JUDGMENT :

T.S. Sivagnanam, J.

1. This appeal filed by the assessee under Section 130 of the Customs Act, 1962 (the Act) is directed against the order dated 27th July 2010 passed by the Customs, Excise and Service Tax Appellate Tribunal, East Regional Bench, Kolkata in Customs Appeal No. 37/87. The appeal was admitted on the following substantial questions of law by an order dated 2nd March, 2011.

(i) Whether the Tribunal below committed substantial error of law in upholding the confiscation of goods imported by the appellant under Additional Licences issued for the 1978-79 Import Policy period in terms of the order dated April 18, 1985 of the Hon’ble Supreme Court in Union of India V. Rajanikant Brothers and imposition of redemption fine of Rs. 85 lakh and penalty of Rs. 15 Lakh.

(ii) Whether the Tribunal below committed substantial error of law in holding that the question of mens rea was not relevant for adjudging the question of liability for confiscation of imported goods under Section 111 of the Customs Act, 1962 and imposition of penalty under Section 112 of the said Act.

(iii) Whether and in any event, lack of mens rea is a relevant consideration in the matter of determining the quantum of redemption fine and penalty and the Tribunal was justified in law in upholding the redemption fine of Rs. 85 lakh and penalty of Rs. 15 lakh.

2. We have heard Mr. J.P. Khaitan, learned Senior Advocate assisted by Mr. Prithu Dudheria and Ms. Namrata Jha, learned Advocates for the appellant and Mr. Uday Shankar Bhattacharyya and Ms. Manasi Mukherjee, learned Advocates for the respondent.

3. The appellant filed two bills of entry, namely, (i) 2249.867 M/T Palm Fatty Acid distillate in bulk CIF Rs. 37,47,004.78/- and (ii) 1502.079 M/T Palm Acid Oil in bulk CIF Rs. 23,66,147.33/-.

4. The appellant sought clearance of the above goods against 9 Subsidiary Additional Licences issued from the main licence dated 28th August, 1986. These subsidiary licences were issued in terms of the orders passed by the Hon’ble Supreme Court dated 18.04.1985 and is valid for import of items permissible to export house under Additional Licence category as per Para 176 of Import Policy, 1978-79 excluding those items which were banned in the policy period 1978-79 and which have been banned in the policy period 1985-88. The bills of entry were noted provisionally subject to fixation of actual quantity discharged from the vessel after tank measurements and chemical tests of the subject goods. The department took a stand that the two items imported are canalised items permissible for import by State Trading Corporation only. Further, the stand of the department was that the Hon’ble Supreme Court in the judgement dated 15th May, 1986 in writ petition No. 199 of 1986 in Civil Appeal No. 664 of 1986 held that the Additional Licences issued to diamond exporters for the policy period 1978-79 will be valid only for import of items appearing in appendix 6, List 8, Part II of the Import Policy, 1985-88 and, therefore, it was held that the licences submitted by the appellant are not valid for import of such goods by virtue of them being included in appendix 5, Part I of ITC Policy, 1985-88. Thus, it was held that the imports have been unauthorisedly made in contravention of Clause 3(2) of Import (Control) Order, 1955 and with Section 3 of the Import and Export (Control) Act, 1947 as amended. In the light of the above there was a proposal to confiscate the goods under Section 111 (d) of the Customs Act, 1962 and also proposing action against the persons concerned in the unauthorized importation under Section 112 of the Act. The appellant in the written statement dated 4th October 1986 contended that the judgement of the Hon’ble Supreme Court dated 18th April 1985 clearly holds that the appellant shall be entitled to import all other items whether canalised or otherwise in accordance with the relevant goods. Chief Controller of Imports and Exports, New Delhi has issued three clarifi