2017 (7) TMI 274 - HC - Customs

High Court Limits Redemption Fine in Customs Act Case

The High Court clarified the interpretation of Section 125 of the Customs Act, 1962, stating that the redemption fine should not exceed the market value ... Redemption fine - Whether the second respondent has misdirected itself in law and on facts in holding, that under the provisions of Section 125(1) of the Customs Act, 1962, the redemption fine shall be the present market value of the subject goods less the customs duty paid thereon? - Held that: - A perusal of Section 125 of the Act would show that whenever confiscation of goods is ordered, the officer may give the owner of the goods or where the owner of the goods is not known, the person from whom possession or custody of the goods is seized, option to pay in lieu of confiscation, such fine as he thinks fit. A plain reading of the section shows that this option would also extend to those confiscated goods, the importation or exportation of which is prohibited under the Act or any other law for the time being in force. In the instant case, the proviso to subsection (2) of Section 115 of the Act need not detain us, which generally relates to confiscation of conveyances. Suffice it to say that the authority concerned has the discretion to give an option to seek release of confiscated goods, upon payment of such fine as the authority thinks fit and, the fine so imposed should not exceed the market price of the confiscated goods and in arriving at the market price, adjustment of duty chargeable in case of imported goods is required to be made. The proviso to section 125(1) of the Act does not say as construed by the Tribunal that the redemption fine should equal the market value. Furthermore, it appears that the Tribunal did not give enough time to the revenue to revert with the necessary information as to what would be the market price of the subject goods - matter requires reconsideration - appeal allowed by way of remand. Issues:1. Interpretation of Section 125 of the Customs Act, 1962 regarding the imposition of redemption fine.2. Assessment of misdeclaration and under-valuation of imported goods leading to confiscation, penalty, and redemption fine.Issue 1: Interpretation of Section 125 of the Customs Act, 1962 regarding the imposition of redemption fine:The case involved a dispute over the imposition of a redemption fine under Section 125 of the Customs Act, 1962. The Tribunal examined whether the redemption fine should be imposed on the appellant based on the market value of the confiscated goods less the customs duty paid. The Tribunal considered a worksheet presented by the appellant's counsel, showing a loss incurred in connection with the import. The Tribunal concluded that no redemption fine could be imposed based on the presented data. However, the High Court found that the Tribunal misdirected itself in interpreting Section 125. The Court clarified that the redemption fine should not exceed the market value of the confiscated goods after adjusting for the duty chargeable on imported goods. The Court noted that the Tribunal did not give sufficient time for the revenue to provide information on the market price of the goods. Therefore, the Court set aside the Tribunal's judgment and directed a re-examination of the matter, emphasizing the need to consider the market value of the goods and relevant legal precedents.Issue 2: Assessment of misdeclaration and under-valuation of imported goods leading to confiscation, penalty, and redemption fine:The case involved the importation of tin-free sheets waste/waste defective sheets, which were later found to be misdeclared and undervalued. The Revenue intercepted the consignments based on intelligence received and re-examined the goods, concluding that they were misclassified. Subsequently, a show cause notice was issued, and the Adjudicating Authority ordered confiscation of a portion of the goods and imposed a penalty and redemption fine. The appellant contended that the misdeclaration was due to an error by the overseas supplier. The Tribunal upheld the penalty but reduced the amount. The High Court, in a previous judgment, reversed the Tribunal's decision on the requirement of mens rea for penalty under the Customs Act. The Tribunal, in the subsequent round, sustained the penalty but reduced the amount. The High Court, in the present judgment, emphasized the need for a fresh consideration of the matter, directing the Tribunal to re-examine the case considering the legal requirements and factual aspects, including the misdeclaration and valuation of the imported goods.This comprehensive analysis of the judgment addresses the interpretation of Section 125 of the Customs Act, 1962 and the assessment of misdeclaration and under-valuation of imported goods leading to confiscation, penalty, and redemption fine.