ORDER
K.S. Dilipsinhji, Member (T)
1. This is a combined appeal of Shri Hasmukh Dalpatrai Ganatra and his proprietary firm M/s. Export Enterprises, Bombay against the Order No.’ S/J14-4-923/82-Pint, dated 12-10-1983 confiscating 79 takas of synthetic fabrics valued at Rs. 23,700/-cif and Rs. 71,100/- at the market rate under Section 111(p) of the Customs Act and levying a penalty of Rs. 75,000/- on Shri H.D. Ganatra under Section 112 of the Customs Act and a further penalty of Rs. 25,000/-on M/s. Export Enterprises under Section 112 ibid. Appearing on behalf of the 2 appellants, advocate Shri Menon submitted that the appellants imported under their REP Licence Nos. 2948340/2940183/0459677/0467866 992 takas of the fabrics in question and cleared them under B/E No. 003415, dated 12-7-1982. The Collector in his order under appeal had accepted this fact and held that the goods namely, 79 takas seized from the appellants were out of the stock imported under the aforesaid B/E. However, the Collector confiscated the seized goods for contravention of Chapter 1V-A and he levied the penalties for the same contravention. Shri Menon submitted that the penalties had been levied on Shri Ganatra and his pro-prietory concern. This was not legal. He drew our attention in this behalf to the provisions of Section 140 of the Customs Act and explained that a proprietory concern would not come under the definition of a Company under Section 140. In reply to a question from the Bench as to whether the separate penalties should not be treated as a combined penalty of the total amount, Shri Menon submitted that this would not be correct and the question of this consideration was not before the Tribunal and hence the Tribunal could not hold the aforesaid view. Besides under law, it was not legal for the Addl. Collector to impose two penalties on the same person for the same offence. Shri Menon however admitted that the show cause notice was issued to Shri Ganatra and to his firm and in reply to the show cause notice, this argument was taken up before the Addl. Collector but he did not concede the same. In view of this position, Shri Menon submitted that the penalty on the firm should be set aside. As regards the absolute confiscation of goods valued at Rs. 71,100/-, Shri Menon contended that this was not correct. The confiscation had been ordered under Section 111(p) of the Customs Act for the alleged contravention of Chapter IV-A of the Customs Act. Under Section 125 of the Customs Act, it was incumbent on the Addl. Collector to give an option to redeem the confiscated good on payment of a fine. This was not done and hence the Addl. Collector’s order was not legal. As regards the levy of penalty on Shri Ganatra under Section 112, Shri Menon contended that Section 112 was not applicable to Shri Ganatra in the circumstances of the case. He read Section 112 of the Customs Act and also the preamble to the Customs (Amendment) Act, 1969 (Act 12 of 1969) which set out the purpose for incorporating Chapters IV-A and IV-B in the Customs Act. Shri Menon argued that the goods confiscated by the Collector had been validly imported into the country and cleared through the Customs. But there was a subsequent contravention of Chapter IV-A as the appellant had not intimated the place of storage of the goods notified under Chapter IV-A to the Customs authorities nor maintained any accounts for acquiring, sale etc. of the notified goods. Shri Menon conceded that it was the duty of the appellant to comply with the requirements of Chapter IV-A and that the appellants had failed to do so. But in case of such a contravention, Section 112 was not attracted as the goods had been imported regularly, but the only penal provisions which could come into play were those of Section 117. Referring back to the Collector’s order of absolute confiscation of 79 takas, Shri Menon once again contended that the order was not legal. He said that the option to pay fine was mandatory and he relied on the judgment of the Calcutta High Court in the case of Shaikh Mohamed Omer and Ors. v. Collector of Customs, Calcutta and Ors. AIR 1967 Calcutta Page 16. Coming to the facts of the present importation, Shri Menon contended that the goods were imported under a valid licence and hence the goods were not “prohibited” and therefore the Collector should have given an option to redeem the same on payment of a fine. He stated that the other facts regarding non-compliance with provisions of Chapter IV-A were not denied though, they were not relevant for the purpose of the request for giving the option for redemption of the confiscated goods.
2. The Learned SDR Shri Senthivel drew our attention to the Collector’s findings in his order. Shri Senthivel observed that the Collector had held that the appellants had discharged the burden of proof under Section 123 of the Customs Act though the description of the fabrics as given in the B/E was not quite explicit with reference to the description of the takas seized from the appellants. However, the Collector extended the benefit of doubt to the appellant. Shri Senthivel however argued that the appellant had sold the goods to bogus customers. The sales were bona fide. As regards the non-compliance with the provisions of Chapter IV-A, the offence was accepted by the appellants. Shri Senthivel however did not advance any arguments as to why the Collector did not give an option to redeem the goods on payment of a fine. He merely contended that the confiscation under Section 111(p) was not disputed as the appellants had omitted to declare the goods and the place of storage and to maintain the accounts for acquiring, sale etc. as required under Chapter IV-A of the Customs Act. As regards the levy of penalty on Shri H.D. Ganatra and M/s. Export Enterprises, Shri Senthivel implied that the Collector’s decision was correct by pointing out that Section 140 was included under Chapter XVI of the Customs Act which dealt with offences and prosecutions and hence Section 140 would not be attracted in a departmental adjudication by an Addl. Collector. As regards levy of penalty under Section 112, Shri Senthivel urged that the Collector’s order was justified as the goods were confiscated under Section 111(p) and this action of the appellants rendered them liable to the penalty under Section 112 of the Customs Act. Referring to the various provisions for the levy of the quantum of penalty under Section 112, Shri Senthivel argued that this was with a view to determine the maximum amount of penalty leviable and not as to whether a penalty could be levied under Section 112 in a case where the omission on the part of a person to comply with Chapter IV-A would render the goods liable to confiscation under Section 111(p) of the Customs Act. Shri Senthivel therefore supported the Collector’s order.
