2023 (9) TMI 417 - AT - Customs

Tribunal upholds confiscation of imported clothing; reduces fines

Commissioner of Customs (Port), Kolkata Versus Shri Upkar Singh Oberoi

Commissioner of Customs (Port), Kolkata Versus Shri Upkar Singh Oberoi - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether confiscation and imposition of redemption fine/penalty for import of old and used/worn clothing are legally sustainable where import licence for a restricted item under the Foreign Trade Policy is absent. 2. Whether Section 111(m) of the Customs Act can be invoked to confiscate goods where proceedings commenced before filing of the bill of entry and no declaration (bill of entry) correspondingly records the alleged mis-description or mis-valuation. 3. Whether the methodology used to determine enhanced assessable value (market survey / margin of profit) and the consequent fixation of redemption fine and penalty (rates applied) are vitiated by failure to disclose particulars directed in an earlier remand, and if that requires remand or reduction of fines/penalties. 4. Whether, in circumstances of admitted absence of requisite import licence for items classifiable under the relevant tariff heading and restricted under the Foreign Trade Policy, the redemption fine and penalty imposed by the Adjudicating Authority should be enhanced by the Revenue. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Confiscation and fines/penalties for import of restricted old/used clothing without licence Legal framework: Confiscation under Section 111(d) of the Customs Act is permissible where goods are imported in contravention of provisions of the Act or rules, including import restrictions under the Foreign Trade Policy; release of confiscated goods is contingent on payment of redemption fine under Section 125. Precedent treatment: The Tribunal follows its prior treatment in an earlier decision addressing import of old and used garments without licence, holding that confiscation under Section 111(d) is sustainable where want of licence is not disputed. Interpretation and reasoning: The Tribunal reasons that import of goods classifiable under the specified tariff item is restricted and permitted only against a valid specific licence; want of such licence was admitted, and thus confiscation under Section 111(d) cannot be faulted. The statutory scheme linking confiscation and redemption fine supports imposing a fine in lieu of continued confiscation and permitting release upon payment. Ratio vs. Obiter: Ratio - where import licence requirement is admitted to be unmet for a restricted item, confiscation under Section 111(d) is justified; the connection to release via redemption fine under Section 125 is part of the operative holding. Any ancillary observations about market surveys or timing are obiter unless essential to fine-quantification. Conclusions: Confiscation of the imported goods under Section 111(d) is upheld on the admitted failure to obtain the required import licence; statutory mechanism for redemption fine applies. Issue 2 - Inapplicability of Section 111(m) without a corresponding declaration/bill of entry Legal framework: Section 111(m) permits confiscation where goods do not correspond in value or other particulars with the entry made under the Act (i.e., bill of entry) or declaration under Section 77 for baggage; the provision presupposes a declaration to compare against. Precedent treatment: The Tribunal follows its prior reasoning that invocation of Section 111(m) is not in conformity with law where proceedings preceded filing of the bill of entry and there is no declaration against which non-correspondence can be judged. Interpretation and reasoning: The Tribunal emphasizes that material particulars withheld or incorrectly recorded must be in the declaration (bill of entry) for Section 111 to apply; absent a declaration, Section 111(m) cannot be invoked merely because post-clearance inspection reveals mismatches. Consequently, proceedings initiated before filing of the bill of entry render use of Section 111(m) inappropriate. Ratio vs. Obiter: Ratio - Section 111(m) is inapplicable where there is no declaration/bill of entry to compare; invocation of Section 111(m) requires an antecedent declaration containing the particulars complained of. Conclusions: Section 111(m) should not be invoked in the absence of a bill of entry/declaration; confiscation must instead rely on other permissible heads (e.g., Section 111(d)) when licensing or other statutory requirements are breached. Issue 3 - Validity of value enhancement methodology (market survey/margin of profit), disclosure obligations on remand, and effect on fines/penalties Legal framework: Enhancement of declared value and computation of redemption fine often rely on market surveys and assessment of market price/margin of profit; principles of natural justice and prior remand directions require disclosure of material particulars that underpin fining decisions so affected parties can meaningfully contest them. Precedent treatment: The Tribunal considered its earlier decision where it criticised post-hoc market surveys conducted long after importation and after remand, and where the original authority failed to disclose the margin of profit as directed on remand. In that earlier decision the Tribunal reduced redemption fine and penalty due to defects in the process of ascertaining margin and failure to disclose. Interpretation and reasoning: The Tribunal notes that the original authority failed to comply with the remand direction to disclose the margin of profit used to compute the fine. While such failure would ordinarily require another remand to cure procedural infirmity, practical difficulties (paucity of evidence, passage of time, limited scope for accurate ascertainment) may deter remand. Where there is negligible scope to re-ascertain value and the licence breach is admitted, the Tribunal may uphold confiscation but treat the quantum of fines/penalties with moderation. The Tribunal applies this reasoning and follows the earlier approach of reducing fines where ascertainment procedures were defective, but in the present case the adjudicating authority's fines/penalties were found sufficient and therefore upheld. Ratio vs. Obiter: Mixed - Ratio in the earlier authority: failure to disclose margin of profit as directed on remand renders the fine-computing process defective and may justify reduction of redemption fine and penalty. In the present decision the operative ratio is that where practical re-ascertainment is impracticable and the substantive licensing breach is admitted, the Tribunal may uphold confiscation and, depending on circumstances, affirm or moderate fines; here, the Tribunal upheld the fines/penalties as sufficient. Observations about timing and propriety of market surveys constitute guiding dicta but have operative force in assessing procedural fairness. Conclusions: Although the original authority's failure to disclose particulars (margin of profit) on remand can vitiate fine-quantification and justify remand or reduction, where evidence is scant and the licensing breach is admitted the Tribunal may decline further remand and either reduce fines (where justified) or uphold them if they adequately serve justice. In the present matter the Tribunal concluded the redemption fine and penalty were adequate and upheld them. Issue 4 - Whether Revenue's appeal seeking enhancement of redemption fine/penalty should succeed Legal framework: Appeals seeking enhancement of fines/penalties must demonstrate that the quantum imposed is legally inadequate or that material facts justify higher imposition; Tribunal exercises appellate discretion informed by statutory limits (e.g., redemption fine not to exceed market price) and principles of proportionality and fairness. Precedent treatment: The Tribunal relied on its earlier decision where it reduced fines due to procedural defects but recognized limits to enhancement when the imposition already meets ends of justice given the admitted contravention. Interpretation and reasoning: Having considered the admitted absence of licence, the prior precedent, procedural history including failure to disclose margin of profit, and practical inability to re-ascertain value reliably, the Tribunal determined that the redemption fine and penalty imposed by the Adjudicating Authority were adequate to serve the ends of justice. There was no material to justify enhancement by the Revenue. Ratio vs. Obiter: Ratio - absent a compelling basis to increase monetary sanctions (procedural defects, admitted breach, and insufficient evidence to re-calculate value), the appellate authority will not enhance redemption fine/penalty; where fines/penalties already meet ends of justice they will be upheld. Conclusions: The Revenue's appeal for enhancement of redemption fine and penalty is dismissed; the adjudicating order's fines and penalties are upheld as sufficient in the circumstances.