ORDER
Jyoti Balasundaram, Member (J)
1. After hearing both sides for sometime on the application for stay of operation of the order of the Commissioner of Customs determining the unit price of Rough Marble Blocks of Iranian original imported by the applicant herein @ US $ 303 PMT, ordering confiscation of goods imported with option to redeem the same on payment of Rs 17,50,000/- and imposing a penalty of Rs. 3,50,000/- we proceed to take up the appeal itself for hearing after granting the prayer for stay, as we find that the issue viz., the quantum of fine and penalty required to be imposed on such import has already been decided by the Tribunal in a series of cases.
2. The goods in question, which the appellant states to be of Iranian origin, were imported under bill of entry dated 11/02/2003 wherein the CIF value per unit was declared as US $ 298.83 PMT. The value of the goods were loaded to US $ 303 PMT and the goods confiscated with option to redeem on payment of fine and payment of penalty as above. The appellant’s plea is that the fine and penalty are excessive and they seek reduction in fine and penalty to the extent of 20% and 5% of the value determined, in the light of earlier decisions of the Tribunal in the case of Marmo Classic v. CC Nhava Sheva (Order No. CI/1008-09/WZB/2002 dated 16/04/2000), Jai Bhagwati Impex Pvt Ltd. v. CC & CE, Goa [2002 (48) RLT 199], Mahalaxmi Tile & Marble Co. Pvt Ltd., v. CC Ahmedabad (Order No. C-1/3603/WZB/2001 dated 12/11/2001) and Akash Stone Industries & Others v. CC Mumbai/Nhava Sheva/Goa (Order No. CI/1375-1407/WZB/2002 dated 17/05/2002). We find that the Commissioner has taken the margin of profit considering the market price of subject blocks of Rs 27,000/-, as 52% of the CIF value based on the formula, MOP-declared CIF value + duty payable on enhanced CIF/declared CIF value.
3. All aspects of the matter have been considered in the case of Akash Stone Industries, cited supra, where the Tribunal noted its’ earlier decision and held that 20% of the CIF value ascertained would be the appropriate redemption in case of import of marble blocks and 5% of the CIF value ascertained would be the appropriate penalty. (It is pertinent to note that the reference application filed by the Revenue against the Tribunal’s order in the case of Marmo Classic, Stonemann Marble Industries, etc. reducing the fine and penalty have been dismissed by the Hon’ble Bombay High Court 2003-Taxindiaonline-02-HC-Mum-Cus in Customs application Nos. 27 to 36/2002 and Customs application Nos. 2 to 10/2003 by holding that the Tribunal has reduced the quantum of fine and penalty by taking into account, its earlier decision as well as the margin of profit and amount of demurrage incurred on the goods and that writ petition No. 7049/2002 filed by the Revenue in the case of Marmo Classic challenging the Tribunal’s order reducing the redemption fine and penalty on the basis of earlier orders wherein a common ratio was fixed regarding percentage of fine and penalty, has also been dismissed by the High Court). The Tribunal considered the norms set out in the Central Appraising Manual of the Customs Department, and the fact of subsequent liberalisation in grant of licence to actual users and held that rough marble blocks are to be considered as basic material whose import is not banned, but is restricted to actual users engaged in slicing of rough blocks and marketing marble slabs, requiring levy of fine within the norm of 25% as set out in the Appraising Manual.
4. Following the ratio of the above decisions, we reduce the fine and penalty to 20% and 5% respectively, of the CIF value determined. Fine is therefore reduced to Rs 3,50,000/- and the penalty to Rs 17,500/-.
5. The appeal is thus partly allowed with consequential relief, if any, due to the appellant.
6. In this case, the stay application was heard on 21/07/2003 and the order was reserved by the Bench. After the hearing, on 10/09/2003, the learned advocates for the appellants have submitted to the Registry uncertified copies of Honoruable Bombay High Court’s orders in Writ Petition Nos. 4124 and 7049 of 2002. Thereafter, the above order recorded by the Honoruable Member (Judicial) has been sent to me on 15/09/2003, which I have considered very carefully. However, I am unable to concur with the said order for the following reasons:-
(i) In the case, the confiscation of the impugned goods and liability to penalty is not under challenge. As recorded by the Hon’ble M (J) in paragraph 2 above, the appellants are merely seeking reduction in redemption fine and penalty to the level of 20% and 5% of the value determined. It has also been recorded therein that the adjudicating Commissioner has enhanced the declared value from US $ 298.83 PMT CIF to US $ 303 PMT CIF and has determined the margin of profit to be 52% of the CIF value.