3. In reply, advocate Shri Menon submitted that the appellant had since closed down his business and therefore he prayed for mercy. He further repeated the request for release of the goods on payment of a redemption fine.
4. The contentions advanced on behalf of the appellants and the respondents have been given very careful consideration. Taking the salient feature of the appeal first for consideration, it is found that the appellants contend that the penalty levied on the appellants under Section 112 is not legal, though they admit non-compliance with Chapter IV-A and therefore the liability of the goods for confiscation under Section 1ll(p). They plead that at the most, a penalty can be leviable under the residuary Section 117. It is seen that the Heading for Section 111 is “confiscation of improperly imported goods etc.” The Heading of Section 111 therefore covers not only the goods which have been improperly imported into India but other goods also by inclusion of the word “etc.”. The examination of the Sub-sections of Section 111 reveals that the Sub-sections provide for confiscation of goods which have been properly imported earlier. Besides, Sub-section (p) there are Sub-sections like (n), (o) etc. There is therefore no escape to the appellants from the admission that goods imported properly earlier can be confiscated under Section 111(p). Once this position is established, it is seen that under Section 112, a person is rendered liable to penalty under Sub-sections (a) and (b) for the reasons mentioned therein. Applying the provisions of law to the facts of the case, it is seen that after import, the appellants did not comply with the requirements of Chapter IV-A and therefore this omission to comply with the requirements rendered the goods liable to confiscation under Section 111(p) and the appellants to a penalty under Section 112 of the Customs Act. It may further be seen that while Section 112(a) is attracted in the present case as seen above the objection raised by the appellants’ learned advocate is not fully answered so far. The liability to the penalty is to be determined in terms of the 5 clauses of Section 112. Examining these clauses it is seen that Clause (i) is fully attracted to the facts of the case, and this for the reasons which follow. This Sub-clause provides that in case of goods which are prohibited under the Customs Act or any other law for the time being in force, the person concerned is liable to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is greater. The question therefore which next comes up for determination is whether the 79 takas seized and confiscated from the appellants are prohibited goods under the Customs Act or any other Act. The phrase “prohibited goods” is defined under Section 2(33) of the Customs Act which is as follows :
“Prohibited goods” means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with.
5. Therefore, the main question which calls for determination is whether the import of the takas of synthetic fabrics was prohibited under the Customs Act or any other law for the time being in force. So far as the Customs Act is concerned, there is no prohibition on the import of the goods in question. However, under Claused of the Imports (Control) Order, 1955, dated 7-12-55 issued under the Imports & Exports (Control) Act, 1947 any goods of the description specified in Schedule I to this order are prohibited on import unless a licence or a Customs Clearance Permit is granted by the Central Govt. or its authorised officers. This prohibition is deemed to have been made under Section 11 of the Customs Act in terms of Section 3(2) of the Imports and Exports (Control) Act, 1947. The 79 takas of interlining cloth are classifiable under Heading 51.04 of the Schedule I to the Imports (Control) Order, 1955 and hence these are prohibited goods. It may be that in the present case, the prohibition was voided by the issue of an import licence to the appellants. But under the Imports (Control) Order read with the Imports and Exports (Control) Act, the goods become prohibited. Therefore, there is a prohibition on the import of these goods under the Imports & Exports (Control) Act and the goods are prohibited goods in terms of Section 11. The fact that the prohibition was voided in a particular case by the issue of an import licence does not take away the goods from the general category of “prohibited goods”. This position emerges daily before the Customs authorities when they consider the imports which are made without a valid licence. Hence Section 112(a) is very much attracted to the circumstances of the present appeal. In this view, Section 117 is precluded from consideration as this Section provides for a penalty for contravention of any provisions of the Act only where no express penalty is elsewhere provided for such contravention or failure to comply with any provisions of the Customs Act. It is therefore not possible to accept the advocate’s argument that Section 112 does not come into operation but only Section 117 of the Customs Act. The next question which the learned advocate agitated was to request for release of the confiscated goods on payment of a redemption fine. He has urged that under Section 125 of the Customs Act, the goods were not prohibited and hence the Addl. Collector was under statutory obligation to permit release of the goods on payment of a fine. For the purposes of penalty leviable under Section 112 of the Customs Act, it is seen from the foregoing facts that the imported goods come within the general definition of “prohibited goods”. Section 125 of the Customs Act empowers the officer adjudging confiscation of goods to permit the owner of the goods an option to pay a fine in lieu of confiscation if the import or export of goods is not prohibited under the Customs Act or under any law for the time being in force. The mandatory provisions of giving option to the owner of goods arises only in case of other goods which are not so prohibited on importation or exportation. As seen from the foregoing analysis, the 79 takas of synthetic fabrics come within the category of “prohibited goods”. The judgment of the Calcutta High Court in the case of Shaikh Mohamed Omer does not come to the rescue of the appellants. It was therefore not necessary for the Addl. Collector to permit their redemption on payment of a fine in lieu of confiscation under Section 125 of the Customs Act. From this point of view, the Addl. Collector’s order is quite legal. However, the advocate for the appellants has put forward other mitigating circumstances, and asked for mercy. Considering the fact that the goods are not smuggled the prayer for permitting redemption of the goods on payment of a fine is quite apt. In view of all the facts and circumstances of the case, the confiscated goods are allowed to be redeemed by the appellant on payment of a line of Rs. 24,000/- (Rupees twenty four thousand) only in modification of the Addl. Collector’s order.
