2009 (8) TMI 891 - AT - Customs

Tribunal overturns penalty for import declaration error, emphasizes natural justice.

MODISON METALS LTD. Versus COMMR. OF CUS. (IMPORT), NHAVA SHEVA

The Tribunal set aside the order for confiscation and penalty imposed on the appellant for importing capital goods due to a declaration error. The ... - 1. ISSUES PRESENTED AND CONSIDERED * Whether the order of confiscation of goods and imposition of penalties is sustainable where the importer was not afforded the opportunity of being heard under Section 124 of the Customs Act. * Whether the importer's post-assessment communications requesting reassessment and tendering differential duty satisfy the statutory scheme for amendment/reassessment of a bill of entry under Section 149 of the Customs Act. * Whether, in light of the department's subsequent acknowledgement of differential duty payment, the appropriate remedy is to set aside penal measures and remit the matter for reassessment/amendment under Section 149, rather than to sustain confiscation and penalties. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of confiscation and penalties where no hearing under Section 124 was afforded Legal framework: Section 124 of the Customs Act entitles the owner of goods proposed to be confiscated to an opportunity of being heard; Section 112 and Section 125 provide for penalty and fine in lieu of confiscation respectively. Precedent Treatment: No specific prior judicial authorities were cited in the judgment; analysis rests on statutory requirements and principles of natural justice. Interpretation and reasoning: The Court finds that the owner was not heard on any proposal for confiscation and that this constituted a breach of the hearing requirement embodied in Section 124. The absence of such hearing is treated as a breach of the rules of natural justice that the statute mandates prior to imposing confiscation or penalties tied to confiscation. Ratio vs. Obiter: Ratio - The order of confiscation and associated penalties cannot be sustained where the statutory opportunity to be heard under Section 124 was not provided. Conclusions: Confiscation and penalties are set aside because the mandatory statutory hearing was not afforded; the impugned order is quashed on this ground. Issue 2: Effect of importer's request for reassessment and payment of differential duty; applicability of Section 149 for amendment/reassessment Legal framework: Section 149 permits amendment of a bill of entry to correct particulars on which assessment is based; the statutory process enables reassessment so that differential duty can be determined and paid. Precedent Treatment: No precedents were relied on; the Court applies statutory construction and records evidence of departmental acknowledgement of payment. Interpretation and reasoning: The importer submitted letters requesting reassessment and produced the omitted invoice, packing list, EPCG licence and a pay order for differential duty. Although the importer did not formally file an application under Section 149, the Court holds that the substance of the communications amounted to a request for reassessment based on particulars existing at the time of filing the original bill of entry. The Court reasons that the proper officer ought to have guided the importer to make a formal Section 149 application and proceeded to re-assess; departmental conduct (acknowledgement of differential payment via shipment certificate) indicates that reassessment activity or acceptance of duty had been undertaken in practice even though no re-assessed bill of entry appears on record. Ratio vs. Obiter: Ratio - A bona fide request supported by existing documents for reassessment/amendment should be acted upon by the proper officer under Section 149; procedural form should not defeat substantive entitlement to correct assessable particulars. Obiter - The suggestion that the officer should have explicitly advised the importer to file a Section 149 application is practical guidance. Conclusions: The importer's communications and tender of differential duty satisfy the conditions for invoking amendment/reassessment under Section 149 in substance; the department can and should permit amendment and re-assessment to set records straight. Issue 3: Appropriate remedial course - quashing penal measures and remitting for reassessment versus upholding confiscation/penalty Legal framework: Statutory scheme contemplates assessment, amendment (Section 149), confiscation (Section 111/124) and penalties (Sections 112,125); natural justice requirements must be observed before penal measures are imposed. Precedent Treatment: No authorities cited; the Court's decision is driven by statutory requirements and the facts showing an offer/acceptance of differential duty. Interpretation and reasoning: Given (a) the absence of a hearing required under Section 124, (b) the importer's repeated bona fide attempts to bring omitted particulars to the department's notice and to pay differential duty, and (c) departmental acknowledgment of the differential payment in a shipment certificate, the Court finds no valid reason to sustain confiscation or penalties. The appropriate, limited remedy is to set aside the punitive order and remit the matter to the adjudicating authority to permit amendment under Section 149 and to re-assess the bill of entry, after granting the statutory opportunity to be heard under Section 149. Ratio vs. Obiter: Ratio - Where procedural infirmity (absence of hearing) and substantive corrective steps by the importer exist, punitive measures of confiscation and penalty should be set aside and the matter remitted to allow amendment/reassessment under Section 149. Obiter - The observation that departmental records may be corrected by granting permission for amendment is procedural direction. Conclusions: The confiscation and penalties are set aside. The matter is remitted to the Commissioner to grant the importer an opportunity under Section 149, permit amendment of the bill of entry, and re-assess so as to determine and record correct duty liability; the remand is limited to assessment/amendment and does not revive the quashed penal order absent compliance with statutory procedure. Cross-references and practical directions * The Court directs that the Commissioner act upon the importer's request for re-assessment in accordance with law (Section 149) and grant the statutory opportunity to be heard prior to any fresh penal action. * The Court notes the departmental shipment certificate acknowledging differential duty payment as evidentiary support for reassessment and as a basis for setting aside confiscation and penalties.