M/S. Zeta International vs. Additional Commissioner Of Customs And Another

Facts

The petitioner, M/s. Zeta International, filed three shipping bills for the export of Printed Circuit Boards (PCBs) to Dubai. Following an intelligence input regarding substandard quality and inflated value, the consignment was examined by the Directorate of Revenue Intelligence (DRI). The PCBs were seized, and a show cause notice was issued. The petitioner requested cross-examination of Chartered Engineers and Panchas. An Order-in-Original was passed on December 31, 2020, rejecting the declared value, confiscating the goods, and imposing a penalty of Rs. 1,00,000/-. The petitioner appealed, and the appellate authority set aside the order, directing a fresh consideration in accordance with natural justice. Subsequently, the authority declined the request for cross-examination and passed a fresh Order-in-Original on October 31, 2022, imposing a significantly higher penalty of Rs. 1,00,00,000/-. The petitioner filed a writ petition challenging this order.

Held

The Court acknowledged that a statutory alternative remedy exists for the petitioner. It noted the significant increase in penalty from Rs. 1,00,000/- in the previous Order-in-Original to Rs. 1,00,00,000/- in the impugned order, considering this a peculiar factual backdrop. Citing the Delhi High Court judgments in *Ashish Bansal* and *Mohammed Akmam Uddin Ahmed*, which allowed appeals without pre-deposit in similar circumstances, the Court decided not to examine the petitioner's challenge to the impugned order directly in the writ petition. Instead, the Court directed the petitioner to prefer an appeal against the impugned Order-in-Original dated October 31, 2022, within three weeks. The appellate authority was instructed to consider the appeal on merits without dismissing it on grounds of delay. Crucially, considering the enhanced penalty and the petitioner's financial condition, the Court permitted the petitioner to pre-deposit the penalty amount based on the earlier penalty of Rs. 1,00,000/-. The appellate authority was also directed to endeavor to decide the appeal expeditiously and, if the petitioner's earlier appeal (Appeal No. ST/12022-Cus) is pending, to hear both matters together. The Court explicitly stated it was not expressing any opinion on the merits of the case.

Key Issues

1. Whether the authority below ought to have waited for the outcome of the petitioner's pending appeal against a prior order before passing the impugned Order-in-Original dated October 31, 2022? (Question of mixed law and fact, concerning principles of natural justice and procedural fairness). 2. Whether the imposition of a penalty of Rs. 1,00,00,000/- is disproportionate, uncalled for, and unwarranted, especially when the facts and circumstances remained the same as in the previous Order-in-Original which imposed a penalty of Rs. 1,00,000/-? (Question of law and fact, concerning proportionality of penalty). Petitioner's Arguments: The petitioner argued that the authority should have waited for the pending appeal's outcome. They contended that the impugned order was passed without adequate reasons for denying cross-examination of Chartered Engineers and Panchas. The petitioner also argued that the increased penalty was shockingly disproportionate and unwarranted given the unchanged factual backdrop. They relied on judgments from the Delhi High Court in *Ashish Bansal v. Principal Commissioner of Customs (Preventive)* and *Mohammed Akmam Uddin Ahmed v. Commissioner Appeals Customs and Central Excise* to argue for permission to appeal without mandatory pre-deposit. Respondents' Arguments: The respondents opposed the prayer, asserting that the penalty of Rs. 1,00,00,000/- was in accordance with law and not harsh or excessive. However, they conceded that the petitioner possessed a statutory alternative remedy to challenge the Order-in-Original.