6. The advocate has also pleaded against the levy of the penalty on Shri Hasmukh D. Ganatra and on his proprietory firm M/s. Export Enterprises. The advocates has not accepted the Bench’s suggestion that the penalty could be taken as a composite one on the appellant. On the other hand, the SDR has argued that the penalty on Shri Ganatra and on his proprietory firm is legal. The department’s stand shows that M/s. Export Enterprises is the proprietory concern of Shri H.D. Ganatra. It was therefore, not correct and legal for the Addl. Collector to levy separate penalties on Shri H.D. Ganatra and his sole proprietory concern in the circumstances of the case, notwithstanding the argument of the learned SDR on the interpretation of Section 140. Apart from this, it is also seen that there is nothing in the order of the Addl. Collector which could be interpreted to mean that the penalty imposed under Section 112 was a composite one. Since the penalties have been levied on Shri Ganatra and his firm separately, the same are not in order and accordingly the penalty of Rs. 25,000/- (Rupees twenty five thousand) only levied on M/s. Export Enterprises under Section 112 is set aside. Except for the aforesaid modifications in the order of the Addl. Collector of Customs, the same is confirmed and the appeal of Shri H.D. Ganatra and M/s. Export Enterprises is otherwise rejected.
K. Gopal Hegde Member (J)
7. I have carefully gone through the order proposed to be delivered by Brother Dilipsinhji. I respectfully disagree with his conclusions and his interpretation of Sections 112 and 125 of the Customs Act. I however agree with his conclusion that separate penalties was not leviable on the proprietary firm when penalty had been levied on the proprietor.
8. As Brother Shri Dilipsinhji has set out the facts as well as the contentions urged by the two sides, it is not necessary to repeat the facts as well as the contention urged in detail. Suffice if I refer to a few undisputed facts and to the order passed by the Collector.
9. Shri Hasmukh Dalpatrai Ganatra, was, at the relevant time proprietor of the firm M/s. Export Enterprises, Bombay. The firm imported synthetic fabrics weighing 2675 kgs. (nett wt.) valued for the purposes of assessment at Rs. 1,20,379 cif and Rs. 1,17,493/- m.v.
10. On information, the appellant was indulging in the sale of smuggled goods, his business premises was searched and the search yielded in the recovery of 79 takas of 30 yds. each broad cloth, K.T. 4000, Toray Tetoron Polyster made in Japan totally valued at Rs. 23,700/- cif and Rs. 71,100/-m.v. The Customs authorities seized the said 79 takas in the reasonable belief that they are liable for confiscation. Certain other business premises of others were also searched. A show cause notice was issued to the appellant and others alleging violation of Section 111 as well as Chapter IV-A of the Customs Act and the appellant and others were called upon to show cause as to why the seized goods should not be confiscated and why personal penalty should not be levied under Section 112 of the Customs Act. The appellant sent his reply denying the allegations. The Addl. Collector of Customs (P) who held the enquiry ordered absolute confiscation of the seized goods under Section 111(p) and he imposed a personal penalty of Rs. 75,000/- on the Proprietor Shri H.D. Ganatra under Section 112. He also imposed a penalty of Rs. 25,000/- on the proprietory firm M/s. Export Enterprises. He further imposed a penalty of Rs. 10,000/- on Shri S.R. Punjabi, Rs. 5,000/- on R.V. Shah, Rs. 500/- on Shri K.G. Chandrana, Rs. 1000/- on Shri S.I. Mehta, & Rs. 500/- on Shri D.E. Shah.
