that it had none, and in that view chose the more onerous of the two penalties provided, then only a superior court may, remit the case and ask the inferior tribunal to exercise this discretion according to law. In the absence of such indications, the discretion exercised by an inferior tribunal should not be interfered with. Here, there is no such indication. I, therefore, do not propose to interfere”.
(iv) The aforesaid issue was neither raised nor considered in appeal to the Supreme Court in AIR 1971 S.C. 293. It cannot be, therefore, said that the aforesaid observation was affirmed by the Hon’ble Supreme Court;
(v) Even so, the aforesaid observation is inappicable in the facts and circumstances of this case. This is not a case where the inferior tribunal imposed one type of penalty rather than another which is less onerous. The learned adjudicating officer did indeed afford an option for redemption. The question is, if the fixation of the fine in lieu of confiscation could be in his absolute discretion unfettered by any principles or “well established lines” “according to the rules of reason and justice and not according to private opinion : Rookes case (5. Rep 100a); according to law and not humour. It is to be not arbitrary, vague, fanciful but legal and regular” [passage extracted in para 26 of the report in AIR 1966 Cal. 237 from the judgment of Lord Halsbury in Sharp v. Wakefield (1891 AC 173];
(vi) To expatiate a little – duty to act and the discretion as to the manner of performance of that act e.g. “as he thinks fit” – are distinguishable in law. In writ proceedings, performance of a duty can be compelled. [AIR 1968 S.C. 1113 – State of Mysore v. Syed Mohd.]. But not the exercise of discretion in a particular way 1954 SCR 883 – Vice Chancellor Utkal University v. S.K. Ghosh]. Nevertheless, a court in exercise of its jurisdiction under Article 226 of the Constitution of India, will interfere with the manner of exercise of discretion where it is exercised to do an act which is ultra vires the statute that conferred the discretion or it was a malafide exercise or in contravention of the principles of natural justice or where a condition precedent for such exercise was not fulfilled. A malafide exercise of discretion is where the authority is influenced by extraneous or irrelevant considerations or does not apply its mind to the relevant considerations. Also if both relevant and irrelevant considerations are inextricably mixed up, the exercise of the discretion is interfered with. [AIR 1969 S.C 707 – Rohtas Industries Ltd. v. S.D. Agarwal – approving the views of Hidayatullah and Shelat JJ in AIR 1967 S.C. 295 – Barium Chemicals Ltd. v. Company Law Board – See in this context the observations of Lord Denning citing Lord Greene M.R. in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation 1947 – 2 All. ER 680 at 682- “a person entrusted with discretion must direct himself properly in law. He must call attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to the matter he has to consider”];
(vii) Section 125 of the Customs Act, 1962 was enacted in substitution of S.183 of the Sea Customs Act, 1878 – which merely provided that, “whenever confiscation is authorised by this Act, the officer adjudging it shall give the owner of the goods an option to pay in lieu of confiscation such fine as the officer thinks fit”. In construing the said provision the Hon’ble Supreme Court in AIR 1964 S.C. 1140 (Indo-China Steam Navigation Co. v. Jasjit Singh) had categorically held that “S.183 confers discretion on the officer to determine what fine should be imposed in lieu of confiscation and in doing so, he will undoubtedly take into account all relevant and material circumstances, including the extenuating factors on which the owners may reply”. In view of this decision, no contention of an absolute unfettered discretion – not to be interfered with in appeal by a superior forum and not merely by way of a writ.- can be advanced. We, however, observe that in the instant case no extenuating circumstances exist as has been held in Tribunal’s decision in Jayant Oil Mills case and about which there is no dispute. Illegal importation with a view to making profit has been found in a similar case of Jain Exports by Delhi High Court (C.W. 4037 and 4038/82 – copy of the judgment made available).