(ii) The Hon’ble M (J) has proposed in her order to reduce the fine from Rs. 17,50,000 to Rs. 3,50,000/- and penalty from Rs. 3,50,000/- to Rs. 17,500/- which comes to about 9.5% and 0.5% of the determined value of Rs 36,11,980/- (The declared value is Rs. 35,62,269/-). Such reduction will leave a huge margin of profit at the hands of the appellants and encourage contravention of import restrictions on the impugned goods and make smuggling of the same a profitable business. It will also encourage others as they will be assured that breaking the law would entail extra payment of only about 10% by way of fine and penalty leaving a large profit margin.
(iii) The question involved here is not whether the Tribunal can reduce fine and penalty in a particular case. It certainly can, after considering the factual matrix of a case, where the fine and penalty imposed are excessive or unjustified. The question is whether the Tribunal should fix a level of fine and penalty for a class of goods much lower than the statutory levels. Section 125 of the Customs Act, 1962 provides a statutory limit the redemption fine cannot exceed the market price of goods less the duty. Section 112 of the Customs Act, 1962 provides a statutory limit that penalty can not exceed the value of the goods. Within these statutory limits, the customs authorities have the discretion to impose suitable fines and penalties while adjudicating cases of illegal imports. The margin of profit will be no doubt a relevant factor in determining redemption fine. For any category of imports, the margin of profit will also be dependent on market price which will vary according to the origin, quality, grade etc. of the goods. On the other hand, the gravity of offence including repeat offences and deliberate attempts at violating the law again and again will be a vital factor in determining penalty amounts. It is my view, therefore, that the Tribunal should not fix a general level of fine and penalty for any class of goods to be applied in every case of import irrespective of the factual matrix of the case, origin and quality of goods and gravity of the offence. Fixing a lower level of fine and penalty would also amount to lowering the statutory levels for which the Tribunal has no powers nor is the same warranted. Such lowering of the statutory levels to a fixed fine and penalty will also render customs authorities helpless against deliberate and repeated imports made contrary to the law of the land and frustrate the import restrictions imposed by the Government.
(iv) It has been stated in Para 3 above that all aspects of the matter have been considered in the case of Akash Stone Industries and others V/s C.C. Mumbai/Nhava Sheva/Goa – Order No. C-I/1375-1407/WZB/2002 dtd. 17/05/2002 requiring levy of fine within a norm of 25% as set out in the Appraising Manual. I have carefully perused the decision of the Tribunal in the case of Akash Stone Industries (Supra) wherein a reference has been made to the Central Appraising Manual of the Customs Department, Volume V, Chapter 3, Para 4 & 5 [vide para 3 (c) of the said order] and it has ben concluded that fine on marble blocks should be within a norm of 25% and that the same should be binding on the Revenue. With great respect to the Hon’ble M (T) who has recorded the order in the case of Akash Stone Industries (Supra), I must point out that he has overlooked a very specified and relevant guideline contained in the said Central Appraising Manual, Volume V, Chapter 3, Para 4 (bb), which reads as follows :-
“The fine has to be equal to the norm or the margin of profits whichever is higher.”
It is, therefore, clear from the above that “levy of fine within the norm of 25%” is not actually set out in the Central Appraising Manual. It is also clear that by ignoring to consider a vital provision in the Central Appraising Manual as containined in the said para 4 (bb) and holding that the Revenue is bound by the norm, the Tribunal’s decision in Akash Stone Industries (supra) has been rendered per incuriam and the same cannot, therefore, be considered to be a binding precedent.