11. In the present appeal we are concerned with the imposition of personal penalty of Rs. 75,000/- on the appellant, personal penalty of Rs. 25,000/- on the appellant’s proprietary firm and the absolute confiscation of the goods under seizure. It may however be stated here that the only violation said to have been committed by the appellant was violation of Chapter IV-A. The Addl. Collector recorded a finding that the goods seized were licitly imported. He, therefore, held that the goods are not liable to confiscation under Section 111 (d) as well as under Section 111(f). He, however, recorded a finding that the appellant did violate the provisions of Chapter IV-A of the Customs Act. He, therefore, ordered confiscation of the seized goods under Section 111(p) and as stated earlier imposed a personal penalty of Rs. 75,000/- on the appellant Shri H.D. Ganatra and further imposed a penalty of Rs. 25,000/- on his proprietary firm M/s. Export Enterprises under Section 112 of the C.A.
12. In this appeal Shri Menon appearing for the appellant contended that the order of the Addl. Collector was illegal inasmuch as that he has no jurisdiction to order absolute confiscation, he cannot impose the penalty greater than Rs. 1,000/- for violation of the provisions of Chapter IV-A and that separate penalties cannot be imposed on the proprietor and the firm.
13. Shri Senthivel the learned Departmental Representative has however justified the order passed by the Addl. Collector. His contentions are set out by brother Dilipsinhji in his order and it is not necessary to repeat them.
14. Having regard to the contentions of Shri Menon, the three questions that arise for consideration in this appeal are :
(1) Whether the Addl. Collector has no jurisdiction to impose a personal penalty of Rs. 75,000/- on Shri H.D. Ganatra under Section 112 of the C.A. and penalty of Rs. 25,000/- on M/s. Export Enterprises under Section 112.
(2) Whether the Addl. Collector has no jurisdiction to order absolute confiscation of the seized goods.
(3) Whether the imposition of separate penalties on the Proprietor and the firm is illegal.
In order to answer the above questions it would be necessary to refer to the provisions of Section 112, 117 and 123 of the Customs Act.
112. Penalty for improper importation of goods, etc. – Any person
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, or
(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111, shall be liable. –
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five times the duty sought to be evaded on such goods or one thousand rupees, whichever is the greater;
(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under Section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the greater;
(iv) in the case of goods falling both under Cls. (1) and (ii), to a penalty not exceeding five times the value of the goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest;
(v) in the case of goods falling both under Cls. (ii) and (iii), to a penalty not exceeding five times the duty sought to be evaded on such goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest.
117. Penalties for contravention, etc. not expressly mentioned :-
Any person who contravenes any provision of this Act or abets any such contravention or who fails to comply with any provision of this Act with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to a penalty not exceeding one thousand rupees.
125. Option to pay fine in lieu of confiscation :-
(1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods give to the owner of the goods an option to pay in lieu of confiscation such fine as the said officer thinks fit.
15. It is seen that Section 112 consist of two parts. The first part deals with as to when a person becomes liable for imposition of penalty and part two deals with the amount of penalty that could be levied on a person. Unless both the parts are complied with, no penalty could be levied on a person.
16. As per Section 112, the quantum of penalty leviable are :-
(1) if the goods liable for confiscation are prohibited goods the penalty not exceeding five times the value of the goods or the difference between the dutiable value and the value thereof;
(2) if the goods liable for confiscation are dutiable goods other than prohibited goods, a penalty not exceeding five times of the duty sought to be evaded or five times the difference between the declared value and the value of the goods; and
(3) if the goods liable for confiscation are the goods in respect of which value stated in the B/E or the value declared in respect of baggage item is higher than the value declared, the penalty not exceeding five times the difference between the declared value and the value thereof which penalty not exceeding five times the value of the goods or five times the duty sought to be evaded on such goods.
17. In the whole of his order, the Addl. Collector did not record a finding that the seized goods are prohibited goods. On the other hand, his finding was that they formed part of licitly imported goods. Therefore, the seized goods cannot be considered as prohibited goods within the meaning of that expression. There is also no allegation that there was evasion of duty in regard to the seized goods. The Addl. Collector has accepted the appellant’s contention that the seized goods formed part of the goods cleared under the B/E No. 003415, dated 12-7-1982. Further, there was neither an allegation nor proof that the seized goods were the goods in respect of which the value stated in the B/E is less than the value of the penalty. In the said circumstances, there is no scope to levy a penalty under Section 1 1 2.
18. It is pertinent to point out that the Addl. Collector had recorded a finding that the seized goods are not liable for confiscation under Section 111(d) as well as under Section 111(1). The said provisions read :-
lll(d) any goods which are imported or attempted to be
imported or are brought within the Indian Customs
waters for the purpose of being imported, contrary
to any prohibition imposed by or under this Act
or any other law for the time being in force;
11d(f) any dutiable or prohibited goods required to be
mentioned under the Regulations in an import
manifest or import report which ate not so
mentioned;
As a matter of fact the contentions of the appellant
that the seized goods formed part of the goods
cleared against their REP Licences Nos.
2948340/2940183/0459677/0467866 was accepted
by the Addl. Collector.
