2023 (9) TMI 195 - AT - Customs

Tribunal upholds redemption fine on imported clothing, stresses compliance with licensing.

The Tribunal upheld the redemption fine and penalty imposed on imported old and used worn clothing, confirming that they were sufficient for the ends of ... Valuation of imported goods - old and used worn clothing, completely fumigated - restricted item - enhancement of value - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [2018 (11) TMI 625 - CESTAT MUMBAI], wherein this Tribunal has held that The failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. However, the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. Against the confirmed duties and the penalties the Redemption Fine imposed by the Adjudicating Authority, the Respondent has not filed any appeals - the redemption fine and penalty imposed on the respondents by the adjudicating authority is sufficient to meet the end of justice. Therefore, the redemption fine and penalty confirmed by the adjudicating authority are upheld. There are no infirmity in the impugned order and the same are upheld - appeals filed by the Revenue are dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether confiscation of imported old and used/worn clothing without a valid specific import licence is sustainable under Section 111(d) of the Customs Act. 2. Whether invocation of Section 111(m) is permissible in absence of a bill of entry or declaration discrepancies. 3. Whether enhancement of declared value by reference to market survey and subsequent assessment is lawful and whether disclosure of margin of profit as directed on remand is required before imposing redemption fine. 4. Whether the redemption fine and penalty fixed by the Adjudicating Authority are excessive, and if so, what principles govern reduction of redemption fine and penalty (including limits under Section 125). ISSUE-WISE DETAILED ANALYSIS Issue 1: Confiscation for import without licence under Section 111(d) Legal framework: Section 111(d) permits confiscation where goods are imported in contravention of provisions of the Act or any rule, notification or order; Foreign Trade Policy and ITC (HS) list prescribe certain restrictions and require a specific licence for import of used clothing under the relevant tariff entry. Precedent Treatment: The Tribunal relied on prior reasoning in Venus Traders which sustained confiscation under Section 111(d) where want of prescribed import licence was not disputed. Interpretation and reasoning: The Court treated the absence of the required specific licence as a clear statutory non-compliance justifying confiscation. The decision emphasises that import-control conditions in the Foreign Trade Policy are substantive prerequisites; failure to obtain the licence is not excused by other considerations. Ratio vs. Obiter: Ratio - Confiscation under Section 111(d) is maintainable where import licence required by Foreign Trade Policy is not obtained; this forms the operative legal holding applicable to the facts. Conclusion: Confiscation of the goods was upheld as justified under Section 111(d). Issue 2: Inapplicability of Section 111(m) absent a declaration/bill of entry Legal framework: Section 111(m) penalises goods that do not correspond with the entry made under the Act or declaration under Section 77; the bill of entry is the declaration for imports for purposes of Section 111. Precedent Treatment: The Tribunal adopted the view in Venus Traders that Section 111(m) cannot be invoked where proceedings commenced prior to filing of bills of entry or where no declaration exists that can be proved to be incorrect. Interpretation and reasoning: The Court reasoned that confiscation under Section 111(m) presupposes an incorrect or withheld declaration; in absence of a bill of entry or declaration mismatch, invoking 111(m) is inconsistent with the statutory scheme. Material particulars for Section 111 are those in the bill of entry; without that instrument, 111(m) is inapplicable. Ratio vs. Obiter: Ratio - Section 111(m) cannot be applied in absence of a bill of entry/declaration; application of 111(m) in such circumstances is legally infirm. Conclusion: Section 111(m) was not an appropriate basis for confiscation in the present factual matrix. Issue 3: Validity of value enhancement by market survey and duty to disclose margin of profit on remand Legal framework: Customs valuation principles allow ascertaining value where declared value is suspect; Section 125 and related provisions govern redemption fine based on ascertained value and permit market surveys to determine margins. Precedent Treatment: Venus Traders was followed for the proposition that a market survey may be undertaken to determine margin of profit for computation of fine but that the authority must comply with remand directions to disclose the basis (margin) to the importer. Interpretation and reasoning: The Tribunal observed that while a market survey is an acceptable method to ascertain margins and value, a remand direction to disclose the margin of profit must be complied with. The original authority's failure to disclose the margin as directed undermined procedural fairness. However, given paucity of evidence and limited scope for fresh ascertainment after many years, further remand was not always pragmatic. Ratio vs. Obiter: Mixed - Ratio that market survey is a permissible mechanism to ascertain margin/value and that disclosure of margin as directed on remand is required; obiter that in long-delayed cases a further remand may be futile depending on evidentiary circumstances. Conclusion: The value enhancement by market survey is not per se invalid, but the authority must disclose the margin of profit as required by remand directions; practical considerations may, in appropriate cases, preclude further remand. Issue 4: Appropriateness and quantum of redemption fine and penalty; limits under Section 125 Legal framework: Section 125 permits release of confiscated goods on payment of fine in lieu of confiscation (redemption fine) and conditions the quantum by reference to market price and statutory limitations; penalty provisions provide for additional monetary consequences. Precedent Treatment: The Tribunal followed the approach in Venus Traders where confiscation was upheld but redemption fine and penalty were reviewed and, in that case, reduced to specified percentages (10% and 5%) to meet ends of justice considering procedural lapses. Interpretation and reasoning: The Court recognized that while confiscation is justified by licensing breach, the quantum of redemption fine must be proportionate and not exceed statutory limits (e.g., not exceed market price). The prior decision emphasised that failure to disclose margin of profit and reliance on belated surveys makes the original computation suspect; in light of such failure and limited evidentiary scope, reduction of fines and penalties may be warranted to achieve fairness. Ratio vs. Obiter: Ratio - Redemption fine must be within statutory boundaries and computed on disclosed, ascertainable margins; where procedural deficiencies exist in valuation computation, reduction of fines is an appropriate remedial measure. Obiter - Specific percentage reductions in other cases are illustrative and contingent on facts. Conclusion: Applying the guiding precedent and considering the circumstances, the redemption fine and penalty imposed by the Adjudicating Authority were held sufficient in this instance and were accordingly upheld; in other factual matrices, reduction may be appropriate where procedural non-compliance in valuation is shown. Cross-reference Issues 2 and 3 are interrelated: inapplicability of Section 111(m) (Issue 2) limits the bases for confiscation to statutory breaches such as absent licence under Section 111(d) (Issue 1), and consequently the valuation process (Issue 3) and quantum of redemption fine (Issue 4) assume central importance once confiscation is sustained. Overall Conclusion The Tribunal upheld confiscation under Section 111(d) for import without the required specific licence; rejected application of Section 111(m) in absence of a declaration/bill of entry; affirmed that market surveys can be used to ascertain value but required compliance with remand directions to disclose margins; and found the redemption fine and penalty imposed were adequate on the facts, dismissing the Revenue's appeal.