2023 (6) TMI 711 - AT - Customs

Tribunal upholds redemption fine on imported clothing, dismisses Revenue's appeal, confirms confiscation

Commissioner of Customs (Port), Kolkata Versus M/s S.P.P. Impex

Commissioner of Customs (Port), Kolkata Versus M/s S.P.P. Impex - TMI 1. ISSUES PRESENTED AND CONSIDERED 1. Whether import of old and used worn clothing is classifiable under Tariff Item No. 63090000 and is restricted under the Foreign Trade Policy such that import without a specific licence renders the goods liable to confiscation under Section 111(d) of the Customs Act, 1962. 2. Whether invocation of Section 111(m) for confiscation is legally tenable in the absence of a declaration/bill of entry misstatement, when proceedings commence before filing of bill of entry. 3. Whether value enhancement by market survey and ascription of margin of profit (for computation of redemption fine under Section 125) is sustainable where the original authority failed to disclose the margin of profit as directed on remand. 4. Whether the quantum of redemption fine and penalty imposed (19.5% and 7.8% respectively) is excessive or requires reduction in view of precedents and the circumstances of the case. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification and confiscation under Section 111(d) Legal framework: Confiscation under Section 111(d) applies where goods are imported in contravention of any provision of Chapter 2 of the Foreign Trade Policy and related statutory controls; restricted items require a valid specific import licence. Precedent Treatment: Followed earlier Tribunal reasoning that import of 'old and serviceable garments' without prescribed licence attracts confiscation under Section 111(d). Interpretation and reasoning: The goods were old and used worn clothing, completely fumigated, and import of items classifiable under Tariff Item No. 63090000 is restricted unless imported against a specific licence. Want of such licence was not disputed. The Court accepts that lack of requisite licence is a ground for confiscation under Section 111(d). Ratio vs. Obiter: Ratio - Confiscation under Section 111(d) is justified for import of restricted used clothing without specific licence; this forms a binding part of the decision. (See cross-reference to Issue 2 for limits on invoking Section 111(m)). Conclusion: Confiscation under Section 111(d) is legally sustainable and upheld. Issue 2 - Invoking Section 111(m) in absence of declaration/bill of entry Legal framework: Section 111(m) addresses goods that do not correspond with the entry made under the Act (i.e., bill of entry) or declaration under Section 77; invocation presupposes a declaration misstatement. Precedent Treatment: Distinguished/limited - the Tribunal (Venus Traders) observed that Section 111(m) cannot be invoked where proceedings were initiated before filing of bills of entry and where there is no declaration to impugn. Interpretation and reasoning: Confiscation under Section 111(m) requires an incorrect or withheld material particular in the declaration (bill of entry). Where no declaration exists at the time proceedings commence, application of Section 111(m) is not in conformity with law. The present proceedings lacked a basis to invoke Section 111(m) given the timing and absence of a declaration misstatement. Ratio vs. Obiter: Ratio - Section 111(m) is inapplicable in the absence of a declaration/bill of entry misstatement; invocation under such circumstances is contrary to statutory scheme. This limitation is integral to the Court's reasoning. Conclusion: Section 111(m) was not properly available as a ground for confiscation in the circumstances; confiscation is instead upheld under Section 111(d) for want of licence. Issue 3 - Validity of value enhancement, market survey and remand compliance regarding margin of profit Legal framework: For computing redemption fine under Section 125, the market value/margin of profit may be ascertained by survey; however, statutory limits (fine not exceeding market price) and procedural fairness (disclosure of basis for computation) must be observed. Remand directions of a Tribunal to disclose margin of profit to parties must be complied with. Precedent Treatment: Followed and applied the Tribunal's earlier decision (Venus Traders) which criticized post-hoc market surveys undertaken long after import and after remand, and emphasized the requirement to disclose margin of profit determined on remand. Interpretation and reasoning: The earlier decision noted defects in conducting a market survey more than a decade after import and after a remand, and that failure to disclose the margin of profit contravened the remand direction and procedural fairness. In the present matter, while questions were raised on margin and survey validity, there was no serious resistance to the ascertained value. Given paucity of evidence and limited scope for further ascertainment, remand was deemed impracticable. Ratio vs. Obiter: Mixed. Ratio - Authorities must disclose the margin of profit used to compute fine when directed on remand; post-facto surveys long after import are suspect. Obiter - Practical constraint reasoning (paucity of evidence deterring further remand) is case-specific guidance rather than broad rule. Conclusion: Although the manner of ascertaining margin of profit and market survey is infirm in principle, absence of substantial contest to the ascertained value and impracticability of further remand justified proceeding without fresh remand; the value enhancement stands for purposes of this adjudication. Issue 4 - Quantum of redemption fine and penalty Legal framework: Redemption fine under Section 125 cannot exceed market value of goods; Tribunal has discretion to adjust redemption fine and penalty to meet ends of justice, especially where original authority failed to comply with remand directions or where evidentiary lacunae exist. Precedent Treatment: Applied the Tribunal's earlier approach in reducing fines where procedural deficiencies occurred - specifically reducing redemption fine to 10% and penalty to 5% in analogous circumstances (Venus Traders). Interpretation and reasoning: The adjudicating authority imposed redemption fine at 19.5% and penalty at 7.8% of assessed value. The Tribunal examined the earlier decision which, in light of failure to disclose margin of profit and defects in market survey, reduced fines to meet ends of justice. In the present appeal the Tribunal found the earlier reasoning persuasive and concluded that the redemption fine and penalty as imposed by the adjudicating authority were sufficient. Ratio vs. Obiter: Ratio - Tribunal may moderate redemption fine and penalty where procedural infirmities or paucity of evidence make the original computation unreliable; however, where value ascribed is not seriously contested, the fines imposed by the adjudicating authority may be upheld. The principle of proportionality and limits under Section 125 form part of the binding reasoning. Conclusion: The redemption fine and penalty imposed by the adjudicating authority are upheld as meeting the ends of justice in the facts of the case; no enhancement is warranted and the impugned orders are sustained. Cross-references Refer to Issue 2 for limiting application of Section 111(m) where no declaration/bill of entry misstatement exists; refer to Issue 3 for constraints on remand and requirements of disclosure of margin of profit when computing redemption fine under Section 125.