19. Brother Dilipsinhji after referring to the definition of the expression “prohibited, goods” defined under Section 2(33) of the Customs Act and after referring to Clause 3 of the Imports (Control) Order and Section 11 of the Customs Act had held that the seized goods are prohibited goods As stated earlier, I am in total disagreement with this finding of his
20. Clause 3 of the Imports (Control) Order, 19.55 reads :
3(1) Restriction of Import of certain goods:- (1) Save as otherwise provided in this Order, no person shall import any goods of the description specified in Schedule I, except under and in accordance with a licence or a Customs permit granted by the Central Government or by any officer specified in Schedule II.
The rest of the clause is not relevant for our purpose. This clause prohibits import of goods specified in Schedule I of the Order except under and in accordance with the licence or a Customs Clearance Permit granted by the authorities specified in Schedule II, the finding of the Addl. Collector was that the seized goods formed part of the goods imported and cleared against the licnece. Therefore, it cannot be said that the appellant violated the provisions of Clause 3(1) of the Imports (Control) Order, 1955.
21. For the purposes of imposing penalty under Section 112 it is not sufficient if the Customs authorities establish that the goods Became liable for confiscation. They have to further establish that any of the penalties specified in that Section is imposable. I have in the preceding paragraphs has held that none of the penalties specified in Section 112 is imposable. I have further held that the seized goods are not prohibited goods or that there was evasion of payment of duty or the values stated in the B/E is lesser than the value of the goods. In other words, there was no scope to attract the provisions of Section 112. It is true that there was violation of Chapter IV-A of the Customs Act. Therefore, the goods became liable for confiscation under Section 111(p). It is the act of the appellant which rendered the goods liable to confiscation. Therefore it could be said that Clause (a) of Section 112 is attracted. But then as has been observed earlier, it is not sufficient if the Department establishes the first part of Section 112. It should establish the applicability of both the parts of Section 112. The seized goods are not prohibited goods and in the absence of an allegation of evasion of payment of duty or mis-declaration regarding value, none of the Clauses (i) to (v) of second part of Section 112 is attracted. Therefore, no penalty can be levied under Section 112.
22. Admittedly, there was violation of Chapter IV-A. No separate penalty is prescribed in the Act for such a violation. As such, the provisions of Section 117 are attracted. Under Section 117, the penalty that could be levied cannot exceed Rs. 1,000/-. In the circumstances, the imposition of penalty of Rs. 75,000/- on Shri H.D. Ganatra the proprietor and the imposition of a penalty of Rs. 25,000/- on the proprietary, firm are not legal and the same are set aside.
23. Point No. 2:- As has been seen earlier, the Addl. Collector has ordered absolute confiscation of the seized goods. Shri Menon appearing tor the appellants vehemently contended that the order passed by the Addl. Collector is illegal. He urged that according to the finding of the Addl. Collector, the seized goods formed part of the licitly imported goods. Therefore, they ceased to be prohibited goods and as such, the Addl. Collector was required to give an option to pay the fine in lieu of confiscation. In support of his contention, Shri Menon relied on the provisions of Subsection (1) of Section 125 of the Act. I have already extracted the provisions of Section 125. The contention of Shri Menon is well founded. The absolute confiscation of the goods by an Adjudicating Officer is permissible in respect of the goods the importation or exportation whereof is prohibited under the Customs Act or under any other law for the time being in force. In all other cases even if the goods are liable to confiscation, the adjudicating authority is required to give an option to the owner of the goods to pay a fine in lieu of confiscation. As has been rightly contended by Shri Menon, the finding of the Addl. Collector was that the seized goods formed part of the licitly imported goods. Therefore, it cannot be said that they are prohibited goods. I have already referred to the provisions of the Import Control Order. If the import is in pursuance of a valid licence or Customs Clearance Permit then the import is considered legal and not prohibited under the said order. The Customs Act as such did not prohibit import of the goods in question. In the said circumstances, I accept Shri Menon’s contention and hold that the order of absolute confiscation of the seized goods is illegal and without jurisdiction. In the normal course, I should have referred back to the Addl. Collector for imposing the fine in lieu of confiscation. But Brother Dilipsinhji though held that the order of absolute confiscation is legal thought fit to allow redemption on payment of a fine of Rs. 24,000/-. In the circumstances, while setting aside the order of absolute confiscation, I direct that the appellant be allowed to redeem the goods on payment of a fine of Rs. 24,000/- in lieu of confiscation.
