Angus Company Limited vs Collector of Customs

Baboo Lall Jain, J.—The Court: This is an application made by Angus Company Limited under Article 226 of the Constitution of India praying that the order dated May 22, 1987 passed by the Deputy Collector of Customs and the demand made pursuant thereto be rescinded. The petitioner is also praying for an appropriate writ to nullify the effect of the impugned order and/or to prohibit the Customs Authorities from giving effect thereto. The petitioner was served with a notice dated 27th November, 1976, asking the petitioner to show cause as to why action should not be taken against the petitioner and why penalties should not be imposed on the petitioner u/s 116 of the Customs Act, 1962, in terms of the guarantee furnished by the petitioner u/s 42 of the said Act. It is to be noted that 1472 cases of vegetable oil were found to be short in the consignment. This was a cargo which was shipped by Lutheran World Relief Inc. to the Food Corporation of India. This cargo consisted of vegetable oil and out of the total 2632 cases of vegetable oil, 1472 cases were delivered short. This was a gift cargo under PL 480 and was meant for distribution amongst the poor in India. The proceedings were commenced by the show cause notice dated 27th November 1976 and it appears that the petitioner was taking time, upto about August 1979 to explain the shortfall. Thereafter, the petitioner was unable to trace the goods and ultimately accepted the responsibility for the shortage.

After that by Order No. 264/76 dated 7.11.1986, the Deputy Collector (M.C.D.) imposed a penalty of Rupees two lakhs on the petitioner. The petitioner filed an earlier writ petition in this Court, which was disposed of by an order dated 6th April, 1987, whereby this Court directed that if the petitioner deposits the entire amount of penalty of Rs. 2 lakhs, then the impugned order will stand set aside and the respondent Customs Authorities will be directed to rehear the matter after giving an opportunity to the petitioner to be heard and to file written report, if any.

It appears that a hearing was thereafter given and the impugned order dated 26th May 1987 was made by P. Karthikeyan, Deputy Collector of Customs (MCD). The said Deputy Collector of Customs after considering the various contentions of the parties rejected them and he held that the party was liable to be penalised to pay penalties u/s 116 of the Act, on its failing to accept for the shortage to the satisfaction of the Customs Authority.

Mr. Suhrid Roy Chowdhury appearing on behalf of the petitioner firstly tried to urge before me that this order could not be made against the client, and that neither the impugned order or the earlier order dated 7th November 1976 could be made against his client, because according to him the proceedings were barred by limitation. It is to be noted that at the time of the earlier application and/or disposal thereof, Mr. Roy Chowdhury, did not raise any such contention before the court. If he had any such contention then it should have been raised at that time; on the other hand he asked for an opportunity to be heard.

Furthermore, this proceeding u/s 116 was really commenced by the Notice to show cause which was within a reasonable time after the goods were unloaded. It is not the contention of Mr. Roy Chowdhury that the said Notice was issued beyond limitation. What he tried to contend, was, that in respect of the said notice to show cause the order could not be passed after ten years. He of course could not satisfy me that there is any limitation prescribed for conclusion of the proceedings. Furthermore, so far as the commencement of the proceeding is concerned this was not, even according to him, beyond limitation. Since the commencement of the proceeding, in this case, is not, even according to the petitioner, beyond the period of limitation, I am unable to accept the contention of Mr. Roy Chowdhury that the conclusion of the proceeding has to be within any prescribed time. Furthermore, it is Mr. Roy Chowdhury''s client who was obtaining time from November 1976 upto August 1979. In or about August 1979, the petitioner virtually accepted responsibility for the shortfall. However, the petitioner submitted that he had a right to be heard. Be that as it may, I am unable to accept the contention of Mr. Roy Chowdhury that the proceedings were barred by limitation.

The other contention raised before me was that there was no jurisdiction for enhancing the penalty from Rs. 2 lakhs to Rs. 2 lakhs 50 thousand. The impugned order does not give any reasons as to why it became necessary to increase the amount of the penalty or what were the additional circumstances which necessitated the increase of the penalty. Mr. Roy Chowdhury submitted that the order should have been a speaking order explaining as to how and why the penalty had to be increased. In the earlier order the value of the duty is mentioned to be Rs. 1,93,000/-. That value of Rs. 1,93,753.33 paise appears to have been increased to Rs. 2,42,441.66 paise. No materials have been discussed in the judgment as to how this duty amount could increase. I think that under the circumstances the order for increase of penalty is without any basis or foundation, and in any event there are no reasons given in the impugned order for this increase, nor was the petitioner given any notice that there was any error in calculation of the duty amount in the previous order.

In that view of the matter, the order in so far as it increases the amount of penalty to Rs. 2,50,000/- instead of the original amount of Rs. 2,00,000/- the same is bad and without any foundation and the same is quashed only to the extent of the increase in amount, and the penalty amount should be read to be Rupees Two lakhs only instead of Rs. 2,50,000/-. In view of the fact that the sum of Rs. 2,00,000/- has already been paid, the same may be appropriated towards the satisfaction of the penalty amount and no further demand is to be raised against the petitioner on account of penalty, and the further demand sought to be raised for the additional sum of Rs. 50,000/- is also quashed.

Each party will pay and bear its own cost.