(e) In fact, in enacting Section 125 of the Customs Act, 1962, in the place of S.183 of the Sea Customs Act, 1878, the legislative intent is explicitly expressed, to
(i) Categorise the classes of cases into those where an option for redemption in discretionary and where it is mandatory, and
(ii) Provide a ceiling for the fine in lieu of confiscation that may be imposed, so that while the fine should be deterrent, the option should not be illusory.
line new section, thus clarifies the considerations relevant in a computation of the fine in lieu of confiscation;
(f) (i) This being so, the first step in fixing the quantum of fine in a case where the option to redeem is once decided upon is, necessarily, the determination of the ceiling, since it cannot, in any view, exceed it. It is totally irrational to decide upon the quantum without, in the first instance, a determination of the monetary limit thereof.
(ii) In the determination of the ceiling for the fine, “the market price of the goods confiscated” has to be ascertained in accord with the legislative mandate,
(iii) One might wonder if the goods confiscated themselves have a market price till they are released from confiscation, cleared on payment of the duty, penalty and fine for redemption and brought to the market for sale. The expression is not “market price for such or like goods” or “market price for which goods of the like kind or quality are sold or are capable of being sold” [of Section 30 of the Sea Customs Act, 1878 and old Section 4 of the Central Excises and Salt Act, 1944 – and the decisions of the Privy Council on the interpretation and application of the aforesaid Section 30 in Vacuum Oil Company v. Secretary State (AIR 1932 P.C.168 = 59 IA 258 = ECRC 1) and Ford Motor Company v. Secretary of State (ECRC 8) and the decisions of the Supreme Court on the old Section 4 of the Central Excises and Salt Act in AIR 1973 S.C. 225 =1977 ELT 177 – A.K. Roy v. Voltas and AIR 1975 S.C. 225 = 1978 ELT 444 – Atic Industries vs. Assistant Collector of Central Excise. Does it make for any difference [if instead of the aforesaid expressions, the expression “market price” is made use of?] but the market price for the self same confiscated goods themselves. How, then, is their market price to be ascertained unless the fine for their redemption is determined and how is the fine determined unless their market price had been ascertained? Again, market price, on what day and at what place? [Is it the date of their import? Or the date when the matter is ultimately adjudicated, may be after an inordinate delay, or the date of actual clearance after adjudication? Or at the place other than the place of importation;
(iv) When one speaks of a market price of goods, it is not the actual price that the goods may ultimately fetch on sale. Indeed, they may not actually be sold at all. “Market Price” on any particular day in a particular place is a notional concept, a hypothesis, implying merely the price a willing purchaser would pay a willing seller for the property in the goods and is evidenced by the price paid in a plurality of transactions of sales and purchaser occurring on that day or nearest to it and in that place in identical goods or goods of like kind or quality, or failing that similar goods at that place or at a time and place nearest to it. In the words of Lord Blanesburgh in Vacuum Oil case the wholesale cash price for which goods of a like kind or quality are sold or capable of being sold is “that price current for staple articles the amount of which, if not a subject of daily publica-in the press, is easily ascertainable in appropriate trade circles”. This is nothing but “market price”. The “market price of the goods confiscated is, in the circumstances, no more and no less than the market price for goods of the like kind or quality or similar goods ascertained on the basis of the prices paid in the course of multiple transactions of sale and purchase;
(v) Market price when and where? Obviously at the time and place of importation. The offending act which rendered the goods liable to confiscation was the import at a particular time and place. It is, therefore, the market price on the date of import and at the place of import that has, in the first instance, to be ascertained;
(vi) Goods of like kind and quality would imply necessarily goods of the same brand or of the same supplier. It has, necessarily, to be for imported rather than indigenous goods. If, however, the market price for goods of like kind and quality is not ascertainable, the price of comparable goods of foreign origin or Indian origin in that order is to be ascertained;
(vii) Ascertainment of market rate of goods of like kind and quality or similar goods on any particular day or place is, doubtless, difficult but cannot, on that account, be shirked. It is a question requiring evidence to be adduced by either party and appreciation thereof;
(g) (i) After ascertaining such market price, deduction therefrom should be made of the duty payable on goods under confiscation. Quantity (Quantum) obtained thereafter would form the ceiling for levy of fine in lieu of confiscation. Instant case is clearly one of imported goods. Therefore the ceiling for levying fine in lieu of confiscation should be arrived at in the instant case as outlined above;