(v) It is also seen that in Akash Stone Industries (Supra) it has been indicated that in the sample appeal considered by the Bench, the Commissioner has worked out the margin of profit to be 33% only. In the instant case, the margin of profit has been worked out as 52% by the Commissioner. It is not difficult to see that depending on the import price and the market value, the margin of profit can vary from consignment to consignment and the fine has to be different depending on the margin of profit determined in each case. The redemption fine adjudged by the Adjudicating Commissioner in the instance case is about 48% of the value determined and considering the fact that the margin of profit has been found to be 52%, the fine imposed is appropriate and is also in consonance with the guidelines contained in para 4 (bb), Chapter 3, Volume V. of the Central Appraising manual referred to above. In fact, in the case of Jai Bhagawati Impext Pvt. Ltd. v. CC & CE, Goa – 2000 (48) RLT 199 involving import of marble blocks, 50% fine was imposed by the Tribunal considering the margin of profit to be 50% and the same has not been altered by the Apex Court on appeal vide 2002 (146) ELT A 313.
(vi) The decision of the Tribunal in the case of Akash Stone Industries (Supra) is also in error in taking a view that the 25% norm for fine should further be split to 20% fine and 5% penalty. The Central appraising Manual referred to by the Bench provides no basis for such a split. In fact, as pointed out earlier, Section 125 of the Customs Act, 1962 provides a basis for imposition of redemption fine whereas the limit on penalty is separately prescribed under Section 112 of the Customs Act, 1962. As such, the Bench order limiting both fine and penalty amounts within the norm for imposition of fine is clearly erroneous and cannot be a binding precedent.
(vii) The Adjudicating Commissioner has, in para 13 of the impugned order, taken note of the fact that the same importer has earlier made imports of the marble blocks on as many as six occasions during 27/10/2001 to 11/10/2002 without having a licence and the goods were allowed clearance to him on such occassions after adjudication on payment of fine and penalty. The Adjudicating Commissioner has also referred to import by the appellants on a regular basis in deliberate definance of law. Under the circumstances, the penalty of Rs 3,50,000/- imposed by the Adjudicating Commissioner which is less than 10% of the determined value of Rs. 36,11,980/-, is not excessive or unreasonable. In my view, the same does not require deduction to Rs. 17,5000/- as proposed by the Hon’ble M (J) as it works out to less than 0.5% of the value determined and would hardly be a deterrent either to the appellants or to anyone else in preventing them from breaking the law again.
7. For the reasons stated above, I am of the view that the quantum of fine and penalty imposed by the Adjudicating Commissioner does not require any interference. The appeal is rejected as devoid of any merit.
The following difference of opinion is placed before the Hon’ble President for reference to Third Member:
Whether the fine and penalty are required to be reduced to 20% and 5% respectively of the CIF value determined for the marble imported by the appellants and the appeal partly allowed, as proposed by Member (Judicial)
OR
Whether the fine and penalty as imposed by the Adjudicating Commissioner are required to be retained and the appeal rejected, as proposed by Member (Technical).
Gowri Shankar, Member (T)
1. The question that has been referred to me is whether the fine adjudged by the Commissioner for confiscation of the marble imported by the appellant to be reduced to 20% of its CIF value and the penalty imposed on the importer to 5% of the CIF value or whether a fine and penalty determined by the Commissioner are to be retained.
2. The Member (Judicial) has based her conclusion for reduction on that fact that in an earlier decision in Akash Stone Industries & Others v. CC it that a fine of 20 % and penalty of 5% of the CIF value were found to be appropriate and that the Bombay High Court had, in its order dated 3rd July, 2003, dismissed the applications filed by the Commissioner against the Tribunal’s order, reducing the fine to this extent in the case of some other importer of marble. She has also recorded that in the case of Akash Stone Industries the Tribunal took into account the norms set out in the Central Appraising Manual of the Department and the fact of subsequent liberalization in grant of licences to actual users.
