2023 (2) TMI 1037 - AT - Customs

Tribunal: Use of dummy IEC code for exporting helicopters deemed technical violation, not substantial. Upheld redemption fine decision.

The Tribunal determined that the respondent's use of a dummy IEC code for exporting helicopters constituted a technical violation rather than a ... Quantum of levy of penalty and redemption fine - low amount of redemption fine and penalty imposed - use of Dummy IEC - Attempt to export helicopters without obtaining an IEC from the DGFT as required under the Foreign Trade Policy - whether the alleged violation, which resulted in confiscation of the goods, is a technical violation or substantial violation calling for enhancement of fine and penalty? - HELD THAT:- On confiscation, the property of the goods will vest in the Central Government and the individual or entity is deprived of its property which is a very serious punishment. The Adjudicating Authority has to, in the first place, decide if the goods attempted to be exported fell under one of the clauses of section 113. If they do not, this section does not apply at all. If the goods fall under one of the clauses under section 113, the goods will be liable to confiscation but the adjudicating authority must use his discretion to decide whether or not to confiscate them. Even if the adjudicating authority finds that the goods fall under one of the clauses of section 113, he does not find the offence serious enough to warrant the punishment of confiscation, he does not have to confiscate them. Considering the nature of the contraventions and the aggravating and extenuating factors, the adjudicating authority can decide to confiscate or not confiscate the goods. The Madras High Court examined the scope of the expression ‘liable to confiscation’ which was used in the predecessor law, Sea Customs Act, 1878 in SHA RIKABDOSS BHAVARLAL VERSUS COLLECTOR OF CUSTOMS, MYSORE [1961 (5) TMI 2 - MADRAS HIGH COURT] and held that the expression does not mean that the goods should be confiscated. Thus, the settled legal position is that ‘liable to confiscation’ does not mean ‘shall be confiscated’ and the adjudicating authority or the assessing officer has to exercise his/her discretion and decide (a) if the goods fall under section 113 (or section 112 in case of imported goods); and (b) if they fall under section 113 (or 112, as the case may be), decide whether or not to confiscate them. It is NOT NECESSARY for the adjudicating authority to confiscate all the export goods which fall under section 113 or all imported goods which fall under section 112. In this case, the Commissioner found that there was only a technical violation which rendered the goods liable to confiscation under section 113. If that be so, he had the complete discretion to have not even confiscated the goods. However, he decided to confiscate the goods and this confiscation is not under challenge - If the adjudicating authority confiscates the goods and if the goods are not prohibited goods, he has to allow them to be redeemed on payment of fine under section 125. Even if they are prohibited goods, he may still allow the goods to be redeemed on payment of redemption fine. There is no formula to determine the quantum of redemption fine nor is there a minimum fine but the fine cannot exceed the market value of the goods. The quantum of fine must be determined based on the facts and circumstances of the case. Similarly, any person will be ‘liable to penalty’ under section 114 for actions and omissions which rendered the goods ‘liable to confiscation’ under section 113. Again the law is the person is ‘liable to penalty’ and not that a penalty shall be imposed on the person. So, it is open for the adjudicating authority to impose penalty under section 114 or not. If he decides to impose the penalty, he cannot exceed the maximum prescribed - In this case, considering the facts of the case, the Commissioner imposed a penalty of Rs. 50,000/- only. Revenue’s case is that the penalty is too low and hence needs to be increased. The penalty imposed is only on account of the perceived technical offence’ and the Commissioner did not have to impose any penalty at all. However, he imposed a penalty of Rs. 50,000/- only, calls for no enhancement. Appeal of Revenue dismissed. Issues Involved:1. Confiscation of helicopters due to the use of a dummy IEC code.2. Determination of whether the violation was technical or substantial.3. Appropriateness of the redemption fine and penalty imposed.Issue-wise Detailed Analysis:1. Confiscation of helicopters due to the use of a dummy IEC code:The respondent attempted to export two helicopters without an Importer-Exporter Code (IEC) from the Directorate General of Foreign Trade (DGFT), using a dummy IEC. This action was found to be in contravention of para 2.05 of Section (II) of the Foreign Trade Policy and Section 7 of the Foreign Trade (Development and Regulation) Act, 1992. Consequently, the Commissioner of Customs (Export), New Delhi, confiscated the helicopters under Section 113(d) of the Customs Act, 1962, which states that any goods attempted to be exported contrary to any prohibition imposed by or under this Act or any other law for the time being in force are liable to confiscation.2. Determination of whether the violation was technical or substantial:The core issue was whether the violation was technical or substantial. The respondent had sought permission from the Deputy Commissioner to export the helicopters using a dummy IEC but did not receive any letter permitting this. The respondent had also approached the Ministry of Civil Aviation and other authorities seeking a legal way to export the helicopters. The DGFT later issued a clarification stating that IDERA holders re-exporting aircraft under Rule 32A of Aircraft Rules, 1937, may be exempted from having an IEC. The Tribunal found this clarification applicable and determined that there was no substantial violation of the Foreign Trade Policy, deeming the violation technical in nature.3. Appropriateness of the redemption fine and penalty imposed:The Commissioner imposed a redemption fine of Rs. 1,00,000/- under Section 125(1) of the Customs Act and a penalty of Rs. 50,000/- under Section 114 of the Customs Act, 1962. The Revenue argued that these amounts were too low given the value of the helicopters and the nature of the violation. However, the Tribunal noted that Section 113 states that goods 'shall be liable to confiscation' rather than 'shall be confiscated,' indicating discretion on the part of the adjudicating authority. Given the technical nature of the violation, the Tribunal found no reason to interfere with the Commissioner's decision to impose a relatively low fine and penalty. The Tribunal upheld the Commissioner's order, rejecting the Revenue's appeal for enhancement of the fine and penalty.Conclusion:The Tribunal concluded that the respondent's actions constituted a technical violation rather than a substantial one. The imposed fine and penalty were deemed appropriate given the circumstances, and the appeal filed by the Revenue was rejected. The Tribunal emphasized the discretionary nature of the adjudicating authority's decision regarding confiscation and penalties under Sections 113 and 114 of the Customs Act.