24. Point No: 3:-
Whether the imposition of separate penalties on the proprietor and the firm is illegal :-
It is not disputed that the firm M/s. Export Enterprises is a proprietary concern. It was also not disputed that Shri H.D. Ganatra was the sole proprietor of the said firm at the relevant time. When it was so, whether the Addl. Collector was justified in imposing separate penalties on the proprietor as well as the proprietary firm. Section 140 of the C.A. though authorises imposition of personal penalty on the firm as well as the partners of the firm, the said Appeal dismissed Section does not authorise imposition of penalty on the proprietary firm as well as on the sole proprietor. The penalty could be imposed either on the firm or on the sole proprietor. In the case of proprietary firm, it has no separate existence than that of its proprietor. I agree with the finding of my brother that the penalty imposed on the firm should be set aside and accordingly the penalty of Rs. 25,000/- imposed on M/s. Export Enterprises is set aside. It may be pointed out that the penalty was imposed under Section 112 which is also illegal as has been held by me earlier, the only other aspect that remains for consideration is whether the appellant Shri H.D. Ganatra is liable for any penalty. It was admitted that the appellant had violated the provisions of Chapter IV-A of the Act. This violation rendered the seized goods liable for confiscation under Section 111(p) but then though the act of the appellant rendered the goods liable to confiscation under Section 111(p) thereby attracting Clause (a) of Section 112, the penalty contemplated under that Section cannot be levied because the goods seized formed part of the licitly imported goods and there was no violation or any restriction imposed in regard to its import. Similarly, there was no evasion of duty in respect of the said goods. Further, there was no declaration as to the value. Thus none of the Clauses 1 to 5 enumerated in Section 112 is attracted. The only other section which provides for penalty in contravention of the provisions of the Act is Section 117. But the penalty imposable under that Section cannot exceed one thousand rupees. I, therefore impose a penalty of Rs. 1,000/- on the appellant Shri H.D. Ganatra.
25. With the result this appeal is allowed. The imposition of penalty of Rs. 75,000/- on Shri H.G. Ganatra and the imposition of penalty of Rs. 25,000/- on M/s. Export Enterprises under Section 112 are set aside and a penalty of Rs. 1,000/- is imposed on the appellant Shri H.D. Ganatra under Section 117.
26. The order of absolute confiscation of the seized goods is set aside. The appellant is however allowed redemption on payment of a fine of Rs. 24,000/- in lieu of confiscation.
27. The appellant be granted consequential relief.
As there is difference of opinion between the two Members, the records are submitted to the President for referring the points of dispute to one or other Members of the Tribunal [vide Section 129-C(5)J.
Question 1:- Is the imposition of penalty of Rs. 75,000/- on the appellant Shri H.D. Ganatra and the imposition of Rs. 25,000/- on the firm M/s. Export Enterprises under Section 112 of the C.A. is legal as held by M(T) and illegal and without jurisdiction as held by M(J).
Question 2:- Is the order of absolute confiscation of the seized goods is legal as held by M(T) and illegal and without jurisdiction as held by M(J).
This matter is referred to the President in terms of Section 129-C(5) of the Customs Act to consider the following points :
(1) Whether in the facts and circumstances of the case, the 79 takas of cloth valued at Rs. 23,700/- c.i.f. and confiscated by the Additional Collector in his order dated 12-10-1983 are prohibited goods; and
(2) Whether the proposed order of M(J) of levy of a fresh penalty of Rs. 1,000/- under Section 117 of the Customs Act is legal and proper under Section 129-B ibid.
V.T. Raghavachari, Member and G. Shankaran, Vice President and K.P. Anand, Member (T)
28. M/s. Export Enterprises, of which Shri Hasmukh Dalpatrai Ganatra is the owner, had imported 992 takas of synthetic fabrics and cleared them under Bill of Entry No. 003415, dated 12-7-1982, the import being covered under 4 REP licences. Subsequently 79 takas were seized from the appellants, the ground being that they were out of the stock imported as aforesaid and that the provisions of Chapter IV-A of the Customs Act had been contravened in respect thereof. On adjudication the Additional Collector ordered absolute confiscation of the seized goods under Section 11 1(p) of the Customs Act and imposed personal penalty of Rs. 75,0001- on Shri Ganatra, Rs. 25,000/- on M/s. Export Enterprises and certain penalties on others. An appeal was preferred to the West Regional Bench of the Tribunal against the said order by Shri Hasmukh Dalpatrai Ganatra and M/s. Export Enterprises. After hearing both sides two separate orders were passed by the Members of the West Regional Bench in which they had indicated the points on which they were not in agreement. Thereupon papers were submitted by them to the President under Section 129-C(5) of the Customs Act. The President of the Tribunal under order dated 14-8-1986 constituted the present bench for hearing submissions on the points of difference arising under the orders of the Members of the West Regional Bench. The President had indicated that since the points of difference had been differently formulated by the two Learned Members of the West Regional Bench, the Members of this Bench, will formulate the points of difference on which submissions arc to be heard.
29. Accordingly members of this Bench formulated the points of difference as follows :
(i) Whether, on the facts and in the circumstances of the case, the 79 takas in question were prohibited goods (for purposes of confiscation without option for redemption) as held by Shri Dilip-sinhji, Member (T) or whether they were not prohibited goods as held by Shri Hegde, Member (J)?
(ii) Whether, on the facts and in the circumstances of the case, the levy of penalty of Rs. 75,000/- under Section 112 of the Customs Act on Shri H.D. Ganatra was justified or not?
