2021 (3) TMI 1389 - AT - Customs

Confiscated goods sale proceeds go to Government if no fine paid; penalty can still apply. Order for sale proceeds payment without deduction of fine was incorrect.

The Tribunal held that when goods are confiscated and the party does not opt to pay the fine, the sale proceeds vest with the Government, and penalty ... Confiscation of goods - marble blocks - restricted goods or not - When the order confiscating the goods has been issued and the party has not opted to pay fine in lieu of confiscation, then would the sale proceeds remain with the Government if the goods are auctioned or they have to be paid to the importer after deduction of such payment or without such deduction? HELD THAT:- The records indicate that it was only on April 28, 2014 that the respondent informed the adjudicating authority that it had filed an appeal against the order passed by the Additional Commissioner and was awaiting orders - there is nothing on the record to indicate whether any application was filed by the respondent for recall of the order 20.08.2013 by which the appeal was dismissed nor the date on which the application for condoning the delay was filed by the respondent has been mentioned. What is important to notice is that the Commissioner (Appeals) has also ordered for payment of the entire sale proceeds to the respondent after deduction of the penalty amount. Section 126 of the Customs Act provides that where any goods are confiscated under the Act, such goods shall thereupon vest in the Central Government. The respondent did not make any request for either the redemption of the goods or the sale proceeds and, therefore, a direction for payment of the sale products to the respondent could not have been issued. Of course, the redemption fine can be imposed only when a request for redemption of the “goods” or the “sale proceeds” is made. Imposition of the penalty is independent of the request for redemption and can be imposed under section 112 of the Customs Act. When the order confiscating the goods has been issued and the party has not opted to pay fine in lieu of such confiscation, then the goods can be sold and the sale proceeds would vest with the government. Penalty can still be imposed under section 112 of the Customs Act. An order for payment of all sale proceeds without deduction of redemption fine cannot, therefore, be issued - The issue as to whether the party can still opt to pay fine in lieu of such confiscation at this stage, has not been considered or decided by this Larger Bench and it will be open to the respondent to raise this issue before the Division Bench, if it is permissible in law to raise this issue at this stage. Issues Involved:1. Confiscation of imported goods and the imposition of redemption fine and penalty.2. Auctioning of goods during the pendency of the appeal.3. Entitlement to sale proceeds after auction.4. Validity of imposing redemption fine when goods are auctioned.Issue-wise Detailed Analysis:1. Confiscation of Imported Goods and Imposition of Redemption Fine and Penalty:The respondent imported marbles, which are restricted goods under the EXIM Policy and require a license. Sixteen containers arrived at ICD, Tughlakabad, New Delhi, but were not cleared within the stipulated 30 days as per Section 48 of the Customs Act, 1962. Consequently, seven show cause notices were issued under Section 111(d) of the Customs Act, proposing confiscation and penalty under Section 112. The Additional Commissioner of Customs ordered the confiscation of goods valued at Rs. 59,07,768/- and imposed a redemption fine of Rs. 20 lakhs and a penalty of Rs. 10 lakhs. The respondent's appeal was dismissed as it was filed beyond the prescribed period without seeking condonation of delay.2. Auctioning of Goods During Pendency of Appeal:The goods were auctioned by the Department between May 2013 and June 2013. The respondent informed the adjudicating authority about the appeal on 28.04.2014. The Commissioner (Appeals) condoned the delay and partly allowed the appeal, setting aside the redemption fine and directing the sale proceeds to be paid to the respondent after deducting the penalty amount. The Commissioner (Appeals) noted that the Department should not have auctioned the goods while the appeal was pending and the importer had not exhausted all legal remedies.3. Entitlement to Sale Proceeds After Auction:The Commissioner (Appeals) held that since the goods were auctioned, the respondent could not be compelled to pay the redemption fine as they had no option left to redeem the goods. The sale proceeds were to be paid to the respondent after deducting the penalty amount. The Tribunal, however, noted that confiscated goods vest in the Government under Section 126 of the Customs Act, and the sale proceeds replace the goods. Thus, the sale proceeds should be paid to the importer only after deducting the redemption fine and penalty.4. Validity of Imposing Redemption Fine When Goods Are Auctioned:The Tribunal examined conflicting decisions and concluded that once goods are confiscated and auctioned, the sale proceeds represent the goods. Therefore, the redemption fine should be deducted from the sale proceeds. The Tribunal rejected the view that redemption fine cannot be imposed once goods are auctioned, as it would encourage importers to delay redemption until auction. The Tribunal emphasized that the property in the goods vests in the Government upon confiscation, and the sale proceeds replace the goods.Conclusion:The Tribunal held that when goods are confiscated and the party does not opt to pay the fine, the sale proceeds vest with the Government, and penalty under Section 112 can still be imposed. The order for payment of sale proceeds without deduction of redemption fine was incorrect. The issue of whether the party can opt to pay the fine at this stage remains open for consideration by the Division Bench.