3. The Member (Technical) has upheld the penalty and fine imposed by the Commissioner on the following grounds:-
(a) While margin of profit is a fact to be considered in determining the fine and penalty, gravity of the offence and its repetitiveness are also the facts to be considered. The Tribunal overlooked in its order on Akash Stone Industries a significant guideline in the Central Appraising Manual to the effect that the fine has to be equal to the norm set out in it or the margin of profit, whichever is higher. In the sample appeal considered in Akash Stone Industries the margin of profit determined by the Commissioner was 33% whereas it is 52% in the present case. Margin of profit can vary from consignment to consignment, the fine has to be tailored in each case to fit that margin. Fine of 50% on margin of profit determined by the Tribunal in Jai Bhagwati Impex Pvt. Ltd. v. CC, 2000 (48) RLT 19, has not been interfered with by the Supreme Court. The fine in the present case is reasonable, considering the six earlier imports made by the appellant without licence, the penalty which is less than 10% is also not unreasonable.
4. The counsel for the appellant conceded that the figures of Rs 3.50 lakhs and Rs 17,500/-, being fine and penalty respectively in the order of the Member (Judicial) was erroneous. The value determined of the consignment was approx. Rs. 36,50 lakhs. The fine at 20% of this value therefore would correctly be around Rs 7.3 lakhs and the penalty at 5%, Rs. 1.8 lakhs. The Member (Technical), he says, has not considered these amount, but has gone by the erroneous amounts shown in the order of the Member (Judicial). On merits, he contends that the earlier orders of the Tribunal determining fine and penalty at these levels have been upheld by the High Court on more than one occasion. The High Court had accepted the Writ Petition No. 4124 of 2002 filed by Marmo Classic and directed the Commissioner to sanction refund by implementing Tribunal’s order reducing the fine and penalty to these levels. In large number of cases earlier, the Tribunal has found the fine and penalty at 20% and 5% respectively to be sufficient. The Commissioner had not shown that in the present case the profit margin was higher than that in the past cases. His order determining the market price of marble slabs manufactured out of rough marble is not based on actual figures gathered from the market. The margin of profit that is derived is thus not based on facts and rests on conjecture. There is therefore no reason to take a different view in the present case as in the past. The appellant has also incurred substantial amount by way of demurrage, according to his cost, and in fact, leading to loss in the present transaction. The fact that that the appellant had imported six consignments earlier should have no bearing upon the determination of fine and penalty. In each case, the fine and penalty have nullified the profit that the appellant would have earned.
5. The Departmental Representative contends that the High Court has not specifically affirmed as correct the level of fine and penalty determined by the Tribunal in the earlier orders. It has dismissed Customs application No. 27/2002 and other applications of the Commissioner under Section 130A of the Act on the ground that determination of fine was a finding of fact. Similarly, while allowing the writ petition No. 4124 of 2002 of Marmo Classic, it has only gone by the fact that since similarly placed persons had earlier been given benefit of refund consequent on the implementation of the Tribunal’s order reducing the fine and penalty, the petitioner before it should not be denied that benefit. He cited the judgment of the Supreme Court in Commissioner of Customs, Ahmedabad v. Jayant Ointments Pvt. Ltd., 1998 (100) ELT 10, Jain Export Pvt. Ltd. v. UOI, 1993 (63) ELT 37 and the Tribunal’s decision in CC v. Mansingka Brothers, 1988 (38) ELT 05, in support of his contention that quantum of fine should depend on the totality of the facts and circumstances in each case. The Supreme Court had said that the quantum of redemption fine depends on the facts and circumstances of each case and no hard and fast rules can be laid down. Fine could be imposed even in cases of bona fide imports. The appellant has imported six consignments earlier, which were subjected to lower fine, penalty also being lower. The fact that it continued to import the same goods clearly shows that it was finding it commercially viable to do so and thus was making a profit. He emphasized that the provisions of the Central Appraising Manual, which the Bench had earlier cited, provided in 1970 that basic articles for which the fine would be 25%, did not include marble. The basic articles listed therein were machinery used in specified industries and specialized raw material and intermediaries. These instructions did not contemplate that raw materials for consumer goods such as marble would be basic articles. He also points to instructions in the Manual that the fine has to be equal to these norms or the margin of profit whichever is higher.