(iii) Whether, on the facts and in the circumstances of the case, any penalty could be imposed on Shri H.D. Ganatra, under Section 117 of the Customs Act as has been done in the order of the Member (Judicial)?
30. Accordingly, after issue of notice to both sides, we have heard Shri S.P. Luthra Advocate for the appellants and Shri K.C. Sachar for respondents.
31. The confiscation of the seized goods had been ordered under Section 111 of the Customs Act. Both Members of the West Regional Bench have held that the seized goods were liable lor confiscation. Hence Shri Luthra himself does not question before us the correctness of the said conclusion. The confiscation has been ordered since no proper accounts as required to be kept under the provisions of Chapter IV-A of the Customs Act had been maintained in connection therewith. The confiscation was therefore under the provisions of Section 111 (p) of the Customs Act. The question is whether in respect of such goods confiscation of which had been ordered under Section 111 (p) of the Customs Act an order for penalty could be passed under Section 112 of the Customs Act or whether an order for penalty can only be under Section 1 17 of the Customs Act. This would again depend on the interpretation of the provisions of Section 112 (i) of the Customs Act which refers to goods in respect of which any prohibition is in force.
32. Shri Luthra submits that the goods had been validly imported in terms of REP licences produced in that connection and therefore they were not prohibited goods and hence no penalty could be levied under Section 112 of the Customs Act even if the goods may be liable for confiscation under Section 111 (p). On the other hand Shri Sachar contends that the word “prohibition” in Section l)2(i) would not be restricted to any prohibition in force at the time of import but would include even restrictions subject to which the import was permitted, including restrictions as enumerated in Chapter IV-A of the Customs Act with reference to the subsequent dealing with such goods.
33. Shri Luthra relied upon the decision of the Allahabad High Court in the case of Modi Rayon and Silk Mills (1978 ALJ 855). He relies upon paragraph 9 of the said judgment which reads as follows :
“From the above definition of the ‘prohibited goods’ it would appear in order to attract the goods within mischief of the definition it is necessary that the import or the export of the goods should have been made without compliance of the conditions under which the goods could be imported or exported. It has already been found by the Customs authorities that the import of the goods into India was not in contravention of any conditions. The petitioner has been found guilty only of non-compliance of the requirement prescribed under Chapter IV-A of the Act. In this view of the matter in our opinion the goods in question cannot be said to be prohibited goods and consequently the said clause of the second part of Section 112 could not be attracted”.
He contends that, similarly, in the present instance also, the goods having been validly imported in terms of REP licences produced therefor, the subsequent failure to comply with the provisions of Chapter IV-A of the Customs Act could not make the importer Shri Ganatra liable for penalty under Section 112 of the Customs Act and penalty could be levied only under Section 117 of the Customs Act.
34. On the other hand Shri Sachar relies upon the decision of the Supreme Court in Sheikh Mohd. Omer v. Collector of Customs, Calcutta (AIR 1971, Supreme Court 293) to contend that the word “prohibition” would take in not merely prohibition at time of import and export but would include restrictions or other controls relating to goods imported. We take note of the fact that the decision of the Supreme Court related to an import of 1964 (i.e.) prior to the introduction of Chapter IV-A of the Customs Act in 1969. We also take note of the fact that the judgment of the Supreme Court related to import of a mare which was not permissible in view of Clause 3(1) of the Import Control Order, 1955 which restricted the import of animals, living, all sorts, unless the import was of one dog or one pet animal or birds in a limited number, subject to certain conditions. The Supreme Court was dealing in the said case with the contravention of the provisions of Section 111(d) of the Customs Act under which the import of any goods contrary to any prohibition imposed by or under would render the same liable for confiscation. It was in that context that the word “prohibition” was construed and it was held as follows :
“Any “prohibition” referred to in that section applies to every type of “prohibition”. That prohibition may be complete or partial. Any restriction on import or export is to an extent a prohibition. The expression “any prohibition” in Section 111(d) of the Customs Act, 1962 includes restrictions. Merely because Section 3 of the Imports and Exports (Control) Act, 1947 uses three different expressions “prohibiting”, “restricting” or “otherwise controlling” we cannot cut down the amplitude of the word “any prohibition” in Section 111(d) of the Act. “Any prohibition” means every prohibition. In other words all types of prohibitions. Restriction is one type of prohibition. From item (1) of the Schedule I, Part IV to Import Control Order, 1955 it is clear that import of living animals of all sorts is prohibited. But certain exceptions are provided for. But nonetheless the prohibition continues”.
