1. This petition is directed against a final order of the Settlement Commissioner dated 6 January, 2012 under Section 127C(5) of the Customs Act, 1962. The finding which has been arrived at by the Settlement Commission is that the petitioners declared in their Bill of Entry having imported two consignments of knitted fabrics. However, on examination a large quantity of woven fabrics was also found concealed in the two consignments. The goods were, therefore, held to be liable to confiscation under Section 111(i) and Section 111(m). The total duty liability was assessed at Rs. 80,58,731/-. The petitioners having already paid an amount of Rs. 60,79,130/- at the time of provisional release, the balance that remained to be paid was Rs. 19,79,601/-. The Commission directed the petitioners to pay interest under Section 28AB, a fine of Rs. 15 lakhs in lieu of confiscation and imposed a penalty of Rs. 4 lakhs on the first petitioner and of Rs. 50,000/- on the second petitioner who is a Director.

2. At the hearing of these proceedings, the order of the Settlement Commission has been challenged on three grounds: (i) The Settlement Commission rejected the prayer of the petitioners to utilize a DFRC licence for the payment of the balance duty, without indicating any reasons; (ii) Under the proviso to Section 125(1), the fine in lieu of confiscation cannot exceed in the case of imported goods, the market price less the duty chargeable thereon. The assessable value of the goods, according to the Revenue, is Rs. 86 lakhs (based on a market enquiry). The duty is Rs. 80.58 lakhs. Hence, the imposition of a fine of Rs. 15 lakhs is contrary to the proviso to Section 125(1); (iii) No reasons have been indicated for imposing a penalty of Rs. 4 lakhs on the first petitioner and of Rs. 50,000/- on the second petitioner.

3. On the other hand, Counsel appearing on behalf of the Revenue has supported the order of the Settlement Commission on these aspects.

4. We would take up the third issue relating to the imposition of the penalty on the petitioners first. The Settlement Commission has noted that the petitioners declared consignments consisting of knitted fabrics, but on examination a large quantity of woven fabrics was found in both the consignments. The petitioners admitted to the misdeclaration of the description of the goods in their application, but sought to saddle the responsibility upon the foreign supplier for having mistakenly sent woven fabrics without an order. The Settlement Commission has taken a justifiable view in rejecting the defence which was termed as nothing but a lame or feeble excuse. The Commission, however, in Paragraph 16.12 of its decision held some leniency can be shown since the petitioners have admitted their mistake and made a full and true disclosure of their duty liability by admitting the entire duty amount as demanded under the notice to show cause (as amended by a corrigendum) and the quantity of the goods was according to the declaration given in the Bills of Entry though the contents were largely different. The Commission has considered all the relevant facts and circumstances and has imposed a penalty of Rs. 4 lakhs on the first petitioner and Rs. 50,000/- on the second petitioner. The Commission having considered the entirety of the matter in a proper perspective, we find no reason to interfere with the penalty imposed.

5. Both on the issue as to whether the petitioners should be permitted to avail of a DFRC licence to pay the balance of the duty and on the extent of the fine imposed in lieu of confiscation, we find merit in the contention of the petitioners that no reasons have been indicated in the order of the Settlement Commission. We may note, at this stage, that the submission of the petitioners is that the Notification dated 11 September 2009 (Notification 98/2009-Cus.) of the Union Government of the Ministry of Finance does not prohibit the petitioners from paying the balance of duty by availing of a DFRC licence. Further, it has been urged on behalf of the petitioners that the licence could have been utilized by the petitioners while seeking clearance of the goods at the time of import or alternatively even subsequently, once an assessment has been completed. The order of the Settlement Commission notes in Paragraph 14.2 the submission of the Jurisdictional Commissioner that a blanket opinion as to whether DFRC licences can be used for debit could not be furnished without actually verifying the details of the licences such as date of issue, date of expiry, name of the licence holder and conditions mentioned in the licence. This part of the arguments of the Revenue was, in our view, fair and proper. The Settlement Commission indicated no reasons for rejecting the plea. We are of the view that the matter would necessitate the Settlement Commission to have a fresh look on this aspect. Similarly, as regards the imposition of a fine in lieu of confiscation, we have noted the submissions urged on behalf of the petitioners that (i) the duty liability has been assessed at Rs. 80.58 lakhs; (ii) the assessable value of Rs. 86 lakhs is based on a market enquiry (this submission being based on the report filed by the Commissioner of Customs (Import), New Customs House, Mumbai, at page 173 of the Paper-Book). In the circumstances, it has been urged that the redemption fine could not exceed the market value less the duty as assessed. On this aspect as well since there is no reason found in the order of the Settlement Commissioner we are of the view that a fresh look on this issue would be necessitated. Accordingly, we remit the proceedings to the Settlement Commission to re-examine two issues: (i) Whether the utilization of the DFRC licence should be allowed subject to verification in all respects, for the purposes of paying the balance of the duty liability of Rs. 19.79 lakhs and (ii) Whether the fine in lieu of confiscation of Rs. 15 lakhs needs to be modified having regard to the provisions of the proviso to Section 125(1) The Settlement Commission shall pass a fresh order on the aforesaid two aspects alone after considering the submissions of the parties and in accordance with law. We clarify that we have not disturbed the rest of the order of the Settlement Commission. The petition shall accordingly stand disposed of in these terms. There shall be no order as to costs.