6. Section 125(2) of the Act provides that the fine for redemption of goods ordered to be confiscated cannot exceed the market price of the goods and excise duty payable thereupon. Therefore, any fine that is not in excess of this limit cannot be said to be contrary to law. Similarly, the penalty on the importer will not be illegal if it is within the limits specified by Section 112 of the Act. The margin of profit, which is a contentions issue in this appeal, is only a working rule that the department accepts. The reason for basing fine upon margin of profit is that no importer should benefit from his illegal act of importation by making a profit on the importation.
7. I agree that the Commissioner’s order does not disclose the calculation on which he has determined the profit margin. I however do not find that this by itself is sufficient to hold as incorrect the fine determined by the Commissioner. It is not contended that the fine determined is contrary to the provisions of section 125(2). In that situation, I do not find any requirement of law for the adjudicating authority to furnish a precise basis for the fine that he has determined. The exercise of discretion in the matter of determination of fine is not ex-facie arbitrary, capricious or mala fide. It would have been easy enough for the appellant to demonstrate the incorrectness of the Commissioner’s conclusion by furnishing figures. This has not been attempted.
8. It is a settled law that fine and penalty are to be determined upon the facts of each case. The judgments of the Supreme Court cited by the Department Representative make this clear. The Court has also not found incorrect the action of the Tribunal in determining the fine based on facts available to it. The Tribunal’s decision in Jai Bhagwati Impex Pvt. Ltd., fixing a fine of 50% which has not been interfered with by the Supreme Court-2000 (146) ELT A313-is itself sufficient to show that the margin of profit on marble has not been consistently found to be 20%.
9. I do not think that it is necessary to discuss the provisions of the Appraising Manual. It did not form part of the ratio of Akash Stone Industries. It is only referred to by Member (Technical). The Manual is only a set of instructions to departmental officers, and can at best have persuasive value for the Tribunal. The question of the Tribunal’s derision being per incuriam of that Manual does not arise.
10. One factor is obviously of great significance. It is to be noted that there have continuing and a large number of imports of marble by various persons without import licence. That is clear from the large number of orders that has been referred to in these proceedings. If the fine of 20% was sufficient to wipe out the margin of profit, how would such imports contrary to law continue unabated? No group of businessmen would continue to import goods to sell them in the domestic market with the full knowledge that there would be no profit and propose to incur loss and keep doing so for quite a long while. There may perhaps be exceptions as in the cases of branded goods where a person may temporarily suffer loss in order to keep the brand name alive in the market. Marble blocks clearly do not fall in this category. It is clear from these facts that the quantum of fine determined earlier has ben insufficient to eliminate the profitability of import. The fines determined in the past have thus failed to give effect to the provisions of law prohibiting import of the goods without a licence. It is possible that, as a result of the fines that were earlier fixed, the market price has increased, leading to a continuation of import. If that is what has happened, it is clear that the market situation has changed, resulting in the earlier levels of fine being lower than the current margin of profit. In that case, too, a higher fine would be called for to cater to the changed situation. The present appellant has himself earlier imported goods six times earlier in 2001-2002 and was permitted to clear them presumably on the basis of penalty lower than that imposed now. It is thus clear that the fine imposed earlier has not acted as deterrent to further imports by nullifying any gain made from illegal imports. The same consideration, the fact that the previous levels of penalty have failed to deter the appellant from continuing to import goods despite being conscious that the import was contrary to law justifies a higher penalty.
11. I also do not find it possible to agree with the contention of the counsel for the appellant that the difference in the conclusion of the two Members of the Bench has only occurred because the Member (Technical) had gone by the incorrect figures of fine and penalty contained in the order of the Member (Judicial). While his order touches upon this aspect, a reading of it makes it clear that he has been guided solely by these figures. I am unable to say whether or not the demurrage incurred by the appellant justifies the lower fine. No evidence has been produced before me in support. There is no reference to this claim in the orders of the members of the bench that heard the appeal. The memorandum of appeal does not refer to any such expenses, or contain a ground based upon them.
12. As a result of these discussions, I am of the view that the fine and penalty determined by the Commissioner require to be upheld and agree with the Member (Technical).
13. The papers may be returned to the referring bench.