35. A perusal of the REP licences produced to cover the import in question shows that no specially restrictive condition was attached thereto except the usual printed condition that the issue of the licence was without prejudice to the application of any other prohibition or Regulation affecting the importation of the goods which may be in force at the time of the arrival. It is not the case that there was any other such prohibition or Regulation affecting the importation of the goods at the time of their arrival. Section 2(33) of the Customs Act defines prohibited goods as “any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with”. As we have seen earlier, the import of the goods in question were not subject to any prohibition under the Customs Act or any other law for the time being in force except insofar as valid licences were required for their import. Nor was it subject to any condition subject to which the goods were permitted to be imported. In the circumstances the goods would not be prohibited goods within the meaning of Section 2(33) of the Customs Act. The mere circumstance that a licence would be required to be obtained under Clause 3 of the Import (Control) Order 1955 would not render the goods prohibited goods as defined in Section 2(33) of the Customs Act. On the issue of the licence the goods could De validly imported and, as we have seen, no condition has been imposed subject to which the import was to take place.
36. But the further question is whether, for the reason that the goods were such as were subject to observance of the provisions of Chapter 1VA of the Customs Act they would be goods in respect of which any prohibition may be said to be in force under the Customs Act for the purposes of Section 112 of the Customs Act. As earlier seen, the Supreme Court held (though in connection with the provision of Section 111(d) that that word prohibition occurring therein would contemplate a restriction also. The restriction in the present instance is not with reference to import, since the import was under a valid licence granted, but with reference to the dealing with the goods subsequent to import. This restriction had been imposed under Chapter IV-A of the Customs Act. Section 112(i) reads “in the case of goods in respect of which any prohibition is in force under this Act”. Since, as earlier noted, the Supreme Court held that prohibition would include a restriction also we are satisfied that the restriction (as imposed under Chapter IV-A of the Customs Act) would also be a prohibition as contemplated in Section 112(i) of the Customs Act.
37. The Judgment of the Allahabad High Court relied upon by Shri Luthra proceeded on the basis that for imposition of penalty under Section 112 of the Customs Act two conditions are to be satisfied. They are (1) the person must have done or omitted to do an act by reason of which the goods shall be liable for confiscation and (ii) the goods must be subject matter of any prohibition under the Customs Act or any other law for the time being in force. As Shri Sacher points out, the decision of the Supreme Court cited supra had not been considered by the Allahabad High Court and the principle laid down by the Supreme Court, as to how the word “prohibition” is to be construed, had not been considered by the Allahabad High Court.
38. Since, for the reasons mentioned earlier, we hold that though the subject goods may not be prohibited goods as defined in Section 2(33) of the Customs Act, they would be goods that were subject to prohibition (in the sense of a restriction) under Chapter IV-A of the Customs Act, we further hold that as the said goods were liable for confiscation under Section 111(p) of the Customs Act Shri Ganatra as the owner of the goods and who had failed to observe the restrictions under Chapter IV-A of the Customs Act, was liable to be penalised under Section 112 of the Customs Act.
39. In view of the finding that the goods (in the present case and having regard to the fact that they were covered by valid import licences) were not prohibited goods as defined in Section 2(33) of the Act and, therefore, the importation thereof was not prohibited under the Customs Act or under any other law for the time being in force, we hold that under Section 125 of the Customs Act an option for redemption was mandatory.
40. In the light of the above discussion our findings on the three points of difference between the two members of the West Regional Bench, s enumerated earlier, are as follows :
1. We hold that the 79 takas in question were not prohibited goods as defined in Section 2(33) of the Customs Act which could be confiscated without an option for redemption but that though they are liable for confiscation an option for redemption is mandatory. We note that so far as the quantum of redemption fine is concerned there has been no difference between the two members.
2. We hold that the levy of penalty of Rs. 75,000/- under Section 112 of the Customs Act on Shri H.D. Ganatra, was justified.
3. In view of the finding on Point No. 2 our finding on this point is in the negative. We may further note in this connection that when the departmental representative was asked whether, in any event, any penalty can be levied under Section 117 of the Customs Act in the absence of any notice thereof in the proceedings before the Additional Collector Shri Sachar conceded that it could not be done.
41. Since we have recorded our findings on the points of difference, the records shall be sent back to the West Regional Bench for passing further orders in the appeal in terms of Section 129-C(5) of the Customs Act.
Sd/- Sd/- Sd/- (V.T. RAGHAVACHARI) (G. SANKARAN) (K. PRAKASH ANAND) MEMBER (JUDICIAL) VICE PRESIDENT MEMBER (TECHNICAL) FINAL ORDER
The points of difference in this appeal were referred by the President in terms of Section 129-C(5) to. a Bench of three Members who have recorded their findings above dated 4-12-86. As per Section 129-C(3), the appeal has to be disposed of in terms of the majority opinion. The appeal regarding the confiscation of the goods is rejected, but the appellant is given an option to redeem the confiscated goods on payment of fine of Rs. 24,000/-(Rupees Twentyfour thousand only) in lieu of confiscation. The Addl. Collector’s order of levying a penalty of Rs. 75,000/- on Shri H.D. Ganatra is continued, but his order of levying a penalty of Rs. 25,000/- on his proprietary firm M/s. Export Enterprises is set aside, and the consequential relief is ordered to be granted to him. The combined appeal of Shri H.D. Ganatra and M/s. Export Enterprises is disposed of accordingly.