(ii) Imposition of redemption fine equivalent to the ceiling may at times prove illusory. What is necessary, however is that the profit that an importer is likely to make on the date of import by sale of such illegally imported goods is mopped up so that premium on or incentive to dishonest activities is curbed;
(iii) In the case of M/s. Jain Exports mentioned supra, the Hon’ble High Court was pleased to direct an enquiry into the ultimate profit actually made by the importer on the sale of the imported goods. The sale, however, had obviously taken place long after the date of import and the price realised on such sale may have nexus with the market price ruling on the date of sale rather than on the date of import. The profit or less realised may be the result of fluctuations in the market as well as the speculation of the importer as to the way the market may act. If he had incurred less it is not as if nothing is to be recovered by way of fine in lieu of confiscation, notwithstanding that on the date of the import he could have made a profit. We may draw an analogy from the principles relating to the computation of damages on breach of contract as laid down in AIR 1915 P.C. 48 [A.K.A.S. Jamal v. Moola Dawood Sons & Co]. In that case, on a breach by the buyer in a contract of sale of certain shares in consequence of a fall in the market, the seller demanded payment of damages on the basis of the difference between the contract rate and the market rate ruling on the date of breach. Subsequently, however, the seller happened to sell them in a rising market at some profit. This resulted in mitigation of his loss to a certain extent. The question that was considered was whether the measure of damages for breach of contract was the difference between the contract price and the market price at the date of breach or the measure of actual loss sustained after re-sale in a rising market. If the seller was bound to reduce the damages by subsequent sale at better prices and if the purchaser is entitled to the benefit of such sale, it must be that he must bear the loss also, if any, in consequence of such sale. Their Lordships categorically held that the latter is impossible and the former proposition is equally unsound. If the seller holds on to the shares after the breach, the speculation as to the way the market will subsequently act, is the speculation of the seller and not of the buyer. The seller cannot, therefore, recover from the buyer the loss below the market price at the date of the breach if the market falls. Nor is the liable to the purchaser for the profit if the market rises. While it is true that the seller owed a duly to mitigate the loss consequent upon breach, the loss to be ascertained however, is the loss at the date of breach. The mere fact that the seller reduces his loss by selling the shares at a higher price than obtained at the date of breach is of no relevance seeing that the seller’s loss at the date of breach was and remained the difference between the contract price and market price at that date. When the buyer committed breach, the seller remained entitled to the shares and became entitled to damages as well for the breach. In consequence of resale, his pocket received the benefit but his loss at the date of breach remained unaffected. On the same analogy it may be observed, with respect, that the profit earned or loss incurred in an actual sale long after the date of import is not of such relevance as the profit the importer could have made on the date of the import itself;
(j) The question before us is whether the fine imposed in the instant case is according to the above guidelines. We observe that in the impugned order, there is no determination of market price of the confiscated goods at the time and place of importation. Determination of fine by the learned Collector appears to be ill-informed. It is based on no evidence whatsover. It was a mere ipse-dixit. No opportunity would appear to have been afforded to the assessees to adduce evidence against that quantification. It is almost as if it were “plucked out of air”. We have no hesitation therefore in setting it aside and directing a de novo determination thereof, in the light of the aforesaid guidelines.
6. In the premises, the appeal is allowed only in respect of the fine in lieu of confiscation which is, hereby, required to be re-determined by the Collector on remand. In the aforesaid enquiry, needless to say, the Collector can summon all such records as he my find relevant. The enquiry may be completed within three months from the date of this order. Since admittedly, the goods were liable to confiscation and they were cleared, the fine already realised need not be refunded till the re-determination thereof. On such a re-determination, if any part of the fine is to be refunded, it may be refunded. If any more amount is to be realised, it should be directed to be paid and realised.
7. Order accordingly.